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SMM Daily Review – 2012/4/13 Base Metals Market
Apr 16,2012 10:24CST
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The most-traded July copper contract on the SHFE opened RMB 660/mt higher at RMB 58,800/mt last Friday, since LME copper prices rebounded in the previous session.

SHANGHAI, Apr. 16 (SMM)--

The most-traded July copper contract on the SHFE opened RMB 660/mt higher at RMB 58,800/mt last Friday, since LME copper prices rebounded in the previous session. SHFE copper prices trended lower after the opening on growing sell-offs. After China later announced its GDP for 1Q fell sharply from the prior data, both SHFE and LME copper prices retreated, with the latter easing falling momentum in the afternoon business after gaining support at the 5-day moving average. The Shanghai Composite Index extended increases in the afternoon session, so SHFE copper prices lurched narrowly around RMB 58,300/mt but lost all daily gains to test a low at RMB 58,000/mt at the tail of trading as selling pressures dampened markets again. Finally, the most-traded SHFE copper contract prices ended at RMB 58,030/mt, down RMB 110/mt or 0.19%, with positions increasing by 16,586 lots but trading volumes decreasing by 11,606 lots. SHFE copper prices suffered high resistance at RMB 58,700/mt, with RMB 58,000/mt remaining the struggle between long and short investors.

As SHFE copper prices opened higher in the morning session, spot copper only traded at slightly premiums of around positive RMB 30/mt, enticing some speculators to enter the market. SHFE copper prices then slid all the way, but SHFE 1207 copper contract prices showed resilience and registered relatively smaller declines. SHFE near-term copper contract prices remained weaker than forward contract prices. In this context, cargo-holders in spot copper markets withheld goods, causing supply to decrease gradually. Spot copper premiums therefore rose to around positive RMB 100/mt. Mainstream spot copper premiums were quoted between positive RMB 30-120/mt in the morning business. Traded prices for standard-quality copper were between RMB 57,900-58,000/mt in the morning session, and RMB 57,950-58,150/mt for high-quality copper, with downstream producers continuing to exhibit buying interest at prices below RMB 58,000/mt. In the afternoon business, SHFE copper prices continued to fall, and spot copper supply remained limited, both of which helped spot copper premiums hold firm between positive RMB 60-120/mt. Traded prices, though, declined to between RMB 57,750-58,050/mt in the afternoon session, while market transactions were slightly down from the morning business levels. SHFE copper inventories were reported to decrease by 265 mt to 221,827 mt last Friday.

The most active SHFE aluminum contract for July delivery opened higher at RMB 16,200/mt but closed up only RMB 5/mt at RMB 16,160/mt last Friday, after weaker-than-expected Chinese GDP data pulled the contract below the 5-day moving average. Transactions increased 494 lots to 9,652 lots while positions dropped 968 lots to 50,644 lots. As support at the bottom still exists, the contract is likely to stabilize in the near term. More support is needed, which may come from a possible reserve requirement cut in light of weak economic data, for the contract to move forward.
Spot aluminum traded between RMB 15,960-15,990/mt in Shanghai, at discounts of RMB 10/mt to premiums of RMB 20/mt over the current-month SHFE aluminum price. Traders began holding goods at RMB 15,970/mt, compared with at the RMB 16,000/mt mark during recent days, as the delivery date neared.

On Friday, SHFE lead prices opened higher at RMB 15,750/mt and surged to RMB 15,785/mt briefly. Later, China’s GDP growth was reported lower than expected at 8.1%, and other economic data released also indicated the slowdown of investment, weakening demand and remaining inflation pressure. As a result, market concerns weighed on base metal markets, with SHFE lead prices falling down to finally close at RMB 15,720/mt, up RMB 105/mt. Positions were down 168 lots to 2,050 lots, and trading volumes were 420 lots.
In China’s domestic spot markets, lead prices increased RMB 50/mt from a day earlier, and initial quotations for Chihong Zn & Ge and Nanfang were around RMB 15,750/mt, but leaving sparse deals done, and some transactions were finally concluded between RMB 15,720-15,730/mt. Shenqian and some brands from Gejiu region were quoted between RMB 15,600-15,650/mt. Market players were cautious ahead of weekend, and trading did not improve.

Last Friday, SHFE three-month zinc contract prices opened higher at RMB 15,695/mt, boosted by LME zinc prices overnight. As China’s GDP growth was 8.1%, much lower than expected 8.4%, the Shanghai Composite Index plummeted, pushing down SHFE three-month zinc contract prices to fall and move between RMB 15,550-15,650/mt in the afternoon. Finally, SHFE three-month zinc contract prices closed at RMB 15,565/mt, up RMB 55/mt. Trading volumes decreased by 10,000 lots to 146,686 lots, and total position decreased by 248 lots to 176,150 lots.

In domestic spot markets, discounts of #0 zinc were RMB 260/mt in the morning session and narrowed to RMB 240/mt, with traded prices between RMB 15,350-15,400/mt. #1 zinc was traded between RMB 15,300-15,320/mt. The market lacked confidence as SHFE zinc prices fell, combined with tight goods supply available in the market ahead of the delivery date, the overall transaction did not improve.

On Friday, trading in Shanghai tin market was light, and goods supply was sparse except some well-known brands. Mainstream traded prices were between RMB 166,500-169,000/mt. Nanshan, Feidie, and Yunshan were mainly traded between RMB 166,500-167,300/mt, while most deals for Yunxi were concluded at RMB 167,000-167,500/mt, with a few deals done at RMB 169,000/mt. Selling interest among smelters has maintained low due to the falling tin prices, leaving fewer goods available to markets. At present, traders were cautious against the low tin prices and soft consumption, while smelters were reluctant to move goods on account of high costs. Meanwhile, as production and consumption within electric industry were negatively affected by China’s economic slowdown, orders for downstream enterprises dropped, dampening the tin consumption. Thus, transactions in tin market will not improve in the near term.

Jinchuan Group raised ex-works prices for refined nickel to RMB 134,000/mt last Friday, up RMB 2,000/mt. In the Shanghai nickel spot market, mainstream traded prices for Jinchuan nickel were between RMB 133,000-133,500/mt, and RMB 131,500-132,000/mt for Russian nickel. In the afternoon business, mainstream traded prices for Jinchuan nickel advanced to RMB 134,000-134,200/mt supported by Jinchuan Group’s ex-works prices. Rising prices helped boost market demand and improved transaction volumes as well.








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