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SMM Daily Review – 2012/2/28 Base Metals Market
Feb 29,2012 09:27CST
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SHFE 1205 copper contract prices, the most active one, opened RMB 10/mt up at RMB 60,420/mt Tuesday.

SHANGHAI, Feb. 29 (SMM) --

SHFE 1205 copper contract prices, the most active one, opened RMB 10/mt up at RMB 60,420/mt Tuesday. After the opening, as LME copper prices stood steadily above USD 8,500/mt after the US dollar gave up some of overnight gains, SHFE copper prices moved higher after fluctuating briefly, with an intraday low only at RMB 60,370/mt. In the afternoon session, as long investors entered the market, SHFE copper prices continued to rise and touched an intraday high at RMB 61,070/mt at the tail of trading, after triggering short investors' stop-loss limit. Finally, SHFE 1205 copper contract prices closed at RMB 61,060/mt, up RMB 650/mt or 1.08%. Positions for SHFE 1205 copper contract were up 596 lots, while trading volumes were down 101,000 lots. SHFE copper prices already stood above recent daily moving averages and were expected to test resistance at RMB 60,000/mt for the near future.

In spot markets, SHFE copper prices stood above RMB 60,000/mt, but the supply of high-quality copper decreased due to aggressive buying from traders who had no cash flow pressures. In this context, mainstream spot copper discounts fell slightly to between negative RMB 450-350/mt in Tuesday's morning business. Traded prices for standard-quality copper were between RMB 59,550-59,650/mt, and RMB 59,600-59,750/mt for high-quality copper. Downstream producers stood on the sidelines at the RMB 60,000/mt mark, and tight cash flows at the month-end continued to dominate the market, keeping market activity light. In the afternoon business, as SHFE copper prices rose steadily, cargo-holders became more optimistic about future copper prices, helping spot copper discounts hold the morning business levels. Traded prices increased to between RMB 59,850-60,050/mt in the afternoon session, but market transactions were greatly depressed at above RMB 60,000/mt.

The most active SHFE three-month aluminum contract opened at RMB 16,255/mt and closed up RMB 20/mt or 0.12% at RMB 16,270/mt on Tuesday. SMM expects the contract to struggle near the RMB 16,250/mt mark lacking direction and in the meanwhile trying to gather upward momentum.

Spot aluminum traded between RMB 15,880-15,920/mt in Shanghai, at discounts of RMB 130-170/mt over the SHFE current-month aluminum price. Due to stagnating SHFE current-month aluminum price, gains in other base metals failed to boost buying interest for the light metal. In addition, tight cash flow at month's end further dampened the already weak downstream demand. Discounts of spot aluminum in Wuxi over Shanghai aluminum spot narrowed further and even converted to slight discounts while the traded volume stayed light.

On Tuesday, SHFE lead prices opened higher at RMB 16,200/mt and moved above the moving averages in the morning due to the positive US economic data. In the afternoon, the US dollar index fell, and LME lead prices rose to RMB 16,360/mt, the intraday high and a new high since February. Later, SHFE lead prices fell to RMB 16,300/mt and finally closed at RMB 16,310/mt, up RMB 160/mt. Trading volumes increased by 150 lots to 628 lots and positions were up 26 to 1,942 lots.

In China's domestic spot markets, quotation for well-known brands such as Chihong Zn & Ge, Chengyuan and Nanfang were between RMB 16,000-16,050/mt in the morning, with discounts against the most active SHFE lead contract price expanding to RMB 200-250/mt, but traded prices were mainly at RMB 15,970-16,020/mt. Buyers were more willing to trade with several traders offering lower quotations. In the afternoon, SHFE lead prices rose above RMB 16,300/mt, and quotations for Chihong Zn & Ge were adjusted to RMB 16,080/mt, but purchases were still limited on the whole, and smelters were more willing to move goods at prices above RMB 16,000/mt.

On Tuesday, SHFE three-month zinc contract prices opened at RMB 15,980/mt, rising to struggle at RMB 16,000/mt level after opening. As the weakening US dollar index boosted LME zinc prices at noon, SHFE three-month zinc contract prices surged to RMB 16,140/mt in the afternoon, and finally closed at RMB 16,125/mt, up RMB 185/mt. Trading volumes increased by over 40,000 lots to 196,732 lots, and  positions increased by 7,746 lots to 194,288 lots.

In domestic spot markets, #0 zinc was traded between RMB 15,700-15,750/mt, with transactions made at the low end, and with discounts between RMB 340-370/mt against SHFE three-month zinc contract prices. #1 zinc was traded between RMB 15,650-15,700/mt. Downstream buyers purchased on an as-needed basis, while discounts expanded modestly as registered brands available in the market were limited.

Spot tin prices narrowed further to RMB 173,500-175,000/mt in Shanghai on Tuesday after the low end climbed another RMB 500/mt. Trading was still light, though. Yunshan, Yunxiang and Nanshan branded tin traded between RMB 173,500-174,000/mt while Yunxi and Yunheng struck deals between RMB 174,000-175,000/mt. A strong wait-and-see sentiment was seen as both sellers and buyers were cautious for near term deals.

After opening at USD 20,164/mt, LME nickel prices broke through 10-day and 5-day moving average consecutively and hit a high at USD 20,336/mt during the Tuesday's Asian trading hours, which was mainly boosted by that Germany Parliament passed second round Greek bailout agreement at 4:00 pm. During the European and US trading hours, market optimism may grow due to the European Central Bank's three-year long term refinancing operation (LTRO) to be implemented on Wednesday.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 139,800-140,000/mt, and mainstream traded prices of nickel from Russia were between RMB 139,200-139,500/mt due to tight supply and firm offers during the morning trading hours. During the afternoon trading hours, mainstream traded prices of nickel from Russia advanced to RMB 139,500/mt amid LME nickel price hike, leaving price spread between Russian nickel and Jinchuan nickel as narrow as RMB 500/mt.









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