SMM Daily Review – 2012/5/24 Base Metals Market

SHANGHAI, May 25 (SMM) –

Copper
As LME copper extended the losing streak, the most active SHFE 1209 copper contract started RMB 60/mt lower at RMB 54,970/mt Thursday. LME copper lost USD 7,600/mt, and Chinese stock markets fell and came under pressure at the 5-day moving average, causing the contract to move lower after the opening. In the afternoon, as shorts imposed selling pressures again, trading volumes for the contract continued to increase but positions fell, with prices sliding to a low at RMB 54,550/mt. However, at the tail of trading, a falling US dollar helped LME copper rally and SHFE copper prices return above a key support at RMB 54,800/mt. Finally, SHFE 1209 copper contract closed RMB 120/mt or 0.22% higher at RMB 55,150/mt, with trading volumes and positions increasing by 112,000 lots and 2,372 lots, respectively. Trading volumes for all SHFE copper contracts added by 103,000 lots, but total positions fell by 6,554 lots, with growing divergence between longs and shorts at RMB 55,000/mt. SHFE copper exhibited resilience Thursday but will likely fall further for the foreseeable future as bearish sentiment dominates markets.

SHFE copper prices retreated, with SHFE 1206 copper contract losing RMB 56,000/mt completely. Coupled with prevailing selling pressures for forward copper contracts, cargo-holders in spot markets became more pessimistic over future copper prices and therefore became more willing to move goods. Spot copper supply increased in consequence, leading spot copper premium quotes to slide to positive RMB 250-330/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,750-55,870/mt, and RMB 55,800-55,930/mt for high-quality copper. Downstream producers stood on the sidelines since they were also negative about future prices, so market transactions were not seen to increase in the morning. In the afternoon session, SHFE copper prices stopped falling, but spot copper premiums held with the morning business levels. Traded prices marched lower to RMB 55,700-55,850/mt in the afternoon, while market activity remained muted.

Aluminum
The aluminum contract for September delivery became the most actively traded SHFE aluminum contract on Thursday, starting lower at RMB 15,950/mt and settling down RMB 25/mt or 0.16% at RMB 15,960/mt. Positions added 8,310 lots to 88,174 lots. The price difference between short-term contracts almost shrank to none. The HSBC May PMI eroded the light metal's rebound momentum. The contract is expected to struggle at RMB 15,950/mt in the near term.

Spot aluminum traded at RMB 15,950-15,980/mt in Shanghai, at discounts no more than RMB 10/mt or premiums within RMB 20/mt over the current-month SHFE aluminum contract. The light metal was sold at RMB 15,960-15,990/mt in Wuxi and at RMB 15,960-15,980/mt in Hangzhou. SHFE aluminum continued to slip but the space for loss is limited, driving low selling interest of some goods holders. The majority of traders liquidated at the month's end. Downstream buying stayed weak and supply remained excessive. The overall traded volume was little changed.

Lead
On Thursday, SHFE lead prices opened at RMB 15,190/mt and moved weakly between RMB 15,040-15,150/mt in the morning. Later, prices dipped as low as RMB 15,010/mt due to the falling domestic stocks. In the afternoon, the most active SHFE lead prices rallied and finally closed up RMB 30/mt to RMB 15,130/mt. Trading volumes were up 56 lots to 260 lots, while positions increased to 1,770 lots, up 30 lots.

In China's domestic spot market, selling interest was apparently lower with limited supply. Chihong Zn & Ge was mainly quoted between RMB 15,220-15,250/mt, with premiums of RMB 150/mt over the most active SHFE lead contract price. Shuangyan was quoted at RMB 15,150/mt. Transactions improved slightly as some buyers downstream purchased at low prices.

Zinc
On Thursday, SHFE 1208 zinc contract prices opened lower at RMB 14,750/mt and plunged to a new low for the year at RMB 14,620/mt, and rallied to the moving average as large numbers of buyers entered the market. HSBC released China's PMI for April, causing concerns to grow. In this context, SHFE three-month zinc contract prices moved between RMB 14,650-14,700/mt during the day, and finally closed at RMB 14,725/mt, down RMB 55/mt.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were between RMB 40-60/mt, with traded prices between RMB 14,600-14,630/mt. #1 zinc prices were between RMB 14,550-14,600/mt, but with transactions muted. The market lacked confidence as zinc prices have been falling recently, and downstream buyers only purchase on an as-needed basis, keeping transactions quiet.

Tin
In Shanghai tin market, mainstream traded prices were between RMB 154,500-155,500/mt Thursday. Most transactions for Yunheng, and Yunxi concluded between RMB 155,000-155,500/mt, with a few deals for Kaiyuan and Nanshan done at RMB 154,500/mt. Since demand downstream remained weak, transactions were sparse even at low prices. Spot market was depressed on the whole due to the weak LME tin prices and worse-than-expected PMI data.

Nickel
On Thursday, mainstream traded prices of Jinchuan nickel were between RMB 126,000-126,300/mt, while mainstream Russian nickel prices were between RMB 124,000-124,200/mt. In the afternoon, Jinchuan Group raised prices to RMB 126,500/mt as LME nickel prices rose. Traders were holding goods as spot nickel prices have hit a record low, despite increasing inquiries, keeping transactions muted.