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SMM Daily Review – 2012/5/23 Base Metals Market
May 24,2012 10:01CST
smm insight
SHFE 1209 copper contract ended at RMB 55,000/mt Wednesday, down RMB 950/mt or 1.7%. The most active SHFE aluminum contract closed down RMB 90/mt or 0.56% at RMB 16,000/mt.

SHANGHAI, May 24 (SMM) –

The most active SHFE 1209 copper contract opened RMB 700/mt lower at RMB 55,250/mt Wednesday, as LME copper retreated overnight. The contract fluctuated narrowly between RMB 55,000-55,300/mt after the opening, with a high at only RMB 55,290/mt. In the afternoon session, as LME copper tested last week's low of USD 7,620/mt, and since Chinese stock markets also fell, SHFE 1209 copper contract lost ground rapidly, down below RMB 55,000/mt to RMB 54,710/mt while shorts increased selling pressures. Nevertheless, position closing at the tail of trading helped SHFE 1209 copper contract pare some of daily losses before finally ending at RMB 55,000/mt, down RMB 950/mt or 1.7%. Positions and trading volumes for the most active copper contract added by 39,198 lots and 138,000 lots, respectively. With growing selling pressures, SHFE copper found weak support at RMB 54,700/mt.

SHFE copper prices opened significantly down, but cargo-holders in spot markets insisted on moving goods at prices above RMB 56,000/mt. Spot copper premiums thus rose to above positive RMB 300/mt. Spot copper premiums were quoted between positive RMB 250-320/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,000-56,120/mt, and RMB 56,050-56,150/mt for high-quality copper. Some traders were optimistic about future premiums and therefore opted to hold back goods, but cargo-holders of hedged copper became more willing to move goods. Spot copper supply remained stable. Downstream producers were hesitant to buy at around RMB 56,000/mt, leaving market activity quiescent in the morning. In the afternoon session, as SHFE 1206 copper contract fell to around RMB 55,500/mt, spot copper premium quotes rose further to positive RMB 280-350/mt. Traded prices basically came under pressure at RMB 56,000/mt, between RMB 55,850-56,000/mt in the afternoon, but market activity remained lackluster.

The most active SHFE aluminum contract for August delivery closed down RMB 90/mt or 0.56% at RMB 16,000/mt on Wednesday, after gapping lower at RMB 16,010/mt and slipping to RMB 15,970/mt the intraday low. SHFE aluminum prices tracked movement of LME aluminum. Positions and transactions of the September contract increased noticeably, signaling a rollover. The most active SHFE aluminum contract is expected to struggle near RMB 16,000/mt as the market sentiment is expected to remain slightly bearish.

Spot aluminum traded at RMB 15,970-16,000/mt in Shanghai, at discounts within RMB 10/mt and premiums no more than RMB 20/mt over current-month SHFE aluminum prices. The trading band is RMB 15,980-16,000/mt in Wuxi and RMB 15,970-15,990/mt in Hangzhou. SHFE aluminum gapped lower and the current-month failed to recover the RMB 16,000/mt mark, weighing on spot aluminum prices. Mainstream traded prices of aluminum spot dropped below 16,000/mt. Goods holding at low prices induced deals at slight premiums. The downstream buying interest stayed weak, though, with purchases done only as-needed and at low prices. The overall traded volume stayed light as a result.

On Wednesday, SHFE lead prices opened RMB 50/mt lower at RMB 15,100/mt and moved weakly between RMB 15,120-15,150/mt. In the afternoon, SHFE lead prices fell along with LME lead prices to RMB 15,050-15,100/mt, and closed the day at RMB 15,075/mt, down RMB 135/mt. Trading volumes were down 52 lots to 204 lots, while positions increased to 1,740 lots, up 36 lots.

In domestic spot markets, Chihong Zn & Ge was initially quoted around RMB 15,300/mt, with premiums of RMB 150/mt over the most active SHFE lead price, but quotations were lowered to RMB 15,250/mt along with the falling SHFE lead prices in the afternoon. Shuikoushan was quoted at around RMB 15,200/mt, while offers for Shenqian were at RMB 15,170/mt. Trading remained unimproved.

On Wednesday, SHFE 1208 zinc contract prices opened lower at RMB 14,880/mt and moved between RMB 14,855-14,880/mt after opening, and plunged to an intraday low at RMB 14,685/mt at noon as the Shanghai Composite Index plummeted. Finally, SHFE three-month zinc contract prices closed at RMB 14,755/mt, down RMB 220/mt or 1.44%. Trading volumes increased by 15,804 lots to 51,458 lots, and total position decreased by 6,954 lots to 151,074 lots. SHFE 1209 zinc contract prices became more actively traded, with trading volumes increasing by 52,474 lots to 107,836 lots and total position increasing by 18,188 lots to 137,322 lots.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were between RMB 60-80/mt, with traded prices between RMB 14,800-14,820/mt. Spot discounts narrowed to RMB 30/mt at noon and traded prices were between RMB 14,740-14,750/mt. #1 zinc prices were between RMB 14,700-14,750/mt in the morning session, but with transactions muted. Downstream buyers were uncertain of price trends, keeping transactions quiet.

In Shanghai tin market, goods supply was limited and transactions were quiet with mainstream traded prices were between RMB 154,500-155,500/mt on Wednesday. Nanshan, Jinhai and Jinlong were mainly traded between RMB 154,500-155,000/mt, while most transactions for Yunheng and Yunxi were concluded between RMB 155,000-155,500/mt. Most smelters were not willing to move goods due to low tin prices, while demand from downstream enterprises remained sluggish. Dealers said it was difficult to replenish stocks and sell goods.

On Wednesday, mainstream traded prices of Jinchuan nickel were between RMB 126,600-127,000/mt, while mainstream Russian nickel prices were between RMB 124,600-124,800/mt. Jinchuan Group lowered prices to RMB 126,500-126,800/mt as LME nickel prices plunged in the afternoon, while Russian nickel prices were lowered to RMB 124,500/mt. Since the EU meeting did not open, the market remained cautious, keeping transactions remained muted.

base metals; daily review

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