SMM Daily Review - 2012/3/7 Base Metals Market

Shanghai, Mar. 8 (SMM) --

Copper

As LME copper prices dived overnight, SHFE 1206 copper contract prices, the most active one, opened RMB 1,400/mt down at RMB 59,180/mt Wednesday. After the opening, SHFE copper prices shook off the lows rapidly as long investors entered the market, moving higher slowly after gaining support at RMB 59,030/mt. Later, as Chinese stock markets rallied, SHFE copper prices accelerated rising momentum and pared previous declines gradually, but still met resistance at RMB 59,650/mt. At the tail of trading, SHFE copper prices failed to rally and remained weak, since Chinese stock markets lost 2,400 points. SHFE 1206 copper contract prices finally ended at RMB 59,470/mt, down RMB 1,110/mt or 1.83%. Positions for SHFE 1206 copper contract were up 12,314 lots, and trading volumes were up 14,440 lots. SHFE copper prices faced new resistance at RMB 60,000/mt, but were supported at near RMB 59,000/mt, with limited upside room expected.
 
In spot markets, as SHFE copper prices plunged, copper discounts continued to fall. Mainstream offers were reported between discounts of negative RMB 70/mt and premiums of positive RMB 30/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,700-58,820/mt, and RMB 58,750-58,880/mt for high-quality copper. Spot copper prices fell below RMB 59,000/mt, helping hedged copper come into markets. Spot copper supply increased significantly as a result. Downstream producers believed there was still downside room for copper future prices, so made appropriate purchases at the lows. Copper premiums failed to sustain, and even turned into slight discounts due to position closings at the tail of trading. Market surpluses appeared again.

Aluminum

The most active SHFE aluminum contract for delivery in May opened lower at RMB 16,100/mt on Wednesday following plunges in LME aluminum prices and European and US stock prices. The contract recovered slightly backed by the climbing Shanghai Composite Index before closing at the intraday low of RMB 16,165/mt of the previous trading day. Transacted contracts were 7,972 lots while positions dropped 994 lots to 51,478 lots. Light trading has been limiting the moving band while support still exists at the 60-day moving average.
 
Spot aluminum traded between RMB 15,870-15,910/mt in Shanghai, at discounts of RMB 30-70/mt over the SHFE current-month aluminum price. Low-iron aluminum traded between RMB 15,980-16,000/mt. Spot aluminum prices in Wuxi were between RMB 15,870-15,910/mt. Spot discounts dropped further as the current-month SHFE aluminum contract dipped further. Trading stayed light as even inquiries were quiet among both middlemen and downstream.

Lead

On Wednesday, SHFE lead prices opened below the 60-day moving average and moved around RMB 15,660/mt due to the plunge of LME lead prices overnight. In the morning, SHFE lead prices failed to move up along with Chinese domestic stocks and LME lead prices and kept hovering around RMB 15,670/mt. In the afternoon, prices continued the weak track and finally closed at RMB 15,630/mt, down RMB 345/mt. Traded volumes increased by 288 lots to 578 lots and positions were down 224 lots to 1,338 lots.
 
In China’s domestic spot markets, quotation for well-known brands such as Chihong Zn & Ge, Chengyuan were around RMB 15,680/mt, close to most active SHFE lead contract price. Yubei lead was quoted at RMB 15,680/mt, and quotations for Shenqian from Fujian at RMB 15,600/mt, but limited deals were done. In the afternoon, some traders cut prices further with Chihong Zn & Ge quoted at RMB 15,650/mt. Lead prices showed sharp declines today, smelters believed downward scope should be limited, and were reluctant to move goods. Downstream consumption improved.

Zinc

On Wednesday, SHFE 1206 zinc contract prices became the most actively traded, with prices opening lower at RMB 15,560/mt tracking LME zinc prices overnight and fluctuating around the moving average during the day. At the end of trading, SHFE 1206 zinc contract prices dipped due to falling Shanghai Composite Index, and finally closed at RMB 15,615/mt, down RMB 305/mt. Trading volumes increased by 180,360 lots, and total position increased by 20,818 lots to 145,050 lots.
 
In domestic spot markets, discounts of #0 zinc narrowed to RMB 180-220/mt, with traded prices between RMB 15,300-15,350/mt. #1 zinc was traded between RMB 15,250-15,300/mt. traders were actively moving goods while downstream buying interest also improved, but transactions were muted due to unclear price trends.

Tin

Despite reduced supply, spot tin prices dropped further to RMB 169,500-171,000/mt in Shanghai on Wednesday due to weak demand and losses in LME tin prices. Nanshan and Jinlong branded ingots were traded at the low-end RMB 169,500/mt. Feidie, Yunxiang, Yunshan and Yunxi struck deals between RMB 170,000-171,000/mt. Quotations at RMB 171,500/mt were heard but no deals were concluded.

Nickel

During Wednesday’s Asian trading hours, LME nickel prices rebounded slightly to move around USD 18,850/mt after opening at USD 18,690/mt. Greek private creditors had to vote over the debt swap deal which aims to 53.5% write-down of its EUR 177 debt. Investors concern that an agreement may not be reached on debt restructuring plan, which may inevitably cause Greek debt default. Therefore, LME nickel prices still face downward pressure. 

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 134,200-134,500/mt, and mainstream traded prices of nickel from Russia were between RMB 133,900-134,100/mt during the morning trading hours. Supply of Jichuan nickel was ample in the market, while Russian nickel traders were reluctant to move goods as spot nickel prices were lower than converted LME nickel prices, leaving narrow price spread between Jinchuan nickel and Russian nickel. It was reported that some Jinchuan nickel were traded at RMB 134,000/mt, flat from prices of Russian nickel. In the afternoon trading hours, traded prices of spot nickel advanced to certain extent. Mainstream traded prices of Jinchuan nickel were around RMB 134,500/mt, and Russian nickel around RMB 134,000/mt.