SMM Daily Review - 2012/2/14 Base Metals Market

SHANGHAI, Feb 15 (SMM) –

Copper
As LME copper prices extended losses overnight, SHFE 1205 copper contract prices, the most active one, opened RMB 410/mt down at RMB 60,390/mt Tuesday. SHFE three-month copper contract prices continued to fluctuate around the daily moving average after the opening and just rose to RMB 60,480/mt at the high-end. In the afternoon business, as LME copper prices retreated to test support at USD 8,400/mt, and as Chinese stock markets closed with losses, SHFE three-month copper contract prices drifted lower to near RMB 60,150/mt and completely came under pressure at the daily moving average, with the lowest price touching RMB 60,040/mt. Finally, SHFE 1205 copper contract prices closed at RMB 60,080/mt, down RMB 720/mt or 1.18%. Positions for SHFE 1205 copper contracts were up 14,858 lots, while trading volumes were down 60,862 lots, with selling pressures rising. SHFE copper prices continued to slip following the previous two days’ declines, with RMB 60,000/mt becoming the focus of long and short investors.

In the spot market, mainstream copper offers were reported between discounts of negative RMB 20/mt and premiums of positive RMB 80/mt in the morning business, as copper prices continued to come under pressure, and as cargo-holders insisted on premiums due to the approach of the delivery date for SHFE 1202 copper contracts. Traded prices for standard-quality copper were between RMB 59,350-59,420/mt, and RMB 59,400-59,500/mt for high-quality copper. Despite a continuous drop in traded prices, downstream producers’ buying interest was depressed owing to prevailing copper premiums, so overall demand was weak. Overall market supply also decreased, leaving market activity extremely quiet. In the afternoon session, SHFE copper prices fell, but the wait-and-see sentiment was heightening, causing copper premiums to fall. Copper offers were generally between discounts of negative RMB 10/mt and premiums of positive RMB 60/mt in the afternoon business, while traded prices slid to between RMB 59,150-59,250/mt.

Aluminum
The most active SHFE aluminum contract for delivery in May closed down RMB 75/mt or 0.46% at RMB 16,215/mt on Tuesday after moving narrowly below the recent moving averages, partly due to weak performance of LME aluminum. Transactions were still below 10,000 lots, which effectively limited the moving range. Stagnation of the moving averages means pressure is mounting. SMM expects the contract to test support at the 30-day moving average in the near term.

Spot aluminum traded between RMB 15,880-15,920/mt in Shanghai, at discounts of RMB 20-60/mt over the SHFE current-month aluminum price. A slight loss of RMB 20/mt was seen based on the average traded price. Purchases from downstream buyers, however, were not much encouraged and stayed little changed. In contrast, goods holders have become less willing to move goods after the drop. Spot aluminum price is still in a downward passage in East China due to high stocks, weak futures prices and sluggish demand. However, support at RMB 15,900/mt is building up. Light trading therefore is expected to dominate the near term aluminum market.

Lead
On Tuesday, the most active SHFE lead contract price opened below RMB 16,000/mt and fell slightly due to the downgrade of several eurozone countries and Spanish banks. In midday, SHFE lead prices were boosted by the increasing domestic stocks and rose to moving averages, but met resistance later due to increase in the US dollar index and falling LME lead prices. Prices finally closed at RMB 15,820/mt, down RMB 195/mt or 1.22%. Trading volumes increased by 64 lots to 240 lots, positions decreased by 176 lots to 1,384 lots.

In China’s domestic spot markets, quotations for Chihong Zn & Ge were between RMB 15,820-15,850/mt, while lead of Chengyuan was quoted around RMB 15,800/mt, with discounts against the most active SHFE lead contract price at RMB 120-180/mt. Others brands were quoted between RMB 15,700-15,740/mt. In the afternoon, transactions in spot markets were sparse with quotations remaining basically unchanged from morning. Buying interest among downstream enterprises did not improve, and transactions remained the same with the previous trading day.

Zinc
On Tuesday, SHFE 1205 zinc contract became the most actively traded, opening lower at RMB 16,040/mt due to weakening LME zinc prices overnight. As a large number of longs left the market in the morning session, SHFE three-month zinc contract prices plummeted below RMB 16,000/mt, but rallied to the level along with rising Shanghai Composite Index. At the end of trading, SHFE three-month zinc contract prices inched down to close at RMB 15,935/mt, down RMB 165/mt. Trading volumes increased by over 20,000 lots to 182,120 lots, and positions increased by 15,236 lots to 123,746 lots, with short momentum stronger.

In domestic spot markets, discounts of #0 zinc were between RMB 200-220/mt against SHFE three-month zinc contract prices, with traded prices between RMB 15,650-15,700/mt. #1 zinc and imported zinc were traded RMB 350-380/mt below SHFE three-month zinc contract prices between RMB 15,550-15,600/mt. Traders were actively moving goods due to narrowing discounts, but downstream buyers still preferred imported zinc, with the overall transactions quiet.

Tin
Spot tin prices dropped further to RMB 175,000-180,000/mt in Shanghai on Tuesday, with the low-end slipping by nearly RMB 2,000/mt, after Moody’s cast more downgrades for European countries and due to weak demand and losses in LME tin prices. Goods holders’ selling interest was strong but buying interest was weak at downstream buyers who mostly have been consuming stocks prepared ahead of Chinese New Year. In addition, low operating rates at downstream means consuming of existing stocks will last. A strong wait-and-see attitude was present in the market. Mainstream tin brands of the day were Yunxi, Nanshan and Jinlong and the traded volume stayed light.

Nickel
During Thursday’s Asian trading hours, LME nickel prices continued to slip as the euro versus the US dollar fell due to negative impact from Moody’s credit cut of several European countries on Monday. As of 3:45 pm, LME nickel prices hit a low of USD 20,313/mt and fell to around 30-day moving average. During European and the US trading hours, LME nickel prices were still weighed by negative news from the euro zone. Upward momentum of LME nickel prices is weak as market expects that no solid news will come from the euro zone before Greece receive bailout fund. Technically speaking, RSI suggests that LME nickel prices are tend to fall by USD 400/mt if falling below 30-day moving average. Otherwise LME nickel prices may rebound slightly in the short term since RSI suggested overbuying already. Generally speaking, LME nickel prices are weak, and may fall to USD 20,000/mt if prices fall below 30-day moving average. Otherwise, LME nickel prices may rebound slightly in the short term.

On Tuesday, Jinchuan Group cut ex-works nickel prices by RMB 5,000/mt, to RMB 142,000/mt. In China’s nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 143,500-144,000/mt, and mainstream traded prices of nickel from Russia were between RMB 142,200-142,500/mt during the morning trading hours. After Jinchuan Group cut its ex-works nickel prices, mainstream traded prices of nickel from Jinchuan Group were between RMB 142,700-143,000/mt, and mainstream traded prices of nickel from Russia were between RMB 141,800-142,000/mt. As Jinchuan Group cut ex-works nickel prices during the afternoon trading hours, spot nickel prices fell to the lowest level since Chinese New Year holiday, attracting some downstream bargain hunters and boosting market transactions.