SMM Daily Review – 2012/7/17 Base Metals Market

SHANGHAI, Jul. 18 (SMM) –

Copper
As LME copper stabilized overnight, SHFE 1210 copper contract, the most active one, started RMB 340/mt up at RMB 56,420/mt Tuesday. After the opening, the contract fell rapidly after temporarily climbing to a high of RMB 56,560/mt, down to around RMB 56,200/mt, as longs conducted profit-taking, with the high price level restricted by an earlier high of RMB 56,350/mt. In the afternoon, SHFE copper prices followed LME copper prices to slip, coming under pressure at the daily moving average and gradually moving away from this price mark. However, SHFE copper prices then stopped falling after retreating to the previous session's low of 55,790/mt, hovering narrowly around RMB 55,900/mt and narrowing some of daily declines at the tail of trading. SHFE 1210 copper contract finally settled RMB 160/mt or 0.29% lower at RMB 55,920/mt, with trading volumes and positions decreasing by 21,888 lots and 14,702 lots, respectively. Positions for all SHFE copper contracts fell by 7,306 lots while trading volumes added by 72,710 lots. The shift of the most active copper contract began as selling pressure for forward SHFE copper contracts grew again. With longs and shorts struggling severely at RMB 56,000/mt, SHFE copper prices are likely to remain within current pricing range over the near term.

As SHFE copper prices extended rebounds, some hedged copper was restricted in the morning. In the face of falling SHFE/LME copper price ratio, cargo-holders of imported copper tried to raise premiums. Spot copper offers were generally between premiums of positive RMB 0-80/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,180-56,270/mt, and RMB 56,220-56,350/mt for high-quality copper. The price gap between standard and high-quality copper widened. A small number of cargo-holders were moving goods at slight discounts to generate cash eagerly, but appropriately scaled back sale volumes near the midday when SHFE copper prices dropped rapidly. No price spread among SHFE copper contracts kept traders on the sidelines, while downstream producers resisted high spot copper premiums, leading to muted market activity in the morning. In the afternoon, as SHFE copper prices dropped rapidly, mainstream spot copper premium quotes rose to positive RMB 40-120/mt. Traded prices were between RMB 55,950-56,150/mt in the afternoon, with some downstream buying below RMB 56,000/mt, but overall market transactions remained limited. 

Aluminum
SHFE aluminum for October delivery started slightly higher at RMB 15,615/mt and closed down a slight RMB 10/mt or 0.06% at RMB 15,580/mt on Tuesday, after meeting strong resistance at the 30-day moving average and finding firm support at the 10-day moving average. Positions dropped 2,154 lots to 106,124 lots as longs and shorts closed positions. Transacted contracts were less than 10,000 lots as trading cools, keeping SHFE aluminum gains behind those of other base metals. The contract is not likely to break through RMB 15,600/mt for the near term.

Spot aluminum traded at RMB 15,560-15,600/mt, at discounts of RMB 30-60/mt over current-month SHFE aluminum prices. Low-iron aluminum was sold at RMB 15,660-15,680/mt. The current-month contract struggled near RMB 15,630/mt. Weak spot aluminum consumption led to active price cuts by traders, so discounts did not narrow. Spot aluminum prices were pressured at RMB 15,600/mt in East China and trading was light. The current-month contract headed lower to RMB 15,600/mt in the afternoon. The wait-and-see sentiment was strong among both sellers and buyers, with sparse quotations at RMB 15,550-15,560/mt but no deal heard.

Lead
SHFE lead prices touched a high of RMB 15,065/mt after opening higher at RMB 14,995/mt Tuesday, the highest level since mid-June. However, prices did not extend the increase and only moved around RMB 15,000/mt. In the afternoon, SHFE lead moved down to RMB 14,970/mt to end the day at RMB 14,960/mt with strong support at the 10-day and 30-day moving average. Trading volumes were up 30 lots to 386 lots, while positions were down 20 lots to 2,402 lots.

SHFE lead prices opened slightly higher and moved weakly on Tuesday. Offers in China's spot lead market edged up. Nanfang and Shuikoushan were mainly quoted between RMB 15,090-15,100/mt, with spot premiums over the most active SHFE lead price at RMB 100/mt. Quotations for Mengzi and Hanjiang were at RMB 15,060-15,070/mt and Shenqian was quoted at around RMB 15,030/mt. As lead prices kept rising, downstream buyers remained cautious with limited deals made.

Zinc
On Tuesday, SHFE 1210 zinc contract prices opened higher at RMB 14,850/mt, and inched down as large numbers of shorts entered the market, and then rebounded slightly to the moving average. SHFE 1210 zinc contract prices fell further in the afternoon and dipped to RMB 14,755/mt as increasing shorts rushed to the market. Since the shorts left the market with profit-taking, SHFE 1210 zinc contract prices gained back some losses and finally closed at RMB 14,800/mt. Trading volumes increased by 6,552 lots to 75,790 lots, and total position decreased by 12,270 lots to 148,000 lots.

In domestic spot markets, discounts of #0 zinc were around RMB 120/mt, with traded prices between RMB 14,740-14,750/mt. As SHFE zinc prices fell slightly, discounts of #0 zinc narrowed to RMB 100-110/mt, with traded prices between RMB 14,710-14,730/mt. SHFE zinc prices dropped further in the afternoon, but discounts of #0 zinc remained unchanged, with traded prices between RMB 14,680-14,700/mt. Imported zinc was highly available in the market and had an advantage in price, polular with downstream buyers. But purchases from downstream buyers were limited, while traders moved goods actively, with transactions limited.

Tin
In Shanghai tin market, mainstream traded prices were between RMB 146,500-148,500/mt on Tuesday, and supply in the market was still limited. Smelters were not willing to sell goods and traders were cautious, leaving sparse transactions made. Some branded goods traded in the market were inventories built earlier. In the afternoon, buyers rarely made inquiries. Transactions for Nanshan and Nancang were mainly concluded at RMB 146,500/mt, while Yunxiang and Yunheng were traded at RMB 147,000/mt. Traded prices for Yunxi were between RMB 147,500-148,000/mt and quotations remained little changed.

Nickel
On Tuesday, mainstream prices of Jinchuan nickel were between RMB 119,500-119,700/mt in the morning session, while mainstream Russian nickel prices were between RMB 117,500-117,700/mt. Traders lowered quotes slightly in the afternoon due to sluggish purchasing from downstream buyers in the morning, with Jinchuan nickel prices down to RMB 119,400-119,500/mt, and Russian nickel prices down to RMB 117,400-117,500/mt. But downstream inquiries were barely reported, and transactions were mainly made among traders. Imported nickel market was also sluggish, so premiums of Russian nickel fell, down from USD 130/mt early in the week, to USD 120/mt.