SMM Daily Review - 2012/2/21 Base Metals Market

SHANGHAI, Feb. 22 (SMM) --
Copper:
As LME copper prices continued to close down overnight, SHFE 1205 copper contract prices, the most active one, opened RMB 430/mt down at RMB 59,250/mt Tuesday. The SHFE copper contract for delivery in May drifted higher after the opening owing to position closings, fluctuating in a broad band during the whole trading day and with the low-end price at RMB 59,230/mt and high-end price at RMB 60,120/mt. Lifted by rising Chinese stock prices, SHFE copper prices surged above the daily moving average in the afternoon session, and held the RMB 60,000/mt benchmark at the tail of trading. Finally, SHFE 1205 copper contract prices closed at RMB 60,050/mt, up RMB 370/mt or 0.62%. Positions for 1205 copper contract were down 13,120 lots, while trading volumes were up 143,000 lots. SHFE copper prices got temporary support at the 30-day moving average of RMB 59,250/mt, but would continue to test resistance at RMB 60,000/mt.

In the spot market, as SHFE copper prices fluctuated in a broad band, and as spot copper supply remained ample after hedged copper came into the market amid falling prices, spot copper discounts expanded further to between negative RMB 420-300/mt in Tuesday’s morning business. Traded prices for standard-quality copper were between RMB 58,750-59,050/mt, and RMB 58,800-59,200/mt for high-quality copper. Domestic copper smelters reduced sale volumes owing to excessive copper discounts, while traders were wary of buying due to severe fluctuations in copper prices. Downstream producers had no intention of buying when copper prices surged abruptly in the session. Market transactions failed to improve as a result, leaving market surpluses more pronounced. In the afternoon business, SHFE copper prices drifted higher, but spot copper discounts rose to between negative RMB 450-350/mt, while traded prices stood above RMB 59,000/mt, causing transaction volumes to fall.   

Aluminum:
SHFE aluminum contract for delivery in may, the most active one, closed higher at RMB 16,180/mt, the intraday high, during Tuesday’s trading. Transactions were 7,862 lots and positions dropped further by 486 lots to 58,652 lots. Gains of the metal were mainly contributed by stop loss of shorts and longs were still refrained from any big moves. SHFE aluminum prices therefore will continue to be pressured by climbing stocks and slowly recovering demand.

Spot aluminum prices were between RMB 15,850-15,880/mt in Shanghai, at discounts of RMB 100-120/mt over the SHFE current-month aluminum price. Goods flew actively among middlemen and deals were mainly done for lower-priced goods. Some still bullish traders kept their quotations high. On a general perspective, the buying interest is still depressed due to weak demand, high stocks and supply sufficiency.

Lead:
On Tuesday, SHFE lead prices fluctuated between RMB 15,700-15,770/mt after opening. At around 10:50 a.m., euro zone finance ministers reached agreement on the second round of Greek bailout loans. In response, LME lead prices moved up to touch a high of RMB 15,800/mt. In the afternoon, SHFE lead prices maintained at RMB 15,800/mt and rose at the tail of trading with prices finally closing at RMB 15,820/mt, up RMB 135/mt or 0.86%. Trading volumes increased by 74 lots to 328 lots and positions were up 140 to 2,116 lots.

In China’s domestic spot markets, initial quotations for well-known brands such as Chihong Zn & Ge, Chengyuan, Nanfang and Shuikoushan were RMB 15,700/mt, with discounts against the most active SHFE lead contract price at RMB 50/mt. Other brands such as Shenqian from Fujian Province were mainly quoted at RMB 15,600/mt. As market players were optimistic to the result of euro zone finance ministers’ meeting, and downstream buyers, expecting an increase in lead prices, were more actively making inquiries and purchased on an as-needed basis. At around 10:50 a.m., euro zone finance ministers reached agreement on the second round of Greek bailout loans, SHFE lead prices moved up to RMB 15,800/mt. In domestic spot market, prices of branded lead increased to RMB 15,750-15,770/mt, maintaining discounts against the most active SHFE lead contract price. Prices of Shenqian lead from Fujian also rose by RMB 20/mt to RMB 15,620/mt. In the afternoon, SHFE lead prices moved around RMB 15,800/mt, and spot prices rose further, with branded lead quoted at RMB 15,780/mt. Buying interest was low after the increase in prices.

Zinc:
On Tuesday, SHFE three-month zinc contract prices opened at RMB 15,615/mt, attempting to touch RMB 15,750/mt in the morning session, but falling below the moving average as shorts were selling goods. It was reported euro zone finance ministers reached an agreement on the EUR 130 billion of bailout fund to Greece, and that Greek debt will be cut to 120% of its GDP by 2020, boosting market confidence. In this context, the Shanghai Composite Index rising, and SHFE three-month zinc contract prices rallied to the moving average and moved between RMB 15,750-15,800/mt in the afternoon, and finally closed at RMB 15,780/mt, up RMB 125/mt.

In domestic spot markets, #0 zinc was traded between RMB 15,400-15,450/mt, with discounts between RMB 270-280/mt against SHFE three-month zinc contract prices. #1 zinc was traded between RMB 15,300-15,350/mt. Downstream buying interest weakened as zinc prices rose, with transactions mainly made among traders.

Tin:
Mainstream spot tin prices were hardly changed between RMB 171,500-176,000/mt in Shanghai on Tuesday. Nanshan, Jinlong and Kaiyuan branded tin traded between RMB 171,500-172,000/mt. Goods quoted between RMB 170,500-171,000/mt were supplied by Jiangxi sellers to promote deals and were quickly consumed. Yunshan and Yunxiang branded tin traded between RMB 173,000-174,500/mt. Yunxi and Yunheng branded tin traded between RMB 175,000-176,000/mt. Purchases at lower prices increased after European finance ministers agreed on the second Greek bailout. Whether such deals can continue, however, is still uncertain given weak demand.

Nickel:
Mainstream traded prices of nickel from Jinchuan Group were around RMB 140,000/mt, while mainstream traded prices of nickel from Russia were around RMB 139,000/mt. Euro zone finance ministers sealed a deal for a second bailout for Greece, helping boost trader and downstream consumer confidence. But the caution still dominated the market given severe volatility in LME nickel prices recently, keeping trading activity in check.