SMM Daily Review - 2012/5/9 Base Metals Market

SHANGHAI, May 10 (SMM) –

Copper
Weighed by the falling LME copper overnight, the most active SHFE 1208 copper contract started RMB 590/mt down at RMB 57,250/mt Wednesday. As the Shanghai Composite Index lowered to test 2,400, and as LME copper lost USD 8,100/mt, SHFE 1208 copper contract came under pressure at RMB 57,500/mt, reaching a high at RMB 57,480/mt and still finding support at the RMB 57,000/mt mark, as bargain hunting at the lows helped the contract show resilience. The lowest price for SHFE 1208 copper contract was RMB 57,050/mt, and the fluctuating band was only RMB 200/mt. Finally, the most active copper contract ended RMB 450/mt or 0.78% lower at RMB 57,390/mt, with trading volumes and positions increasing by 75,096 lots and 6,314 lots, respectively. Positions for SHFE 1209 copper contract added by 10,000 lots, and selling pressures for SHFE forward copper contracts were increasing noticeably.

SHFE copper prices marched lower after a down open, with near-term contract prices higher than forward contract prices, which posted large drops comparatively. Hedged copper cargo-holders sell aggressively in consequence, leading to a significant increase in spot copper supply. In this context, quotations for spot copper premiums were between positive RMB 30-100/mt in Shanghai in the morning. Traded prices for standard-quality copper were between RMB 57,550-57,650/mt, and RMB 57,600-57,730/mt for high-quality copper. Traders increased purchases amid sliding copper premiums, while downstream producers buying improved at price levels below RMB 58,000/mt, allowing market activity to become more active. In the afternoon, SHFE copper prices drifted lower, but spot copper premiums failed to rise significantly since consumption was weaker than the morning, between positive RMB 50-100/mt. Traded prices stood between RMB 57,500-57,650/mt in the afternoon. 

Aluminum
Losses in LME aluminum and Chinese stocks accelerated the slip of SHFE aluminum. The most active SHFE aluminum contract for August delivery gapped lower at RMB 16,200/mt and closed down RMB 115/mt or 0.71% at RMB 16,150/mt on Wednesday. Positions added 9,288 lots to 89,130 lots. SHFE aluminum weakened for a third day. Aluminum contracts are turning weaker as delivery time expands. If investors continue to join shorts, the most active contract may dip below RMB 16,100/mt.

Spot aluminum traded between RMB 16,070-16,100/mt in Shanghai, at discounts of RMB 20/mt to premiums of RMB 10/mt over the current-month aluminum price. SHFE aluminum prices weakened with the current-month contract being pressured at RMB 16,100/mt. Spot aluminum tracked aluminum futures in East China. Goods holders gradually became unwilling to move goods at low-end prices, holding quotations at RMB 16,100/mt. Most deals were done at slight discounts, however. The overall trading stayed light. In the afternoon, SHFE aluminum slipped further, the wait-and-see sentiment was strong in the spot market. Quotations were sparse and fell between RMB 16,070-16,090/mt. Downstream, bearish towards future aluminum prices, rarely inquired. Deals were hardly reported as a result.

Lead
SHFE lead prices were under downward pressures due to weak fundamentals and opened lower at RMB 15,700/mt Wednesday. Later, SHFE lead prices hit a low of RMB 15,615/mt to finally close at RMB 15,665/mt, down RMB 40/mt. Trading volumes were up 194 lots to 410 lots, and positions dropped by 204 lots to 1,198 lots.

Traded prices in spot market were relatively low due to weak demand despite higher quotations. Offers for Chihong Zn & Ge were at RMB 15,600/mt, with discounts of RMB 100/mt against the most active SHFE lead prices, and Tongguan was quoted at around RMB 15,580/mt. Shuangyan was quoted at RMB 15,560/mt, and offers for brands from Gejiu region hovered around RMB 15,400/mt.

Zinc
On Wednesday, SHFE three-month zinc contract prices opened lower at RMB 15,400/mt and fluctuated between RMB 15,350-15,400/mt, around the moving average in the morning session. In the midday, SHFE three-month zinc contract prices plunged, and finally closed at RMB 15,340/mt, down RMB 160/mt, or 1.03%. Trading volumes increased by over 60,000 lots to 138,044 lots, and total position increased by 14,276 lots to 149,760 lots.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were around RMB 150/mt, with traded prices between RMB 15,220-15,230/mt. Spot prices fell to RMB 15,190/mt at noon. #1 zinc prices were around RMB 15,170/mt. Spot prices were firm despite falling SHFE zinc prices, while downstream buying interest was low, and cargo holders seldom moved goods, leaving transactions quiet. 

Tin
In Shanghai tin market, tin prices continued a downward trend, with mainstream traded prices between RMB 160,000-163,000/mt, with a few goods quoted between RMB 159,500-159,800/mt. Trading was still soft with strong wait-and-see sentiment. Nanshan, Jinlong, Yunxiang and Yunshan were traded between RMB 160,000-161,500/mt, and most transactions for Yunxi were made between RMB 162,000-163,000/mt. In the afternoon, spot market was depressed by falling LME tin prices. Traders replenished cautiously and were willing to sell goods, but demand remained weak. Some deals for Nanshan were done at RMB 159,500/mt. Lower prices failed to promote transactions, leaving market quiet.

Nickel
On Wednesday, Jinchuan Group lowered nickel prices to RMB 130,000/mt, down RMB 3,000/mt. mainstream traded prices of Jinchuan nickel were between RMB 130,500-130,700/mt in the morning session, while mainstream Russian nickel prices were between RMB 128,200-128,600/mt. Jinchuan lowering ex-work prices did not cause spot prices to fluctuate significantly, with market demand still weak and with transactions muted.