SMM Daily Review – 2012/5/22 Base Metals Market

SHANGHAI, May 23 (SMM) –

Copper
The most active SHFE 1209 copper contract opened RMB 190/mt higher at RMB 56,070/mt Tuesday. After the opening, as LME copper met resistance at USD 7,800/mt, SHFE 1209 copper contract suffered selling pressures from shorts at RMB 56,000/mt, slid after touching briefly at RMB 56,100/mt, but gained support after retreating to as low as RMB 55,800/mt. In the afternoon, Chinese stock markets increased by more than 1%, helping SHFE copper prices stop falling but still come under pressure at RMB 56,000/mt. Finally, SHFE 1209 copper contract closed RMB 30/mt or 0.05% down at RMB 55,850/mt, with trading volumes decreasing by 71,124 lots but positions adding by 15,838 lots. Longs and shorts held increasing divergence at RMB 56,000/mt, and shorts exerted selling pressures again after leaving markets for one trading day. Coupled with prominent resistance at the 10-day moving average, SHFE copper prices still face downside risks. 

SHFE copper prices met resistance to rebound, and selling pressures for forward copper contracts increased. Cargo-holders in spot copper markets became more willing to move goods, allowing copper supply to remain stable. Spot copper premiums were quoted between positive RMB 200-260/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,650-56,750/mt, and RMB 56,700-56,830/mt for high-quality copper. Both downstream producers and traders opted to stand on the sidelines, resulting in a drop in market transactions in the morning. In the afternoon, SHFE copper prices stopped sliding, but spot copper premiums held onto the morning business levels. Traded prices were also little changed from the morning session levels, while overall market activity was modest. 

Aluminum
The most active SHFE aluminum contract for August delivery settled down RMB 65/mt or 0.4% at RMB 16,050/mt on Tuesday, after starting lower at RMB 16,100/mt. Transacted contracts dropped below 6,000 lots while positions added 566 lots to 87,462 lots. The quiet trading was due to renewed bearishness in the market and narrow gaps between different contracts which almost eliminated arbitrage opportunities. The contract is expected to test pressure at RMB 16,100/mt at the moment.

Spot aluminum was traded at RMB 16,040-16,070/mt in Shanghai, at discounts of RMB 0-30/mt over the current-month aluminum price, and was sold at RMB 16,060-16,080/mt in Wuxi and Hangzhou. The wait-and-see sentiment turned even stronger in spot markets as SHFE aluminum prices stagnated. Inquiries from downstream were rarely seen and goods holders turned away when prices were low, leading to light trading.

Lead
SHFE lead prices opened at RMB 15,255/mt on Tuesday and fluctuated narrowly. Later, prices fell briefly but found buying support at RMB 15,230/mt, and finally ended at RMB 15,210/mt, down RMB 40/mt. Trading volumes were up 52 lots to 256 lots, while positions were up 186 lots to 1,704 lots.

Quotations for well-known lead brands in China’s spot markets, including Chihong Zn & Ge and Yuguang, were mainly at RMB 15,300/mt, with premiums of RMB 50-60/mt over the SHFE 1208 lead contract price. Shuangyan was quoted at RMB 15,260/mt. Offers for lead from Gejiu region and Shenqian were between RMB 15,200-15,220/mt. Demand downstream remained modest, and transactions were limited though some dealers lowered prices for sales.

Zinc
On Tuesday, SHFE 1208 zinc contract prices opened higher at RMB 15,005/mt and moved around RMB 15,000/mt after opening, and plunged to an intraday low at RMB 14,935/mt at noon as the US dollar index surged to 81. in the afternoon, SHFE three-month zinc contract prices rallied to RMB 14,970/mt, and finally closed at RMB 14,945/mt, down RMB 50/mt or 0.33%. Trading volumes decreased by 37,966 lots to 35,654 lots, and total position decreased by 2,994 lots to 158,028 lots.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were RMB 80/mt, with traded prices between RMB 14,900-14,920/mt. Spot discounts narrowed to RMB 30/mt at noon as SHFE zinc prices fell, but actual quotes were firm around RMB 14,900/mt. #1 zinc prices were between RMB 14,880-14,900/mt. Downstream buyers lacked confidence whether prices would stand at RMB 15,000/mt, keeping transactions quiet.

Tin
On Tuesday, tin prices Shanghai spot market stabilized with low-end prices edging up due to limited low-price goods. Mainstream traded prices were between RMB 154,000-155,000/mt, and quotations, except for a few imported goods, were rarely reported below RMB 154,000/mt in domestic market. Trading was modest with most buyers only making inquiries. Nanshan, Jinhai, Jinlong and Yunxiang were mainly traded between RMB 154,000-154,700/mt, while most transactions for Yunxi were made at RMB 155,000/mt. In the afternoon, some goods were quoted above RMB 155,000/mt but transactions were sparse. Some enterprises downstream were more willing to enter the market due to a sign of stabilizing in LME tin prices, but remained relatively cautious. Meanwhile, market players were expecting spot prices to rise, but prices lacked upward momentum due to the weak demand.

Nickel
On Tuesday, mainstream traded prices of Jinchuan nickel were between RMB 127,200-127,400/mt, while mainstream Russian nickel prices were between RMB 125,500-125,800/mt. Mainstream traded prices of Jinchuan nickel rose to RMB 127,500/mt as LME nickel prices edged up. Transactions remained muted.