SMM Daily Review - 2012/7/5 Base Metals Market

SHANGHAI, Jul. 6 (SMM) –

Copper
As LME copper price movement was restricted overnight, SHFE 1210 copper contract, the most active one, started RMB 70/mt down at RMB 55,950/mt Thursday. The contract hovered around the daily moving average following the opening and touched a high at RMB 56,110/mt. However, as the Shanghai Composite Index fell significantly and lost 2,200 in the afternoon, the contract retreated and directly tested a low at RMB 55,660/mt, the 5-day moving average. SHFE 1210 copper contract, though, clawed back some of daily losses after gaining technical support, before rallying and fluctuating around the daily moving average. Finally, the most active copper contract ended at RMB 55,980/mt, still down RMB 40/mt or 0.07%, with trading volumes increasing by 23,014 lots but positions decreasing by 4,856 lots. Both longs and shorts continued to conduct intraday operations while awaiting results of the European Central Bank’s meeting Thursday evening. SHFE copper prices need to gather impetus to break resistance at the RMB 56,000/mt mark but have gained growing support at the low-end. 

SHFE copper prices came under pressure and helped spot copper discounts narrow marginally despite sufficient market supply. Spot copper offers were between discounts of negative RMB 60/mt and premiums of positive RMB 20/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,150-56,300/mt, and RMB 56,200-56,350/mt for high-quality copper. As copper prices slipped near the midday, cargo-holders in spot markets held divergent views. Cargo-holders who were optimistic towards future copper prices insisted on premiums of positive RMB 0/mt, while pessimists chose to step up sales volumes and offered large discounts. Traders favored high-quality copper with discounts, and downstream producers stuck to a source-to-order strategy. In the afternoon, SHFE copper prices inched down, and spot copper market activity seemed to become weaker, causing spot copper offers to stand between discounts of negative RMB 30/mt and premiums of positive RMB 20/mt. Traded prices were between RMB 56,050 -56,220/mt in the afternoon.   

Aluminum
The most active SHFE aluminum contract for October delivery started slightly higher at RMB 15,645/mt and hit a high of RMB 15,790/mt as shorts continued to take profits, strengthening even when other base metals weakened. Cautious longs and pressure at RMB 15,700/mt dragged the contract back to close at RMB 15,680/mt, up RMB 65/mt or 0.42%. Positions dropped 4,894 lots to 107,958 lots. SHFE aluminum climbed for a third successive trading day, but was also stopped at the 30-day moving average. Transacted contracts dropped further below 50,000 lots. SMM expects the most active SHFE aluminum contract to test support at RMB 15,600/mt for the near term.

Spot aluminum traded at RMB 15,700-15,720/mt in Shanghai, with discounts of RMB 50-70/mt over the current-month SHFE aluminum contract. Low-iron aluminum traded at RMB 15,800-15,820/mt. SHFE aluminum opened with the closing price of the previous trading day after LME aluminum prices dropped slightly a day earlier. It rebounded during later trading, but failed to push up spot prices, with spot discounts expanding to RMB 70/mt. Trader selling interest was strong but buying weak, so deals were quite limited. Spot trading turned even lighter in the afternoon as SHFE aluminum trimmed gains, with sparse quotations seen at RMB 15,690-15,700/mt. No deal was supported in the afternoon session as buying disappeared.

Lead
On Thursday, caution prevailed in market and awaited interest rate decision to be released by the ECB. The most active SHFE lead contract price opened flat and moved at RMB 14,900/mt in the morning with transactions modest. At the tail of trading, SHFE lead prices hit a high of RMB 15,035/mt due to support from longs and closed at RMB 14,995/mt, up RMB 45/mt from the previous trading day. Trading volumes were down 388 lots to 188 lots, and positions were up 34 lots to 1,980 lots.

On Thursday, SHFE 1210 lead contract fluctuated narrowly after opening. In China’s domestic spot markets, goods supplied by Jinsha fell short, with several cargo holders quoting at RMB 15,100/mt. Shuikoushan and Nanfang were mainly quoted between RMB 15,000-15,020/mt, with spot premiums of RMB 20-30/mt over the most active SHFE lead price. Hanjiang was quoted at RMB 14,960/mt. Quotations from Shenqian and Mengzi were RMB 14,920-14,930/mt. Smelters remained unwilling to move goods, while demand downstream was lower as enterprises had purchased to meet production needs during the past few days, leaving transactions quiet.

Zinc
On Thursday, SHFE 1210 zinc contract prices opened at RMB 14,835/mt, and rose to an intraday high at RMB 14,880/mt, and then fluctuated narrowly. In the midday, SHFE 1210 zinc contract prices plummeted due to falling LME zinc prices and rose slightly later. In the afternoon, SHFE 1210 zinc contract prices dipped to RMB 14,760/mt and then edged up with support from the 5-day moving average, as the US dollar index plummeted near the end of trading, SHFE 1210 zinc contract prices gained back some losses and finally closed at RMB 14,850/mt, up RMB 15/mt, or 0.1%. Trading volumes decreased by 38,368 lots to 90,446 lots, and total position decreased by 2,984 lots to 171,972 lots.

In domestic spot markets, discounts of #0 zinc against SHFE 1210 zinc contract prices were between RMB 110-120/mt, with traded prices between RMB 14,730-14,760/mt. Spot prices fell sharply along with SHFE zinc prices, but due to sluggish downstream buying interest, discounts of spot goods did not narrow, with traded prices between RMB 14,700-14,720/mt. #1 zinc was quoted between RMB 14,630-14,660/mt. Downstream buyers took a wait-and-see attitude due to the lack of confidence, while traders did not purchase as actively as the previous day, with transactions muted.

Tin
On Thursday, mainstream traded prices in Shanghai tin prices were between RMB 148,000-149,000/mt. Spot tin prices extended their increases with traded prices remaining relatively sticky. However, investors were not optimistic on market outlook on account of the feeble market fundamentals. In trading market, traded prices for Nanshan were between RMB 148,000-148,300/mt, while transactions for Yunheng and Yunxi were between RMB 148,800-149,000/mt. Transactions remained modest.

Nickel
On Thursday, mainstream prices of Jinchuan nickel were between RMB 1235, 000-123,600/mt in the morning session, while mainstream Russian nickel prices were between RMB 121,000-121,200/mt. Purchases at lower prices increased due to optimism, causing trading volumes to rise. Transactions made by downstream buyers also increased. LME nickel prices did not fluctuate significantly, and spot prices remained steady. Transactions were brisk.