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SMM Daily Review - 2012/5/10 Base Metals Market
May 11,2012 09:37CST
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The most active SHFE 1208 copper contract started RMB 200/mt higher at RMB 57,490/mt Thursday.

SHANGHAI, May 11 (SMM) –

The most active SHFE 1208 copper contract started RMB 200/mt higher at RMB 57,490/mt Thursday, and then fluctuated narrowly around RMB 57,500/mt without a noticeable trend and reaching a low at RMB 57,340/mt. In the afternoon session, as LME copper prices moved higher further after breaking USD 8,100/mt due to the falling US dollar, SHFE 1208 copper contract increased to as high as RMB 57,800/mt, but kept hovering below their moving averages owing to technical resistance and a lack of substantive buying support. Finally, the most active copper contract ended RMB 480/mt or 0.84% higher at RMB 57,770/mt, with trading volumes and positions decreasing by 42,320 lots, and 6,816 lots, respectively. SHFE copper prices exhibited some resilience, but will continue to weaken on account of intersection between the 10- and 20-day moving averages, as well as low market sentiment.

As SHFE copper prices showed strong resilience, hedged copper was restricted. Overall spot copper supply, though, remained stable. Offers for spot copper premiums were between positive RMB 20-100/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 57,680-57,750/mt, and RMB 57,720-57,820/mt for high-quality copper. Downstream producers continued to buy as needed, while traders only stepped up purchases at the tail of the morning trading session. Hence, overall transaction volumes in the morning were smaller than the previous day levels. In the afternoon, as SHFE copper prices rose, mainstream quotations for spot copper premiums narrowed to positive RMB 0-80/mt, but market transactions were limited since market participants were skeptical about a continuous rebound in copper prices.

The most active SHFE aluminum contract for August delivery weakened for a fourth successive trading day settling down RMB 15/mt or 0.09% at RMB 16,145/mt on Thursday, after opening lower at RMB 16,150/mt. Positions added 6,884 lots to 96,014 lots. China will release its April CPI today, which will offer a direction. The weakening bearish sentiment will help the contract consolidate at RMB 16,100/mt.

Spot aluminum traded at RMB 16,060-16,080/mt in Shanghai, at no more than RMB 10/mt of discounts or premiums over the current-month aluminum contract. Continually falling SHFE aluminum prices caused successive losses in spot aluminum. Demand from downstream processors was weak. Goods holders’ willingness to move goods at low-end prices was weak. Spot aluminum traded near the current-month price. Deals were active only for those cheaper goods. Trading stayed light. In the afternoon, SHFE aluminum continued to stagnate. The wait-and-see sentiment prevailed in the spot market and deals were hardly heard.

SHFE lead prices opened lower at RMB 15,610/mt Thursday due to the falling LME lead prices and moved narrowly between RMB 15,630-15,670/mt. SHFE lead prices finally close at RMB 15,650/mt. Trading volumes were down 22 lots to 388 lots, and positions dropped by 174 lots to 1,024 lots.

Spot prices were relatively firm. Quotations for Chihong Zn & Ge were mainly at RMB 15,600/mt, with discounts against the most active SHFE lead prices narrowing to RMB 40/mt, and Shuangyan was quoted at RMB 15,500/mt, and offers for brands from Gejiu region remained around RMB 15,400/mt. In the afternoon, spot prices changed little and trading remained modest.

On Thursday, SHFE three-month zinc contract prices opened lower at RMB 15,300/mt and dipped to RMB 15,250/mt after opening. As large numbers of longs entered the market, SHFE three-month zinc contract prices rallied to the moving average, moving between RMB 15,250-15,300/mt during the day, and finally closed at RMB 15,310/mt, down RMB 45/mt. Trading volumes decreased by over 2,000 lots to 136,710 lots, and total position increased by 16,710 lots to 166,470 lots.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices narrowed to RMB 120-130/mt, with traded prices between RMB 15,150-15,180/mt. #1 zinc prices were around RMB 15,120/mt. SHFE zinc prices fluctuated around the moving average, and arbitragers moved goods due to narrowing discounts, while downstream buyers increased purchases at lower prices, causing transactions to improve.

Trading in Shanghai tin market was rather quiet with market dominated by pessimism. Mainstream traded prices were between RMB 159,000-162,000/mt, and a few deals were done at RMB 158,500/mt. Traded prices for Nanshan and Jinlong were mainly around RMB 159,000/mt, while most transactions for Yunxi and Yunheng were concluded between RMB 159,500-162,000/mt. Inquiries were rarely heard, leaving trading light. Given the falling LME tin prices and weakening demand downstream, purchases were even fewer at lower prices. Dealers would not replenish stocks while those dealers holding tin inventories were eager to sell goods fearing further price declines. Wait-and-see sentiment prevailed in the market.

On Thursday, mainstream traded prices of Jinchuan nickel were between RMB 130,300-130,500/mt in the morning session, while mainstream Russian nickel prices were between RMB 128,200-128,300/mt. Russian nickel prices were lowered to RMB 128,000/mt due to pallid demand. Transactions did not turn around. Traders were unwilling to sell goods as Jinchuan nickel costs including freight charges were higher than selling prices



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