SMM Daily Review – 2012/3/14 Base Metals Market

SHANGHAI, Mar. 15 (SMM) –

Copper
As LME copper prices closed significantly higher overnight, SHFE 1206 copper contract prices, the most active one, opened RMB 450/mt higher at RMB 61,330/mt Wednesday. SHFE copper prices suffered profit-taking immediately after the opening, and as prices met resistance at RMB 61,500/mt, short investors began to enter the market, which in turn dampened prices. In the afternoon business, Chinese stock markets dived by more than 150 to below 2,400, a slump of nearly 2.7%, dragging down SHFE copper prices, which gained falling momentum and moved away from the daily moving average, with the low-end price touching RMB 60,460/mt. Finally, SHFE 1206 copper contract prices closed at RMB 60,530/mt, down RMB 350/mt or 0.57%. Positions for SHFE 1206 copper contract were up 11,330 lots, and trading volumes were up 96,586 lots. With weak support at the 30-day moving average, SHFE copper prices would test the 5-day moving average of RMB 60,500/mt.

In spot markets, as SHFE copper prices moved lower after a high open, some hedged copper was locked, leading to a drop in spot copper supply. The price gap between SHFE 1203 and 1204 copper contract remained at RMB 400/mt, so cargo-holders were unwilling to make more concessions when offering prices, which were between discounts of negative RMB 40/mt and premiums of positive RMB 50/mt in the morning business. Traded prices for standard-quality copper were between RMB 60,100-60,200/mt, and RMB 60,150-60,300/mt for high-quality copper. Downstream producers stuck to the sidelines above RMB 60,000/mt during the whole trading day, but increased purchases when copper prices slid. Overall market transactions were limited in the morning session, though. In the afternoon business, as SHFE copper prices slid faster, hedged copper came into markets, propelling cargo-holders to move goods. However, spot copper offers held firm above premiums of positive RMB 0/mt in the afternoon session, but traded prices declined to between RMB 59,700-60,050/mt, with some downstream producers stepping up purchases at the lows. 

Aluminum
The most active SHFE aluminum contract for May delivery opened higher at RMB 16,230/mt on Wednesday following overnight gains in LME aluminum, but failed stay such high after Chinese Premier Wen Jiabao said property market regulation will not loosen, closing down RMB 30/mt or 0.19% at RMB 16,165/mt. Transacted contracts increased 2,006 lots to 8,974 lots, a one-week high. SMM expects the contract to test support at RMB 16,150/mt in the near term.

Spot aluminum was traded between RMB 15,940-15,970/mt in Shanghai, at discounts of RMB 0-30/mt over the SHFE current-month aluminum price. Low-iron aluminum was traded between RMB 16,040-16,070/mt. Traders were holding quotations as the delivery date nears, narrowing spot discounts. Downstream and middlemen buying was stable but deals concentrated at low end prices.

Lead
On Wednesday, SHFE lead prices opened slightly higher at RMB 16,170/mt and fluctuated down. In the afternoon, the US dollar index surged, dragging down LME lead prices, and domestic stock markets fell slightly. As a result, SHFE lead prices dropped to RMB 15,910/mt and surrendered earlier gains to finally close at RMB 15,920/mt, down RMB 110/mt. Traded volumes increased by 2 lots to 140 lots and positions were up 16 lots to 1,408 lots.

In domestic spot markets, brands such as Chihong Zn & Ge, Yubei and Hanjiang were quoted between RMB 15,940-15,960/mt, with discounts over the most active SHFE lead price at RMB 150/mt. Prices for other brands including Wanyang were at RMB 15,850/mt. Inquiries were frequent but only limited transactions were done due to higher lead prices. In the afternoon, spot prices fell by RMB 50/mt as SHFE lead prices dropped, but transactions did not improve with demand still weak.

Zinc
On Wednesday, SHFE three-month zinc contract prices opened at RMB 16,075/mt, and fell after touching the intraday high RMB 16,175/mt below the moving average. As Premier Wen said at the press conference that China will continue to use strict regulation policies to the real estate sector since domestic house prices are still too high, SHFE zinc prices fell after opening in the afternoon, with prices closing at RMB 15,905/mt, down RMB 85/mt. Trading volumes increased by 58,662 lots to 229,496 lots, and total position decreased by 3,870 lots to 163,870 lots.

In domestic spot markets, discounts of #0 zinc were between RMB 360-400/mt, with traded prices around RMB 15,750/mt. Spot prices slid to RMB 15,700/mt at noon as SHFE zinc prices fell, and #1 zinc was traded between RMB 15,650-15,700/mt. Traders were actively in the morning session, while downstream buyers were cautious at higher prices.

Tin
Spot tin prices climbed to RMB 172,500-174,500/mt on Wednesday in Shanghai, after a jump in LME tin prices overnight. Trading was light, however, as LME tin failed to continue its upward dash and in the face of weak domestic demand. Nanshan and Guangsheng concluded deals between RMB 172,500-173,000/mt. Feidie struck deals between RMB 173,000-173,500/mt. Yunshan and Yunxi finished transactions between RMB 173,500-174,000/mt.

Nickel
During Wednesday's Asian trading hours, the US dollar index continued to advance and hit a high at 80.43, weighing on LME nickel prices to move in a narrow band after a low open. Market widely expects that Greek bailout plan will be implemented on Thursday. In addition, Fitch raised Greek long-term domestic and foreign currency issuer default rating to B-, and adjusted short-term issuer default rating from C to B, with outlook stable, indicating rating agency's recognition of Greece bailout plan. If Greece successfully implements bailout plan, LME nickel prices are expected to advance slightly.

In the Shanghai nickel spot market, Jinchuan Group raised ex-works nickel prices by RMB 3,000/mt, to RMB 138,000/mt. The price hike by Jinchuan Group stimulated downstream buying interest during the morning trading hours, with mainstream traded prices of Jinchuan nickel between RMB 138,000-138,500/mt, and mainstream traded prices of Russian nickel between RMB 137,500-137,800/mt. During the afternoon trading hours, trading sentiment turned quiet and trading volumes were also down when LME nickel prices fell. Some traders slightly lowered prices to promote sales, still failing to boost transactions.