SMM Daily Review – 2012/6/20 Base Metals Market

SHANGHAI, Jun. 21 (SMM) –

Copper
As LME copper climbed stably overnight, SHFE 1210 copper contract started RMB 120/mt up at RMB 55,050/mt Wednesday. The contract hovered narrowly around the daily moving average of RMB 55,100/mt before the midday owing to severe struggle between longs and shorts, with a fluctuating band only about RMB 50/mt. In the afternoon, LME copper stabilized, so the contract drifted higher to RMB 55,200/mt and then continued to lurch, with a high touching RMB 55,330/mt, but the Shanghai Composite Index retreating below 2,300 restricted prices to move higher. However, a lot of longs closed positions five minutes before the trading was closed, causing the contract to reverse earlier gains before sliding to an intraday low of RMB 54,860/mt. Finally, SHFE 1210 copper contract ended RMB 20/mt or 0.04% lower at RMB 54,910/mt, with trading volumes and positions increasing by 19,524 lots and 6,148 lots, respectively. Trading volumes and positions for all SHFE copper contracts decreased by 18,434 lots and 9,200 lots, respectively. SHFE copper prices will test support at the 30-day moving average in the near future.

SHFE copper prices fluctuated in a narrow band. Cargo-holders in spot markets insisted on copper premiums which kept stable between positive RMB 250-320/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,940-55,980/mt, and RMB 55,980-56,040/mt for high-quality copper. Spot copper supply increased compared with the previous day. Some traders still chose to buy at the lows, contributing to the most to market transactions. Downstream producers, though, were still little interested in buying at RMB 56,000/mt. In the afternoon, SHFE copper prices drifted higher, but spot copper premiums held to the morning levels. Traded prices were between RMB 56,000-56,100/mt in the afternoon, entirely standing above the RMB 56,000/mt point, but copper consumption became more sluggish.

Aluminum
The most active SHFE aluminum contract for September delivery started lower at RMB 15,690/mt and settled unchanged from Tuesday at RMB 15,755/mt, after finding its low at RMB 15,640/mt. Aluminum was the only base metal that weakened during the day. Positions dropped 1,434 lots to 98,738 lots. Short-selling faded, with the wait-and-see sentiment strengthening before Fed interest rate meeting results are announced. The most active contract may be able to test resistance at RMB 15,800/mt if Fed delivers support.

Spot aluminum was traded mainly at RMB 15,720-15,740/mt in Shanghai, with low iron aluminum trading at RMB 15,790-15,810/mt. Spot aluminum prices continued to shed heavy losses as aluminum futures weakened against gains of other base metals. Traders expanded premiums required to RMB 50/mt after futures prices dropped. Mainstream traded prices still fell to a new low of this year. Downstream inquires were heard but deals were quite thin. The wait-and see sentiment turned strong among both sellers and buyers after SHFE aluminum futures trimmed losses, with quotations generally held near the current-month SHFE aluminum prices. No deals were done in the afternoon though.

Lead
On Wednesday, SHFE lead prices reacted mildly to the positive news from the G20 summit to open at RMB 15,050/mt, with prices moving narrowly and finally closing at RMB 15,065/mt, up RMB 60/mt. Trading volumes were down 66 lots to 56 lots, while positions were down 22 lots to 2,156 lots.

In domestic spot markets, dealers were actively moving goods ahead of the Chinese Dragon Boat Festival. Quotations for Nanfang and Shuikoushan were RMB 15,130/mt, with premiums of RMB 60/mt against the most active SHFE lead price. Hanjiang was quoted at RMB 15,070/mt, while Mengzi was quoted at RMB 15,080/mt. Quotations for Shenqian and brands from Gejiu region were between RMB 15,050-15,060/mt. Downstream enterprises were not intended to replenish stocks in large amounts, leaving trading light.

Zinc
SHFE 1209 zinc contract price opened at RMB 14,910/mt Wednesday and rallied to RMB 14,965/mt due to positive news overnight, but met resistance to edge down later to RMB 14,900-14,930/mt. At midday, SHFE zinc prices dipped to a low of RMB 14,880/mt due to falling domestic stock markets. However, SHFE zinc prices regained some losses after opening in the afternoon and fluctuated between RMB 14,910-14,940/mt, with prices ending up RMB 25/mt to RMB 14,930/mt, a growth of 0.17%. Trading volumes fell by 12,424 lots to 29,670 lots, while positions were down 5,078 lots to 147,174 lots. SHFE 1210 zinc contract were actively traded with positions up 3,612 lots to 108,934 lots.

In China's domestic spot markets, traded prices for #0 lead were mainly between RMB 14,810-14,830/mt in the morning, with discounts of RMB 100-120/mt over the most active SHFE zinc contract price, but fell to RMB 14,800/mt with spot discounts narrowing to RMB 90/mt. Quotations for #1 zinc were RMB 14,770/mt. Market was attentive to whether the Fed will decide to implement QE3 measures on the upcoming meeting. Cargo holders were eager to move goods, but downstream buyers showed no intention of massive replenishments, leaving trading unimproved.

Tin
On Wednesday, transactions in Shanghai tin market were mainly done between RMB 150,000-151,500/mt, changing little from the previous trading day. Spot tin prices hovered around RMB 150,000/mt with unclear trends on LME market. Traded prices for Nanshan, Jinhai, and Yunheng were mainly between RMB 150,000/mt, while some transactions for Yunxi were concluded between RMB 150,500-151,500/mt. Transactions remained quiet.

Nickel
On Wednesday, mainstream traded prices for Jinchuan nickel were RMB 124,500-147,000/mt in the Shanghai nickel market, and RMB 121,800-122,100/mt for Russian nickel.

LME nickel market overnight gained by more than USD 400/mt, but domestic nickel market failed to follow since weak demand deprived of any rising momentum, and trading was quiet as a result. With the upcoming Chinese Dragon Boat Festival, no large-scale goods replenishment was reported, a sign of sluggish demand in the stainless steel industry. Market players said downstream demand will wane further along with the arrival of the peak power consumption period and the traditional low demand period, and so market pessimism dominated the market. Since May, many private stainless steel mills have reduced production, or shut down production for unit maintenance, reducing demand for nickel.