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SMM Daily Review - 2012/3/27 Base Metals Market
Mar 28,2012 09:31CST
smm insight
As LME copper prices surged overnight, the most actively-traded SHFE 1206 copper contract opened RMB 700/mt higher at RMB 60,900/mt Tuesday.

SHANGHAI, Mar. 28 (SMM) –

As LME copper prices surged overnight, the most actively-traded SHFE 1206 copper contract opened RMB 700/mt higher at RMB 60,900/mt Tuesday. SHFE copper prices fell and came under pressure at the daily moving average after the opening, continuing to fluctuate narrowly in the face of weak Chinese stock markets, finding temporary support at RMB 60,570/mt. At the tail of trading, as LME copper prices rallied, SHFE copper prices broke resistance at the daily moving average, but failed to soar through RMB 61,000/mt before reaching a high at RMB 60,950/mt. Finally, SHFE 1206 copper contract prices slid below the daily moving average as positions were closed, but still ended RMB 510/mt or 0.85% higher at RMB 60,710/mt. Positions for SHFE 1206 copper contracts were down 14,470 lots, and trading volumes were down 9,200 lots. Positions and trading volumes for SHFE 1207 copper contracts, though, increased by 11,860 lots, and 38,110 lots, respectively, a sign of the shift of the most actively-traded copper contracts. Speculative interest was limited, and SHFE copper prices still faced pressures at the RMB 61,000/mt mark.

In spot markets, as SHFE copper prices were pressured down following a high open, quotations for copper discounts expanded to between negative RMB 330-250/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,750-59,830/mt, and RMB 59,800-59,900/mt for high-quality copper. Some hedged copper was still locked. Cargo-holders of standard-quality copper and low-quality hydro-copper refused to move goods at large discounts, leading to a significant drop in copper supply, and causing their price spread to fall. Traders with adequate cash favored high-quality copper, while downstream producers hesitated to buy at the highs, bringing market activity into stalemate in the morning session. In the afternoon business, hedged copper kept locked as SHFE copper prices rose, so market supply decreased, while some cargo-holders became more optimistic about future prices. Spot copper discounts, though, expanded slightly to between negative RMB 350-280/mt in the afternoon session, while traded prices rose to between RMB 59,750-60,000/mt. Nevertheless, downstream producers became more wary at prices near RMB 60,000/mt, leaving market activity still quiet in the afternoon session.

The most active SHFE aluminum contract for June delivery closed up RMB 15/mt or 0.09% on Tuesday, as Bernanke remarks beat losses in Asian equity markets. Total transactions dropped 4,022 lots to 4,472 lots, however, as trading is turning light. SMM expects the contract to stay near the 60-day moving average in the near term.

Spot aluminum traded between RMB 15,970-16,010/mt in Shanghai, at discounts of RMB 30-70/mt over the SHFE current-month aluminum price. Trading was light and deals below RMB 16,000/mt were still seen coming from goods holders with tight cash flow.

On Tuesday, Bernanke’s comments caused investors’ expectations on the QE3 policy, but SHFE lead prices remained a weak track. SHFE 1206 lead contract price opened above the 5-day moving average at RMB 15,680/mt, and moved between RMB 15,615-15,650/mt, with prices finally closing at RMB 15,625/mt, up RMB 55/mt. Trading volumes increased by 62 lots to 364 lots and positions were up 138 lots to 2,080 lots.

In domestic spot markets, traders were actively moving goods for the tight cash flows by month’s end. Well-known brands such as Chihong Zn & Ge and Yuguang were quoted between RMB 15,730-15,750/mt, and quotations for Chengyuan, Dongling and Jinguan were mainly around RMB 15,700/mt, with premiums over SHFE 1206 lead contract price between RMB 70-100/mt. Shenqian was quoted at RMB 15,680/mt. Downstream buyers only made inquiries often and purchased in limited amounts, leaving transactions modest.

On Tuesday, SHFE three-month zinc contract prices opened at RMB 15,615/mt following LME zinc prices overnight, and fluctuated around the moving average as longs struggled with shorts in the morning session. In the afternoon, SHFE three-month zinc contract prices surged as large numbers of shorts left the market with profit-taking, and finally closed at RMB 15,640/mt, up RMB 40/mt. Trading volumes increased by nearly 30,000 lots to 191,008 lots, and total position decreased by 15,532 lots to 191,242 lots. SHFE 1207 zinc contract became more actively traded, with positions increasing by 14,600 lots to 120,776 lots.

In domestic spot markets, discounts of #0 zinc were between RMB 220-240, with traded prices between RMB 15,350-15,370/mt, and #1 zinc was traded around RMB 15,300/mt. Smelters were holding goods, with goods supply mainly available from traders.

Spot tin prices stayed between RMB 169,000-170,000/mt in Shanghai on Tuesday as the wait-and-see sentiment prevailed among both smelters and downstream. Nanshan and Yunshan struck deals between RMB 169,000-169,500/mt while Yunxi concluded most transactions between RMB 169,500-170,000/mt. Some Yunxi ingots were quoted at RMB 170,500/mt but met cold response.

In the Shanghai nickel market, mainstream traded prices of Jinchuan nickel in the morning business were between RMB 133,300-133,500/mt, and RMB 132,800-133,000/mt for Russian nickel. At the midday, traded prices of Jinchuan nickel remained steady, while low-priced Russian nickel was rarely seen. Market transactions were mainly made at RMB 133,000/mt. Some traders purchased some Russian nickel for stocks on Tuesday, due to supply tightness on Monday. But, many cargo-holders were reluctant to move goods now, as the current traded prices of Russian nickel only allowed limited profits.

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