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SMM Dail Review - 2012/3/16 Base Metals Market
Mar 19,2012 09:22CST
smm insight
As LME copper prices closed up overnight, SHFE 1206 copper contract prices, the most active one, opened RMB 580/mt higher at RMB 60,860/mt Friday.

SHANGHAI, Mar. 19 (SMM) --


As LME copper prices closed up overnight, SHFE 1206 copper contract prices, the most active one, opened RMB 580/mt higher at RMB 60,860/mt Friday. As some long investors left the market before the midday, SHFE copper prices failed to break resistance at RMB 61,000/mt substantively, with a high at RMB 61,050/mt. Near the midday, as rubber on the SHFE dived, and as short investors imposed selling pressures, SHFE copper prices began to come under pressure at the daily moving average and drifted slightly lower. In the afternoon session, Chinese stock markets rallied to 2,400, helping SHFE copper prices fluctuate narrowly around RMB 60,700/mt, with a low at RMB 60,580/mt. Finally, SHFE 1206 copper contract prices closed at RMB 60,780/mt, up RMB 500/mt or 0.83%. Positions for SHFE 1206 copper contract were down 4,434 lots, and trading volumes were down 1,248 lots. Despite support at RMB 60,500/mt, SHFE copper prices lacked upside momentum.

As SHFE 1204 copper contract prices surged by RMB 400/mt, spot copper discounts expanded after SHFE 1203 copper contract was delivered, up to between negative RMB 350-260/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,930-60,080/mt, and RMB 59,970-60,170/mt for high-quality copper. Spot copper supply remained sufficient during the whole trading day. Traders bought high-quality copper given large discounts, while downstream producers stood on the sidelines above RMB 60,000/mt. Therefore, market transactions were mainly conducted by traders in the morning session. In the afternoon session, SHFE copper prices trended lower, but spot copper discounts failed to narrow, while traded prices inched down to between RMB 59,900-60,050/mt. Copper inventories monitored by the SHFE increased by 2,495 mt in the week ending March 16th, showing the characteristic that SHFE 1203 copper contract was delivered during the week and also indicating sluggish copper consumption. 


The most active SHFE aluminum contract for May delivery closed down RMB 5/mt or 0.03% at RMB 16,150/mt after a higher opening at RMB 16,190/mt last Friday, with only 2,702 lots of transactions being reported. Positions of the SHFE aluminum contract for June delivery climbed 1,678 lots and its transacted volume beat that of the May contract.

Spot aluminum was traded between RMB 15,960-15,990/mt in Shanghai, at discounts of RMB 60-90/mt over the SHFE current-month aluminum price. Trading in Wuxi was relatively active supported by strong local demand. The current-month contract stabilized at RMB 16,050/mt following its change to April delivery. Its stability failed to push spot price above RMB 16,000/mt, however, restrained by weak demand.


On Friday, SHFE lead prices opened RMB 100/mt higher at RMB 15,965/mt and hit a high of RMB 16,020/mt briefly but fell to the opening price due to a lack of up momentum. At the tail of trading, prices gained support at RMB 15,950/mt and finally closed at RMB 16,015/mt, up RMB 165/mt or 1.04%. Traded volumes decreased by 140 lots to 216 lots and positions were up 30 lots to 1,498 lots.

In domestic spot markets, quotations for brands such as Chihong Zn & Ge, Nanfang were at RMB 16,000/mt initially, close to SHFE 1205 lead contract price, and fell to RMB 15,950/mt later. Other brands such as Shenqian were quoted at RMB 15,800/mt, and quotation for Dongling was at RMB 15,870/mt. In the afternoon, prices did not show significant change, well-known brands were quoted at RMB 15,930/mt. Transactions were limited due to high prices.


Last Friday, SHFE three-month zinc contract prices opened at RMB 15,975/mt and moved between RMB 15,950-16,050/mt in the morning session. Dragged down by LME zinc prices, SHFE three-month zinc contract prices fell below the moving average and rallied to close at RMB 15,980/mt, up RMB 105/mt.

In domestic spot markets, discounts of #0 zinc were between RMB 320-350/mt, with traded prices around RMB 15,650/mt, and #1 zinc was traded around RMB 15,600/mt. A few traders sell goods as discounts expanded, and transactions were mainly made among traders.


Spot tin was traded little changed between RMB 172,500-173,500/mt last Friday in Shanghai as LME tin prices continued to stagnate. Trading at the lower band of RMB 172,500-173,000/mt was relatively active and was contributed by Yunshan, Feidie, Nanshan, Jinlong, Guangsheng and Nancang. Yunxi struck limited deals at the higher band of RMB 173,000-173,500/mt. Quotations at RMB 174,000/mt were heard but transactions were hardly made.


The recent strong non-farm employment data and upbeat retail sales data from the US and the low likelihood of QE3 boosted the US dollar to rally. In response, the US dollar hit the highest level last seen in November 2011, but met strong resistance to climb further after profit-taking. In this context, the US dollar extended gains slowly during last Friday’s Asian trading hours, allowing LME nickel prices to advance slightly. It is expected that LME nickel prices will continue to test resistance at 5-day moving average and support at 10-day moving average on Friday night.

During morning trading hours in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 137,500-137,700/mt, and mainstream traded prices of nickel from Russia were in the RMB 136,500-136,700/mt range. Traders slightly lowered prices in the afternoon trading hours in order to promote sales, so traded prices of Jinchuan nickel were in the RMB 137,300-137,500/mt range and Russian nickel were around RMB 136,500/mt, with few volume traded at RMB 137,000/mt at the tail of the trading. According to market players, tight supply of Russian nickel has eased to certain extent, so price spread between Jinchuan nickel and Russian nickel shall expand to reasonable levels. 


base metals

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