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SMM Daily Review - 2012/5/25 Base Metals Market
May 28,2012 09:52CST
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As LME copper remained weak overnight, the most active SHFE 1209 copper contract started RMB 260/mt lower at RMB 55,150/mt last Friday.

SHANGHAI, May 28 (SMM) --


As LME copper remained weak overnight, the most active SHFE 1209 copper contract started RMB 260/mt lower at RMB 55,150/mt last Friday. The contract moved lower following the opening as longs closed positions and shorts imposed selling pressures, down to RMB 54,830/mt. In the afternoon, a falling US dollar helped LME copper rally to USD 7,600/mt, so the contract broke the RMB 55,000/mt mark abruptly before climbing directly to a high of RMB 55,460/mt. In this context, shorts chose to leave the market. However, Chinese stock markets lost by nearly 1%, dragging down SHFE copper prices. Finally, SHFE 1209 copper contract still closed RMB 480/mt or 0.87% up at RMB 55,370/mt, with trading volumes decreasing by 69,196 lots but positions increasing by 5,386 lots. Longs quitted the market at the tail of trading since they were skeptical about a continuous copper price rebound. SHFE copper price movement experienced a V shape for two consecutive days, highlighting increasing divergence between longs and shorts, who were both wary of operations at RMB 55,000/mt to avert overnight risks.

SHFE copper prices retreated after starting higher, propelling cargo-holders in spot markets to sell. Spot copper supply increased as a result, leading spot copper premium quotes to narrow to positive RMB 220-300/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,820-55,900/mt, and RMB 55,870-55,980/mt for high-quality copper. Some traders were pessimistic about future copper prices and thus hedged against price volatilities. However, downstream producers stuck to the sidelines, leaving market activity lackluster in the morning. In the afternoon session, as SHFE copper prices rose rapidly and helped the SHFE/LME copper price ratio improve swiftly, cargo-holders of imported copper in spot markets stepped up sale volumes. In consequence, spot copper premium quotes fell further to positive RMB 120-200/mt in the afternoon, while traded prices marched slightly higher to RMB 55,930-56,050/mt, with limited market transactions. SHFE copper stocks decreased by 16,325 mt to 157,489 mt last Friday, as copper smelters and trading firms delivered copper to the LME warehouses, and since downstream producers went bargain hunting at the lows.  


The most active SHFE aluminum contract for September delivery opened slightly higher at RMB 15,980/mt and settled up RMB 70/mt or 0.44% at RMB 16,025/mt on Friday, driven by higher LME aluminum prices. Positions dropped 612 lots to 87,562 lots. The bearish market sentiment slightly weakened, with shorts closing their positions to drive up the contract. However, lacking support from policies, the contract struggled near RMB 16,000/mt.

Spot aluminum traded at RMB 15,960-15,980/mt in Shanghai, at discounts of RMB 0-20/mt over the current-month SHFE aluminum price. The light metal was sold at RMB 15,970-15,990/mt in Wuxi and Hangzhou. Though SHFE aluminum strengthened, due to weak demand at the month’s end, spot aluminum failed to follow. Goods holders actively lowered quotations to lure buyers. Some traders still quoted at premiums but deals were not seen, indicating strong pressure at RMB 16,000/mt. Supply was sufficient but stock replenishing demand was limited before the weekend. Trading stayed light.


On Friday, SHFE lead prices opened at RMB 15,140/mt and moved down to fluctuate narrowly between RMB 15,120-15,150/mt. At the tail of trading, SHFE lead prices dropped briefly due to the falling domestic stocks and finally closed up RMB 60/mt to RMB 15,155/mt influenced by decline of the US dollar index. Trading volumes were down 158 lots to 102 lots, while positions increased to 1,786 lots, up 16 lots.

In China’s domestic spot market, quotations for Chihong Zn & Ge and Nanfang changed little from the previous trading day and were mainly at RMB 15,260/mt, with premiums of RMB 130/mt over the most active SHFE lead contract price. Shuangyan and Shuikoushan were quoted between RMB 15,200-15,220/mt. Dealers remained normal sales and downstream buyers purchased on production needs, leaving trading light.


Last Friday, SHFE 1209 zinc contract prices opened RMB 65/mt at RMB 14,770/mt and fluctuated around RMB 14,730/mt, dipping to RMB 14,700/mt twice in the morning session and finding support from large numbers of buyers. In the afternoon, SHFE three-month zinc contract prices slid pointed to an intraday high at RMB 14,820/mt and finally closed at RMB 14,800/mt, up RMB 95/mt or 0.65%. Trading volumes decreased by 36,940 lots to 69,608 lots, and total position increased by 4,086 lots to 146,000 lots. Trading volumes of SHFE 1208 zinc contract decreased by 13,098 lots to 23,376 lots, and total position decreased by 5,666 lots to 140,000 lots. Both longs and shorts were cautious on the last trading day in the week, and prices fluctuated narrowly.

In domestic spot markets, discounts of #0 zinc against SHFE 1208 zinc contract prices were between RMB 50-80/mt, with traded prices between RMB 14,620-14,650/mt. #1 zinc prices were between RMB 14,610-14,630/mt. Goods supply available in the market was limited as smelters were holding goods, while downstream buying interest was low, keeping transactions quiet. Prices in Guangdong were higher than Shanghai's due to short supply, with #0 zinc traded between RMB 14,700-14,750/mt.


LME tin prices followed fluctuated weakly last Friday since Spain’s Catalonia was reported in need of financing help from the central government because it is running out of options for refinancing debt and since S&P downgraded ratings for several Spanish banks. LME tin prices opened at USD 19,890/mt in electronic trading and ended down USD 110/mt to USD 19,760/mt, with the lowest price of the day at USD 19,700/mt and the highest at USD 19,900/mt. Daily trading volumes were down 148 lots to 148 lots, while positions increased by 460 lots to 20,126 lots. LME tin inventories were down 160 mt to 13,465 mt.

The Michigan Consumer Confidence Index was reported at 79.3 in May, a new high since October, 2007, and above the expected 77.8 and 77.8 recorded during the previous month. Negative news from the euro zone remains the major factor influencing the market. The possible Greek exit and financial troubles at Spanish banks, combined with the fresh concerns over Spanish debt financing, sending risk appetite down sharply. In response, base metals dropped rapidly with the US dollar index renewing 20-month record. The weak trend of base metals forced many producers to halt sales, which become the most important support to base metals prices. As markets in the US will be closed for holiday on Monday, financial market may not experience volatile fluctuations.

On Monday, spot tin prices in China’s domestic market should move between RMB 154,000-155,500/mt.


Last Friday, mainstream traded prices of Jinchuan nickel were between RMB 126,400-126,800/mt, while mainstream Russian nickel prices were between RMB 124,300-124,500/mt. As some traders were unwilling to sell goods, Jinchuan's nickel was quoted as high as RMB 127,000/mt in the morning session. Downstream buyers were cautious due to unclear prices, keeping transactions muted.


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