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SMM Daily Review - 2012/5/31 Base Metals Market
Jun 1,2012 09:48CST
smm insight
As LME copper extended the losing streak overnight, the most active SHFE copper contract for September delivery started RMB 10,00/mt lower at RMB 54,250/mt Thursday.

SHANGHAI, Jun. 1 (SMM) --


As LME copper extended the losing streak overnight, the most active SHFE copper contract for September delivery started RMB 10,00/mt lower at RMB 54,250/mt Thursday. The contract moved closely around RMB 54,400/mt before the midday as the severe struggle between longs and shorts continued unabated, with a fluctuating band only about RMB 150/mt. In the afternoon, a sliding US dollar index helped LME copper rally to around USD 7,500/mt, causing the contract to drift slightly higher to RMB 54,500/mt, but with a high at only RMB 54,640/mt. At the tail of trading, shorts accelerated the pace of selling, however, leading SHFE copper prices to gradually retreat to morning business levels. Finally, the most active copper contract settled RMB 820/mt or 1.48% down at RMB 54,530/mt, with trading volumes decreasing by 85,430 lots but positions increasing by 16,368 lots. Total positions for all SHFE copper contracts reached as high as 35,000 lots in the session. Longs and shorts will likely struggle at RMB 54,500/mt ahead of the weekends.

SHFE copper prices slumped by nearly RMB 1,000/mt, but cash generation kept spot copper supply sufficient at the month’s end. Hence, spot copper premiums quotes only rose marginally to between positive RMB 200-250/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,350-55,450/mt, and RMB 55,380-55,500/mt for high-quality copper. Some speculators with adequate cash chose to buy during the day, and downstream producers who were not troubled by cash problems also made appropriate purchases at prices below RMB 55,500/mt. However, overall market transactions were still not seen to increase during the last trading day of May. In the afternoon, as SHFE copper prices edged higher, mainstream offers for spot copper premiums narrowed to positive RMB 150-250/mt. The supply of standard-quality copper increased in the afternoon, but traded prices stayed flat with the morning levels.


The most active SHFE aluminum contract for September delivery opened lower at RMB 15,945/mt and settled down only a slight RMB 30/mt or 0.19% at RMB 15,965/mt, even though LME aluminum dipped to a 2012 low. Positions added 1,720 lots to 97,270 lots. Tight cash flow at month’s end and cautiousness before the US non-farm payroll data had limited the strength of short selling. SMM expects the contract to struggle at RMB 15,950/mt before US employment data.

Spot aluminum was traded at RMB 15,930-15,970/mt in Shanghai, at discounts or premiums within RMB 20/mt over the current-month SHFE aluminum contract. The light metal was sold at RMB 15,930-15,960/mt in Wuxi and RMB 15,940-15,970/mt in Hangzhou. Spot aluminum prices dropped after SHFE aluminum gapped lower. While goods holders have liquidation needs quoted at discounts the last trading day in May, those with abundant cash quoted at premiums. Buying interest was weak even at discounts, however, leading to extremely light trading.


SHFE lead prices gapped lower at RMB 15,000/mt Thursday influenced by the climb of the US dollar to the 83 mark overnight, and moved weakly between RMB 15,000-15,040/mt. In the afternoon, SHFE lead prices edged up to move between RMB 15,040-15,090/mt along with the rising domestic stock markets, and ended down RMB 85/mt to RMB 15,045/mt. Trading volumes increased by 140 lots to 248 lots, while positions were up 122 lots to 2,056 lots.

In China’s domestic spot market, quotations for Chihong Zn & Ge and Nanfang were between RMB 15,150-15,170/mt, with premiums of RMB 120-150/mt over the most active SHFE lead contract price. Dongling was quoted at RMB 15,100/mt, and Hengchang was quoted at RMB 15,000/mt. Downstream buyers purchased in limited amounts, and dealers maintained normal sales with pessimism to market outlook. Transactions were flat compared with the previous trading day.


On Thursday, SHFE 1209 zinc contract prices opened at RMB 14,795/mt and fluctuated between RMB 14,700-14,800/mt in the morning session. As the US dollar index fell in the midday, SHFE three-month zinc contract prices touched an intraday high at RMB 14,845/mt, but sapped due to weakening Shanghai Composite Index, with prices closing at RMB 14,795/mt, down RMB 115/mt or 0.77%. Trading volumes decreased by 14,220 lots to 79,814 lots, and total position increased by 2,010 lots to 171,130 lots.

In domestic spot markets, discounts of #0 zinc against SHFE 1209 zinc contract prices were between RMB 80-110/mt, with traded prices between RMB 14,700-14,720/mt. #1 zinc prices were between RMB 14,660-14,700/mt. Transactions were muted as traders were unwilling to move goods whilst downstream buying interest was also low.


In Shanghai tin market, mainstream traded prices were between RMB 154,000-155,000/mt with demand remaining weak. Nanshan, Jinlong and Yunxiang were traded between RMB 153,500-154,000/mt, while most transactions for Yunxi were concluded between RMB 154,500-155,000/mt. Most market players only waited on the sidelines as the falling LME tin prices depressed market confidence, leaving inquiries from buyers downstream rarely reported. Dealers were not willing to purchase due to higher risks, while smelters willing to move goods reflected poor sales. It was reported most smelters have cut production, with some of them even suspended production on account of sluggish demand and high costs for raw materials. The market fundamentals will not be able to offer any support to tin prices.


On Thursday, mainstream traded prices of Jinchuan nickel were between RMB 124,300-124,500/mt, while mainstream Russian nickel prices were between RMB 121,800-124,300/mt. LME nickel prices plunged to a new low, while spot nickel prices continued to fall. But transactions did not improve as downstream buying interest was low. Besides, Russia raised export tax for non-alloy nickel to USD 1,447.6/mt, up 16.2% from USD 1,245.5/mt.

base metals

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