SMM Daily Review - 2012/3/22 Base Metals Market

SHANGHAI, Mar. 23 (SMM) --

Copper

The most actively-traded SHFE 1206 copper contract opened marginally higher by RMB 30/mt at RMB 60,300/mt Thursday. SHFE copper prices posted cautious movements around the opening price after the opening while awaiting the HSBC Flash China Manufacturing Purchasing Managers' Index (PMI), which was reported after 10:30 to fall sharply. As a consequence, LME copper prices lost USD 8,400/mt, and SHFE copper prices also slid rapidly below RMB 60,000/mt. SHFE copper prices were not seen to stop falling in the afternoon session, with a low already touching RMB 59,620/mt. Finally, the most actively-traded copper contract for June delivery closed RMB 520/mt or 0.86% down at RMB 59,750/mt. Positions and trading volumes for the most actively-traded copper contract increased by 5,062 lots, and 74,864 lots, respectively. It was worth noticing that positions for SHFE 1207 copper contract were up 17,616 lots. Selling pressures were growing during the whole trading day, and SHFE copper prices lacked solid support at the low-end.

In spot markets, as SHFE copper prices fluctuated, copper discounts stagnated with light market activity. However, as SHFE copper prices slid by nearly RMB 500/mt following the release of the significantly falling HSBC Flash Manufacturing PMI data, copper discounts narrowed noticeably. Mainstream copper discounts were quoted between negative RMB 280-180/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,150-59,400/mt, and RMB 59,200-59,600/mt for high-quality copper. Cargo-holders who hedged against prices were moving goods aggressively, while others chose to withhold goods. Downstream producers significantly increased buying at the lows, helping market transactions rise after initially falling. In the afternoon session, SHFE copper prices continued to trend lower, so spot copper discounts held virtually flat with the morning business levels, while traded prices already slid to RMB 59,050/mt.  

Aluminum

The most active SHFE aluminum contract for May delivery opened at RMB 16,160/mt and closed down RMB 55/mt or 0.34% at the intraday low RMB 16,105/mt on Thursday, as the HSBC China manufacturing PMI for March slipped to 48.1%, adding worries towards economic growth of China, the world’s second largest economy. Positions of the June contract are on the rise, signaling a shift.

Spot aluminum traded between RMB 15,960-15,990/mt in Shanghai, at discounts of RMB 30-60/mt over the SHFE current-month aluminum price. Downstream buying increased slightly as SHFE aluminum prices slipped. Hedgers’ selling interest was strong. Most unilateral traders held quotations firm in the morning, but made compromises in the afternoon as mainstream traded prices slipped.

Lead

On Thursday, SHFE lead prices opened at RMB 15,685/mt. In the morning, since the HSBC PMI data for March was reported lower than expected, causing market concerns over the Chinese economic slowdown, SHFE lead prices fell by RMB 100/mt to move between RMB 15,590-15,620/mt and finally close at RMB 15,615/mt, down RMB 115/mt. Trading volumes decreased by 224 lots to 664 lots and positions were down 46 lots to 1,872 lots. SHFE lead prices may hover around RMB 15,500/mt.

In domestic spot markets, quotations for brands such as Dongling and Shuikoushan were between RMB 15,700-15,750/mt, and Shenqian was quoted around RMB 15,680/mt. Later, SHFE lead prices plunged, but spot prices were relatively resilient to declines with prices down RMB 20/mt to around RMB 15,730/mt. Traders purchased moderately with bullish outlook, while downstream buyers still purchased on an as-needed basis, leaving transactions modest.

Zinc

On Thursday, SHFE three-month zinc contract prices opened at RMB 15,750/mt, dragged down by LME zinc prices overnight. Due to lower HSBC China's PMI for March, concerns that domestic demand will improve slowly caused Asian equity markets to plunge. In this context, SHFE three-month zinc contract prices plummeted to RMB 15,650/mt, with prices finally finishing lower at RMB 15,600/mt, down 1.33%.

In domestic spot markets, discounts of #0 zinc were around RMB 250-260/mt against SHFE three-month zinc contract prices, with traded prices around RMB 15,500/mt. Discounts of #0 zinc narrowed to RMB 220-230/mt as SHFE zinc prices fell at noon, and traded prices dropped to RMB 15,420-15,450/mt, with traders actively moving goods. #1 zinc was traded between RMB 15,400-15,450/mt, dip-buying kept transactions brisk.

Tin

The downward trend of spot tin prices continued in Shanghai on Thursday, with mainstream prices dropping to RMB 169,500-171,000/mt. Jinhai, Nanshan, Kaiyuan and Jinlong struck deals at RMB 169,500/mt while Yunxi and Yunheng concluded transactions between RMB 170,000-171,000/mt. Quotations at RMB 171,500/mt were heard for some Yunxi ingots, but deals were hardly struck. Most buyers stood on the sidelines as purchases on Wednesday almost refilled their stocks.

Nickel

During Thursday’s Asian trading hours, LME nickel prices drifted lower after opening at USD 18,875/mt, and accelerated declined during the early European trading hours. As of 6:30 pm, LME nickel prices already hit a low at USD 18,500/mt. The weak momentum of LME nickel prices shall not be easily reversed following losses recorded for six consecutive days, and it is expected that LME nickel prices may hit a new low in this year. LME nickel inventories were 97,788 mt, down 60 mt from a day earlier.

In the Shanghai nickel spot market, spot nickel prices slightly declined on Thursday. During the morning trading hours, traded prices were firm in the RMB 134,300-135,300/mt range. When LME nickel prices fell later, mainstream traded prices of nickel from Russia were in the RMB 134,300-135,300/mt range, and mainstream traded prices of nickel from Jinchuan Group were around RMB 13,500/mt. Overall trading sentiment was quiet amid LME nickel price decline and sluggish downstream purchases.