SMM Daily Review - 2012/2/10 Base Metals Market

SHANGHAI, Feb. 13 (SMM) –

Copper
As LME copper prices closed with gains overnight, SHFE 1205 copper contract prices, the most active one, opened RMB 370/mt higher at RMB 61,950/mt Friday. SHFE three-month copper contract prices fluctuated around the daily moving average of RMB 61,850/mt after the opening and stopped at an intraday high of 62,080/mt, since LME copper prices came under pressure at USD 8,700/mt owing to the increasing US dollar during the whole trading day. In the afternoon session, SHFE three-month copper contract prices met resistance at the daily moving average and tended to move away from the price mark, reversing earlier gains and touching a low at RMB 61,460/mt. Finally, SHFE 1205 copper contract prices closed at RMB 61,650/mt, down RMB 20/mt or 0.03%. Positions for SHFE 1205 copper contracts were up 14,332 lots, and trading volumes were down 56,038 lots. SHFE copper prices faced great upward resistance at RMB 62,000/mt, and need a push from LME copper prices.

In the spot market, SHFE copper prices moved higher after a high open, but copper smelters sold goods in small quantities due to optimism towards future copper prices and as the delivery date for SHFE current-month copper contracts neared. As a result, copper discounts fell to between negative RMB 200-80/mt in the morning business. Daily traded prices for standard-quality copper were between RMB 60,520-60,700/mt, and RMB 60,600-60,820/mt for high-quality copper. Spot copper prices hit a high of RMB 61,000/mt during the trading day. Downstream producers generally stood on the sidelines, while speculative interest weakened owing to the continuously falling copper discounts. Consequently, trading volumes fell significantly compared with the prior day, and market transactions stagnated at nearly RMB 61,000/mt. Copper inventories tracked by the SHFE increased by 18,311 mt to 198,202 mt in the week ending February 10th, indicating market players delivered goods. 

Aluminum
The most active SHFE aluminum contract for delivery in May stayed above RMB 16,300/mt and only hit RMB 16,355/mt last Friday, before closing RMB 20/mt or 0.12% higher at RMB 16,325/mt. The contract has been struggling at the 10-day moving average lacking buying support. The latest SHFE aluminum stocks climbed 23,316 mt to 306,819 mt as the delivery date nears, restraining rebound of aluminum prices.

Spot aluminum traded mainly between RMB 15,900-15,940/mt in Shanghai, at discounts of RMB 50-90/mt over the SHFE current-month aluminum price. Though the current-month contract failed to break through the RMB 16,000/mt mark and stock replenishments from downstream were limited, more goods holders held quotations at RMB 15,900/mt as the delivery date nears. Spot and futures arbitrage trading and position opening for delivery dominated the day’s market.

Lead
On Friday, SHFE lead prices fell after opening higher. Although LME lead prices overnight rose as much as 1.6%, SHFE lead prices did not increase notably with prices opening slightly higher at RMB 16,225/mt in the morning and soon fell to move between RMB 16,100-16,150/mt. In the afternoon, prices dropped further to hit RMB 16,045/mt due to the falling LME lead prices but stopped declining at the tail of trading to move between RMB 16,080-16,130/mt. SHFE lead prices finally closed at RMB 16,070/mt, down RMB 55/mt. Trading volumes decreased by 214 lots to 108 lots, and positions decreased by 52 lots to 1,666 lots.

Quotations for domestic well-known brands such as Chihong Zn & Ge and Chengyuan were at RMB 15,980-16,000/mt, with discounts against the most active SHFE lead contract price at RMB 150-170/mt. Lead from Gejiu were rarely sold. In the afternoon, markets remained quiet, with quotations for branded lead at RMB 15,950/mt. Smelters were actively selling goods but downstream buyers only purchased on an as-needed basis, leaving transactions modest.

 Zinc
Last Friday, SHFE three-month zinc contract prices opened slightly higher at RMB 16,265/mt, trying to rise but meeting resistance in the morning session to move between RMB 16,150-16,250/mt. As a large number of longs left the market with profit-taking, SHFE three-month zinc contract prices fell below the moving average and finally closed at RMB 16,130/mt, down RMB 50/mt.

In domestic spot markets, discounts of #0 zinc were between RMB 300-350/mt, with traded prices between RMB 15,850-15,900/mt. #1 zinc prices were around RMB 15,800/mt, with discounts of RMB 420/mt. Imported zinc prices were quoted RMB 470/mt below SHFE three-month zinc contract prices. Traders were actively purchasing due to favorable discounts. Discounts fell to RMB 280/mt in the afternoon as SHFE zinc prices dipped, but downstream buying interest was still low.

Tin
Spot tin prices were generally stable in Shanghai last Friday. Quotations were little changed from Thursday in the morning and climbed in the afternoon supported climbing LME tin prices and firm quotations by smelters. More downstream businesses from Guangdong struck deals in the face of rising prices and increasing demand after production resumed. Traded prices of the day mainly fell between RMB 177,500-182,000/mt while traded volumes rose a little bit. Mainstream tin brands were Yunxi, Yunheng, Yunxiang, Nanshan and Jinlong.

Nickel
During last Friday’s Asian trading hours, the US dollar rebounded, exerting pressure on LME nickel prices. According to data from China Customs, China’s traded surplus expanded in January. Although the expanding trade surplus was due partly to holiday factors, the weaker import data indicated weak economy in the US and euro zone. Affected by the decline in the US dollar and China’s trade data, LME nickel prices slipped slightly. During the European and the US trading hours, a slew of important economic data will be released from the US, Germany, France and Italy, which will affect LME nickel price movement.

Last Friday, Jinchuan Group raised ex-works nickel prices by RMB 2,000/mt, to RMB 147,000/mt. In response, offers in the Shanghai nickel spot market advanced as well. In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 146,500-147,000/mt, and mainstream traded prices of nickel from Russia were between RMB 145,200-145,500/mt during the morning trading hours. As LME nickel prices slipped and market demand was lackluster, mainstream traded prices of Jinchuan nickel were between RMB 146,300-146,500/mt and mainstream traded prices of Russian nickel between RMB 145,000-145,200/mt during the afternoon trading hours. Transactions, however, were sluggish in the market due to low price acceptance, with wait-and-see sentiment prevailing in the market.