SMM Daily Review – 2012/7/10 Base Metals Market

SHANGHAI, Jul. 11 (SMM)--

Copper:
SHFE 1210 copper contract, the most active one, started slightly down by RMB 80/mt at RMB 55,100/mt Tuesday. After the opening, the contract climbed to a high at RMB 55,100/mt driven by some buying but was dampened following weak readings in China's trade data and unwrought copper and copper semis import data. At the tail of trading, SHFE 1210 copper contract tracked LME copper to retreat below the daily moving average, down below the RMB 55,000/mt point to RMB 54,900/mt. Finally, SHFE 1210 copper contract settled RMB 160/mt or 0.29% at RMB 54,940/mt, with trading volumes and positions decreasing by 20,744 lots and 3,134 lots, respectively. While both longs and shorts exerted caution, resistance at both the 5-day moving average of RMB 55,500/mt and 10-day moving average will weigh SHFE copper prices down over the near term.

As SHFE copper rebounded marginally, the SHFE/LME copper price ratio rose to above 7.3, propelling imported copper cargo-holders to move goods aggressively. Spot copper supply thus increased significantly and slight copper discount quotes occurred, which dragged down high-quality copper. Spot copper offers were generally between discounts of negative RMB 20/mt and premiums of positive RMB 80/mt in the morning business. Traded prices for standard-quality copper were between RMB 55,630-55,730/mt, and RMB 55,670-55,830/mt for high-quality copper. The price gap between standard-quality imported copper and high-quality domestic copper widened, so traders chose to buy in spot markets and sell futures contracts. Downstream producers, though, continued to buy as needed. Market transactions were largely made by traders as a result. In the afternoon, SHFE copper prices dropped and helped spot copper premium quotes rise amid falling supply for high-quality copper, but standard-quality copper was favored by market participants and held the morning's offers. Mainstream spot copper offers were between discounts of negative RMB 20/mt and premiums of positive RMB 100/mt in the afternoon, while traded prices declined to RMB 55,500 -55,830/mt.

Aluminum:
The most active SHFE aluminum contract for October delivery opened slightly higher at RMB 15,585/mt and found its high at RMB 15,645/mt, before falling back to close down a slight RMB 5/mt or 0.03% at RMB 15,520/mt as short selling increased. Positions added a marginal 740 lots to 110,060 lots. Heavy pressure was met at the 5-day moving average. As spot aluminum consumption remains soft, the contract is expected to test support at RMB 15,500/mt for the near term.

Spot aluminum was traded at RMB 15,600-15,630/mt in Shanghai, at discounts of RMB 50-80/mt over current-month SHFE aluminum prices. Low-iron aluminum was sold at RMB 15,690-15,710/mt. In the morning session, though SHFE aluminum rebounded slightly with the current-month contract moving up to test resistance at RMB 15,700/mt, spot aluminum prices failed to follow due to weak consumption. Discounts expanded to near RMB 100/mt, with a few quotations of RMB 15,590/mt seen as traders lower prices to promote sales. Trading nevertheless remained light due to weak buying. Quotations stagnated within RMB 15,590-15,600/mt in the afternoon as SHFE aluminum trimmed gains. Trading was quiet, however, as purchases were hardly seen.

Lead:
On Tuesday, SHFE lead prices opened RMB 60/mt higher at RMB 14,900/mt under the influence of LME lead prices overnight. Later, SHFE lead prices moved within the RMB 14,890-14,920/mt and fluctuated down at the tail of trading along with domestic stocks to finally close at RMB 14,875/mt, up RMB 35/mt, with support at the 20-day moving average and resistance at the 30-day moving average. Trading volumes were down 118 lots to 104 lots, and positions were up 14 lots to 2,150 lots.

Quotations for Chengyuan and Nanfang were between RMB 15,020-15,030/mt, with spot premiums of RMB 100-110/mt over the most active SHFE lead price. Supply from Nanfang fell short in the market, boosting buying interest. Mengzi and Hanjiang were mainly quoted at RMB 14,950/mt. Quotations for Shenqian and brands from Gejiu region were around RMB 14,930/mt. Smelters were less reluctant to move goods and traders continued holding prices firm. Downstream buyers were not willing to buy noting prices were relatively high, leaving limited transactions made.

Zinc:
On Tuesday, SHFE 1210 zinc contract prices opened higher at RMB 14,705/mt, and inched up with LME zinc prices to touch an intraday high RMB 14,790/mt, and then fell to move between RMB 14,740-14,760/mt. In the afternoon, SHFE 1210 zinc contract prices fell along with LME zinc prices, as large numbers of shorts entered the market, SHFE 1210 zinc contract prices rolled back previous gains and finally closed at RMB 14,650/mt, down RMB 50/mt or 0.34%. Trading volumes decreased by 18,228 lots to 89,192 lots, and total position increased by 1,874 lots to 170,818 lots.

In domestic spot markets, discounts of #0 zinc were around RMB 120/mt, with traded prices between RMB 14,640-14,650/mt. As SHFE zinc prices fell, discounts of #0 zinc narrowed to RMB 110/mt, with traded prices between RMB 14,620-14,630/mt. #1 zinc was quoted between RMB 14,580-14,610/mt. Imported zinc was traded prices between RMB 14,600-14,610/mt, Purchases for #1 zinc were sluggish as imported zinc prices were close to #1 zinc prices. Downstream buyers purchased as needed, despite massive arbitrage operation due to expanding discounts, transactions were muted.

Tin:
On Tuesday, mainstream spot tin prices in Shanghai tin market were between RMB 148,000-149,000/mt, a few goods were quoted at RMB 147,500/mt due to sluggish consumption. Downstream demand was weak, leaving transactions limited. It was reported the operating rate at solder enterprises edged down between June and July. Although some enterprises maintained orders flat via developing new businesses, most reported decline in orders in June, and it is expected orders may not improve in July and August. In general, downstream demand remained sluggish with transactions limited, spot tin prices lacked upward momentum, coupled with weak LME tin prices, tin prices are still facing downward pressures.

Nickel:
On Tuesday, mainstream prices of Jinchuan nickel were between RMB 121,100-121,400/mt in the morning session, while mainstream Russian nickel prices were between RMB 118,300-118,400/mt. With sluggish downstream demand, spot prices did not rise but fell due to a wait-and-see sentiment, and downstream buying interest was low, combined with falling LME nickel prices, transactions were extremely quiet.