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SMM Daily Review - 2012/3/6 Base Metals Market
Mar 7,2012 09:51CST
smm insight
Overview of base metal prices on March 6th.

Shanghai, Mar. 7 (SMM) -

As LME copper prices slumped overnight, SHFE 1206 copper contract prices, the most active one, opened RMB 320/mt down at RMB 61,000/mt Tuesday. After the opening, SHFE copper prices followed LME copper prices to slide all the way, with an intraday high only touching RMB 61,050/mt. As Chinese stock markets fell by 1.4%, SHFE copper prices gathered falling momentum in the afternoon session and retreated to as low as RMB 60,270/mt. Finally, SHFE 1206 copper contract prices ended at RMB 60,390/mt, down RMB 930/mt, or a loss of 1.52%. Positions for SHFE 1206 copper contract were up 12,238 lots, and trading volumes were up 61,784 lots. Due to downside technical indicators and increasing selling pressures from short investors, SHFE copper prices were likely to lose RMB 60,000/mt.

Discounts on spot copper were reported between negative RMB 130-70/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 59,650-59,850/mt during the trading day, and RMB 59,700-59,900/mt for high-quality copper. SHFE copper prices moved lower due to increasing resistance, so spot copper discounts fell further. Spot copper supply remained stable. High-quality copper was sought by traders, while downstream producers still hesitated to make purchases, keeping market activity light.

Overnight losses in LME metals led to a lower opening price of the SHFE three-month aluminum contract, which finally settled down RMB 60/mt or 0.37% at RMB 16,175/mt. Transacted contracts were only 7,420 lots due to tight liquidity. Positions of the contract dropped 696 lots to 52,742 lots. SMM expects the contract to stay below RMB 16,200/mt in the near term as a result of sufficient supply and weak demand.

Spot aluminum prices dropped to RMB 15,900-15,930/mt in Shanghai, at discounts of RMB 50-80/mt over the SHFE current-month aluminum price, as SHFE aluminum prices slipped. Low-iron aluminum was traded between RMB 16,000-16,020/mt. The light metal was traded between RMB 15,900-15,930/mt in Wuxi. Spot discounts narrowed as spot quotations held at RMB 15,900/mt despite light trading.
On Tuesday, SHFE three-month zinc contract prices opened at RMB 15,970/mt, and then fell below the moving average later in the day. In the afternoon, SHFE three-month zinc contract prices dipped to RMB 15,720/mt following LME zinc prices overnight, and finally closed at RMB 15,760/mt, down RMB 290/mt. Large numbers of shorts entered the market actively. Trading volumes decreased by 48,604 lots to 131,060 lots, and total position decreased by 8,296 lots to 148,190 lots.

In domestic spot markets, discounts of #0 zinc were between RMB 250-270/mt, with traded prices between RMB 15,600-15,650/mt. discounts narrowed to RMB 230/mt as SHFE zinc prices fell, with transactions limited, and #1 zinc was traded between RMB 15,500-15,550/mt. downstream buyers were cautious until zinc prices stabilize, while traders moved goods actively, but the overall transactions were muted. Spot discounts remained at RMB 230/mt in the afternoon, and zinc prices fell around RMB 15,500/mt, causing downstream buying interest to improve.

On Tuesday, SHFE lead prices fell below RMB 16,000/mt after opening down and then moved around RMB 15,950/mt due to the falling LME lead prices. In the afternoon, SHFE lead prices dipped a low of RMB 15,910/mt level as the US dollar index increased and finally closed at RMB 15,900/mt, down RMB 255/mt. Traded volumes increased by 216 lots to 290 lots and positions were down 146 lots to 1,562 lots.

In China’s domestic spot markets, quotation for well-known brands such as Chihong Zn & Ge, Chengyuan and Nanfang were between RMB 15,850-15,870/mt, with discounts against the most active SHFE lead contract price at RMB 100/mt. Other brands such as Shenqian from Fujian and lead from Gejiu region were quoted at RMB 15,800/mt, but with scarce deals done. Most smelters only waited on the sidelines as financial pressures were eased early in the month and market outlook remained unclear. Traders were actively buying goods, leaving supply relatively tight, but transactions did not improve significantly.

Spot tin trading was quite light even mainstream traded prices dropped to RMB 171,000-173,000/mt, mainly due to slipping LME tin prices, in Shanghai on Tuesday. Nanshan and Jinlong branded ingots were traded at RMB 171,000/mt. Yunxiang, Feidie and Yunshan branded ingots struck deals between RMB 171,500-172,500/mt while Yunxi and Yunheng concluded transactions between RMB 172,500-173,000/mt. Quotations above RMB 173,000/mt were heard but met cold response.

In the Shanghai nickel market, mainstream traded prices of Jinchuan nickel were between RMB 135,300-135,500/mt, and RMB 135,000-135,200/mt for Russian nickel. Jinchuan Group cut ex-works prices of refined nickel to RMB 135,000/mt (large plate), and RMB 136,200/mt (small in barrel), down by RMB 4,000/mt, briefly stimulating spot purchasing demand, with brisk inquiries reported.

Cargo-holders of Russian nickel were reluctant to move goods due to limited supply of goods from earlier high prices. Goods for market transactions were mainly Jinchuan nickel, and the price gap between Jinchuan and Russian nickel briefly narrowed to RMB 200-300/mt. Market transactions turned quiet in the afternoon business as futures nickel prices kept falling.

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