SMM Daily Review - 2012/3/21 Base Metals Market

SHANGHAI, Mar. 22 (SMM) --

Copper

As LME copper prices retreated overnight, SHFE 1206 copper contract prices, the most active one, opened RMB 470/mt lower at RMB 59,980/mt Wednesday. After the opening, SHFE copper prices rose rapidly and broke resistance at the RMB 60,000/mt mark as long investors entered the market, with a low only touching RMB 59,950/mt. However, SHFE copper prices failed to break through the RMB 60,500/mt level during the whole trading day, and later returned to fluctuate near the daily moving average of RMB 60,300/mt as long investors conducted profit-taking. Finally, the most actively-traded copper contract prices ended at RMB 60,400/mt, down RMB 50/mt, or a loss of 0.08%. Positions for the most actively-traded copper contracts were down 6,734 lots, and trading volumes were down 44,772 lots. With solid support at the RMB 60,000/mt, SHFE copper prices remained fluctuating near current values. 

In spot markets, SHFE copper prices lacked momentum to rise, but some hedged copper remained locked. Overall spot copper supply stayed steady, though. Discounts on spot copper were quoted between negative RMB 320-220/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,450-59,600/mt, and RMB 59,550-59,700/mt for high-quality copper. Cargo-holders of standard-quality copper refused to offer large discounts at lower price levels, so its price gap with high-quality copper was limited. Traders and downstream producers continued to stand on the sidelines in the morning business, keeping market activity quiet. In the afternoon session, as SHFE copper prices fell slightly, spot copper discounts narrowed marginally to between negative RMB 300-200/mt. Both traders and downstream producers increased buying at the lows in the afternoon session, allowing market activity to improve from the morning business levels.

Aluminum

The most active SHFE aluminum contract for May delivery opened at RMB 16,135/mt, found its high at RMB 16,175/mt and closed down RMB 5/mt at RMB 16,160/mt on Wednesday. Positions dropped 858 lots to 44,684 lots after 3,908 lots of transactions. The contract is expected to stay in a narrow band in the near term as demand fails to pick up as in previous years lacking a direction.

Spot aluminum traded between RMB 15,970-16,000/mt in Shanghai, at discounts of RMB 50-80/mt over the SHFE current-month aluminum price. Low-iron aluminum traded between RMB 16,060-16,090/mt. Traded prices of spot aluminum in Wuxi were between RMB 15,990-16,000/mt. The SHFE current-month aluminum price moved between RMB 16,040-16,055/mt. Spot discounts were little changed. While traders with capital strength held quotations at RMB 16,000/mt, those in need of cash offered goods at lower prices, leading to a slight drop in the mainstream trading band. Trading remained light, however, as buyers stayed on the sidelines.

Lead

On Wednesday, SHFE lead prices opened lower at RMB 15,760/mt due to the slump of LME lead prices and hit as low as RMB 15,655/mt briefly, a new low since 2012. Later, SHFE lead prices found strong buying support at the RMB 15,690/mt level to move between RMB 15,680-15,730/mt, and finally closed at RMB 15,730/mt, down RMB 130/mt. Trading volumes increased by 620 lots to 888 lots and positions were up 318 lots to 1,918 lots.

Spot prices in domestic markets fell remarkably. Quotations for brands such as Yuguang and Shuikoushan were between RMB 15,730-15,750/mt, and Shenqian was quoted around RMB 15,670/mt. Prices did not change much in the afternoon. Traders were actively moving goods but most downstream buyers only purchased on an as-needed basis and directly from smelters. Only limited transactions were made.

Zinc

On Wednesday, SHFE three-month zinc contract prices opened at RMB 15,775/mt, dragged down by LME zinc prices overnight. Boosted by the strengthening Shanghai Composite Index, SHFE three-month zinc contract prices rallied but dipped to RMB 15,760/mt, with prices finally closing at RMB 15,820/mt, down RMB 70/mt.

In domestic spot markets, discounts of #0 zinc were around RMB 250-260/mt against SHFE three-month zinc contract prices, with traded prices between RMB 15,550-15,600/mt. Spot prices were firm as traders moving goods caused discounts to narrow, and remained around RMB 250/mt since SHFE zinc prices failed to rise at noon, with traded prices down to RMB 15,530-15,550/mt. #1 zinc was traded between RMB 15,460-15,500/mt. Traders were actively selling goods, while downstream buyers only purchased cautiously.

Tin

Mainstream spot tin prices slipped another day on Wednesday to RMB 170,000-172,000/mt in Shanghai. Purchases increased in the afternoon following deals at RMB 169,500/mt. Most deals were done at the lower band of RMB 169,500-170,500/mt, including those of Jinhai, Nanshan, Kaiyuan and Jinlong. Yunxi and Yunshan struck deals between RMB 171,000-171,500/mt. Deals at RMB 172,000/mt were relatively quiet. Though smelters have been reluctant to move stocks, supply is sufficient in the face of weak demand. SMM expects limited downward space for domestic tin prices as LME tin continues to stagnate.

Nickel

During Wednesday's Asian trading hours, LME nickel prices fluctuated narrowly after opening at USD 19,025/mt, hitting at high at USD 19,080/mt and touching a low at USD 18,999/mt as of 4:30 pm.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 135,200-135,400/mt, and mainstream traded prices of nickel from Russia were in the RMB 134,300-134,500/mt range. Downstream consumers still adopted a wait-and-see attitude, so trading sentiment was relatively quiet. It was reported that traded prices and trading volumes did not change much from a day earlier.