SMM Daily Review - 2012/3/23 Base Metals Market

SHANGHAI, Mar. 26 (SMM) –

Copper
As LME copper prices plunged by 1.6% overnight, the most actively-traded SHFE 1206 copper contract opened RMB 120/mt lower at RMB 59,840/mt Friday. SHFE copper prices fluctuated narrowly around the opening price during the whole trading day, with a fluctuating band only within RMB 200/mt and reaching a low at RMB 59,560/mt. At the tail of trading, as LME copper prices abruptly gained momentum, SHFE copper prices rose rapidly, and broke through the RMB 60,000/mt mark to an intraday high of RMB 60,050/mt as large-scale positions were closed. Finally, SHFE 1206 copper contract closed at RMB 60,030/mt, up RMB 70/mt or 0.12%. Positions for SHFE 1206 copper contract were down 15,050 lots, and trading volumes were down 166,000 lots, highlighting increasing risk aversion sentiment before the weekend. Speculative activities decreased sharply. SHFE copper prices still faced resistance at RMB 60,000/mt but showed strong resilience. 

Discounts on spot copper narrowed to between negative RMB 250-180/mt in the morning business, as SHFE copper prices moved lower after a low open despite showing resilience. Traded prices for standard-quality copper were between RMB 59,080-59,120/mt, and RMB 59,120-59,200/mt for high-quality copper. Spot copper supply was stable and remained sufficient during the whole trading day. Downstream producers and traders were cautious and made modest purchases at lower price levels. Copper inventories monitored by the SHFE decreased by 3,644 mt to 223,632 mt in the week ending March 23rd, reflecting that the delivery date for SHFE 1203 copper contracts had ended, and that downstream producers increased buying at the lows during the week. This indicates downstream orders already increased, so copper consumption is likely to improve significantly in April.

Aluminum
Despite heavy losses in LME aluminum overnight, the most active SHFE aluminum contract for delivery in June only shed RMB 20/mt or 0.12% settling at RMB 16,200/mt last Friday. Total positions climbed 2,308 lots to 44,658 lots while overall transactions dropped 1,098 lots to 9,232 lots. SMM expects the contract to stay on the downward rail with weak manufacturing data and fragile support at the moving averages.

Spot aluminum prices were little changed between RMB 15,960-15,990/mt in Shanghai, at discounts of RMB 10-40/mt over a slightly lower SHFE current-month aluminum price. As downstream stayed on the sidelines, buying interest was low, in contrast to a stronger selling interest. Trading improved slightly, though.

Lead
On Friday, SHFE lead prices opened lower at RMB 15,585/mt and fell below moving averages. Later, SHFE lead prices rose to move between RMB 15,550-15,580/mt due to the brief increase in LME lead prices, and found buying support at RMB 15,560/mt to finally close at RMB 15,620/mt. Trading volumes decreased by 78 lots to 586 lots and positions were down 32 lots to 1,840 lots.

In domestic spot markets, quotations for brands such as Yubei and Shuikoushan were around RMB 15,650/mt, and Chihong Zn & Ge was quoted around RMB 15,700/mt with limited goods supply. Prices changed little ahead of the weekend. Traders were cautiously moving goods, expecting lead prices should rise. Downstream buyers were also cautious and mainly purchased on an as-needed basis with uncertainty on market outlook.

Zinc
Last Friday, SHFE three-month zinc contract prices opened lower at RMB 15,570/mt below the 60-day moving average, and dipped to RMB 15,500/mt in the morning session. As large number of buyers entered the market, SHFE three-month zinc contract prices struggled around the moving average and moved between RMB 15,550-15,580/mt. At the end of trading, SHFE three-month zinc contract prices rallied to close at RMB 15,650/mt, down RMB 30/mt.

In domestic spot markets, discounts of #0 zinc were between RMB 220-240, and held around RMB 240/mt at noon, with traded prices between RMB 15,300-15,350/mt, and #1 zinc was traded between RMB 15,250-15,300/mt. SHFE zinc prices stabilized at noon, and downstream buying interest was strong.

Tin
Spot tin prices dropped another day to RMB 169,000-170,000/mt last Friday, due to heavy losses in LME tin prices and weak demand. Yunxi, Xiangxi, Nanshan and Jinlong concluded most deals between RMB 169,000-169,500/mt. Yunshan and low-lead Yunxi struck deals between RMB 170,000-171,000/mt, though with difficulty. Supply dropped slightly as smelters held back goods, with Nanshan and Jinlong ingots at low-end prices becoming hardly seen in the afternoon. Trading was quite light, despite a cut in supply, as the bearish market sentiment prevailed.

Nickel
LME nickel prices fluctuated narrowly and moved below all moving averages after opening at USD 18,499/mt during last Friday's Asian trading hours, reflecting an weak momentum of LME nickel prices.

In the Shanghai nickel spot market, prices slipped and transactions remained quiet. Offers were relatively high during the morning trading hours, but spot nickel prices fell rapidly after Jinchuan Group cut ex-works nickel prices by RMB 3,000/mt to RMB 132,000/mt. During the afternoon trading hours, mainstream traded prices of nickel from Russia were in the RMB 132,200-132,600/mt range, and mainstream traded prices of nickel from Jinchuan Group were in the RMB 133,000-133,500/mt range. Wait-and-see sentiment was strong and overall transactions were sluggish as LME nickel prices continued to slip and faced risk to slip further and since downstream demand was weak.