SMM Daily Review – 2012/7/18 Base Metals Market

SHANGHAI, Jul. 19 (SMM) –

Copper
As LME copper dropped overnight, SHFE 1210 copper contract started RMB 120/mt down at RMB 56,000/mt Wednesday. After the opening, the contract fell all the way as a climbing US dollar pressured down LME copper and as selling pressures for forward SHFE copper contracts grew. In the afternoon, as the Shanghai Composite Index gathered falling momentum and hit another half-year low, the contract fell to a low at RMB 55,540/mt and only eased the falling momentum after dropping to around the 60-day moving average. SHFE 1210 copper contract followed LME copper to pare some of earlier losses at the tail of trading before finally ending RMB 300/mt or 0.53% lower at RMB 55,820/mt. SHFE 1211 copper contract touched a high at RMB 56,100/mt and a low at RMB 55,500/mt during the day, and finally settled at RMB 55,760/mt, down RMB 390/mt or 0.69%. Trading volumes and positions for SHFE 1210 copper contract decreased by 64,062 lots and 13,086 lots, respectively. Positions for 1211 copper contract added by 15,102 lots, but trading volumes fell by 1,458 lots, highlighting that the shift of the most active copper contract was completed. With pressures for forward SHFE copper contracts piling up and technical indicators pointing downside again, SHFE copper prices will test the support at the 5-day moving average of RMB 55,800/mt repeatedly in the near future.

As SHFE copper prices remained weak, spot copper premiums rose to around positive RMB 100/mt. The SHFE/LME copper price ratio still lacked momentum to increase and propelled cargo-holders to raise premiums, which, however, were unable to mover high owing to both diversified and sufficient supply. Market participant resisted high prices and capped the rising trend. Mainstream spot copper offers were between premiums of positive RMB 20-120/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 55,800-55,940/mt, and RMB 55,850-56,000/mt for high-quality copper. Copper prices met resistance to trend higher several times. Downstream producers continued buying as needed, while traders still bought spot copper and sold SHFE copper contracts. Market surpluses were still pronounced in the morning. In the afternoon, SHFE copper prices drifted lower again and helped spot copper premiums increase to between positive RMB 40-150/mt, while traded prices entirely lost RMB 56,000/mt. Some companies bought at the lows in the afternoon, and market activity improved from the morning.

Aluminum
The most actively traded SHFE aluminum contract for October delivery started lower at RMB 15,575/mt and dipped to a low of RMB 15,510/mt, before recovering slightly (shorts took profits) to settle down RMB 30/mt or 0.19% at RMB 15,565/mt. Positions dropped 1,280 lots to 104,844 lots on Wednesday. SHFE aluminum trading was still light. Limited short selling therefore helped SHFE aluminum prices stay near present levels while other base metals shed heavier losses. The contract should struggle near RMB 15,550/mt for the near term.

Spot aluminum traded at RMB 15,510-15,540/mt in Shanghai, at discounts of RMB 40-70/mt over current-month SHFE aluminum prices. Low-iron aluminum sold at RMB 15,600-15,610/mt. Spot discounts expanded to RMB 70/mt as the weak performance of SHFE aluminum added to bearishness downstream and consequently even less buying. Traders in Hangzhou lowered their quotations to as low as RMB 15,500/mt, which only saw a few deals from middlemen, however. Spot aluminum prices dropped to RMB 15,510/mt in the afternoon as SHFE aluminum prices dropped sharply early in the trading session. Deals were hardly concluded as sellers and buyers spit over a proper price.

Lead
SHFE lead prices moved narrowly within a RMB 30/mt band after opening at RMB 14,970/mt Wednesday, with strong resistance at RMB 15,000/mt. In the afternoon, SHFE lead fell to RMB 14,955/mt due to the declines in Chinese stock markets and LME lead prices, but stabilized later with prices closing at RMB 14,960/mt. Trading volumes were down 206 lots to 180 lots, while positions rose 118 lots to 2,520 lots.

Spot lead market showed no violent movements. Buyers mainly made inquiries and traders held quotations firmly with limited goods at hand. Nanfang was 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, Hanjiang and Shenqian were at RMB 15,050-15,070/mt. Only limited transactions were limited in general.

Zinc
On Wednesday, SHFE 1210 zinc contract prices opened at RMB 14,820/mt, and inched down due to the climbing US dollar index, and then fluctuated between RMB 14,800-14,820/mt. With plunging LME zinc prices, SHFE 1210 zinc contract prices fell sharply and dipped to RMB 14,750/mt, but then rebounded to touch RMB 14,800/mt as the Shanghai Composite Index rose, and finally closed at RMB 14,785/mt, down RMB 45/mt, or 0.3%. Trading volumes decreased by 31,072 lots to 44,718 lots, and total position decreased by 1,820 lots to 146,498 lots.

In domestic spot markets, discounts of #0 zinc were around RMB 100/mt in the morning session, with traded prices between RMB 14,700-14,710/mt. As SHFE zinc prices fell slightly, discounts of #0 zinc narrowed to RMB 90/mt, with traded prices between RMB 14,690-14,700/mt. Imported zinc was traded between RMB 14,650-14,660/mt, and #1 zinc was traded around RMB 14,660/mt. Smelters were actively moving goods in Tianjin due to favorable prices. On the other hand traders in Shanghai also continued to sell goods, with downstream inquiries brisk. But purchases from downstream buyers were limited, with transactions limited.

Tin
In Shanghai tin market, mainstream traded prices were between RMB 146,500-148,500/mt, and supply was still insufficient with strong wait-and-see sentiment in the market. Downstream enterprises only purchased in limited amount and kept inventories low due to poor orders and low operating rates. In trading market, deals for Yunxiang and Yunheng were mainly done between RMB 147,000-147,500/mt, and Jinlong and Nancang were traded at RMB 146,500/mt. Quotations from Yunxi remained unchanged, and traded prices were above RMB 147,000/mt. A few imported tin was traded in the market at around RMB 146,000/mt.

Nickel
On Wednesday, mainstream prices of Jinchuan nickel were between RMB 118,800-119,000/mt in the morning session, while mainstream Russian nickel prices were between RMB 116,800-117,000/mt. Downstream buyers and some traders purchased modestly in the morning session, causing transactions to improve. In order to boost transactions, traders further lowered quotes at noon, with Jinchuan nickel prices down to RMB 118,700/mt, and Russian nickel prices down to RMB 116,700/mt. But downstream turned cautious as LME nickel prices fell slightly in the afternoon, with transactions muted.