SMM Daily Review - 2012/7/24 Base Metals Market

SHANGHAI, Jul. 25 (SMM) –

Copper

As LME copper extended weakness overnight, SHFE 1211 copper contract, the most active one, started RMB 470/mt down at RMB 54,300/mt Tuesday. After the opening, the contract continued to fluctuate around the opening price and touched a low at RMB 54,170/mt. During major trading hours, the HSBC announced that the HSBC China manufacturing PMI rose from the previous data and lifted LME copper prices. However, as there was no substantial buying, and as Chinese stock markets remained sluggish, SHFE copper prices merely edged up from the daily moving average, came under clear pressure at the previous session’s settlement price RMB 54,800/mt, and basically hovered around RMB 54,700/mt in the afternoon. At the tail of trading though, short selling appeared again and pressured SHFE copper prices down below the daily moving average again and returning to around the opening price. Finally, SHFE 1211 copper contract closed RMB 270/mt or 0.49% lower at RMB 54,500/mt, with trading volumes decreasing by 106,000 lots but positions adding by 8,816 lots. SHFE copper prices gained increasing buying after slumping below RMB 54,000/mt, but it remains early to say prices will stop falling from this price mark.

SHFE copper prices hovered feebly after starting lower. Cargo-holders in spot markets were moving goods stably and kept spot copper supply sufficient. During major trading hours, HSBC China manufacturing PMI was reported to improve from the previous reading and helped SHFE copper prices pare some of earlier losses, leading spot copper premiums to fall. Mainstream spot copper premiums were quoted between positive RMB 60-180/mt in the morning business. Traded prices for standard-quality copper were between RMB 54,920-55,080/mt, and RMB 55,000-55,150/mt for high-quality copper. Downstream producers continued replenishing stocks at the lows, but overall market transactions were limited in the morning, largely contributed by traders. In the afternoon, as SHFE copper prices stabilized, spot copper cargo-holders continued selling aggressively and caused spot copper premium quotes to narrow to positive RMB 50-150/mt. Traded prices in the afternoon were virtually flat with the morning levels, but market activity became more lackluster.

Aluminum

The most active SHFE aluminum contract for October delivery started lower at RMB 15,310/mt and narrowed losses during profit-taking by shorts before closing down a slight RMB 15/mt or 0.1% at RMB 15,400/mt. Positions decreased 442 lots to 99,824 lots. The rebound of the HSBC China Manufacturing PMI provided significant support. SMM expects the contract to test resistance at RMB 15,500/mt for the near term.

Spot aluminum traded at RMB 15,400-15,420/mt in Shanghai, at discounts of RMB 50-80/mt over current-month SHFE aluminum prices. Low-iron aluminum traded at RMB 15,480-15,500/mt. Though the current-month contract stagnated, the rebound of the HSBC China Manufacturing PMI caused some cargo holders to cut supply at low-end prices. SME traders, however, actively liquidated at such prices. Trading volumes increased slightly as downstream and middlemen increased purchases at prices below RMB 15,400/mt. The current-month contract continued to stagnate in the afternoon and middlemen were still seeking cheap goods. The wait-and-see attitude among afternoon traders, however, led to extremely tight supply. On a few deals were concluded at RMB 15,420/mt in the afternoon.

Lead

SHFE lead prices opened RMB 60/mt lower at RMB 14,745/mt July 24 influenced by the falling LME lead prices overnight, but moved up later to touch RMB 14,895/mt as China’s July PMI hit a five month high of 49.5 according to HSBC. SHFE lead prices closed up RMB 75/mt to RMB 14,880/mt. Trading volumes were down 136 lots to 192 lots, while positions increased 32 lots to 2,618 lots.

In China’s spot lead market, trading remained thin and offers fell below RMB 15,000/mt. Nanfang and Shuikoushan were quoted between RMB 14,970-14,980/mt, with spot premiums of RMB 100/mt over the most active SHFE lead price. Quotations for Tianma were at RMB 14,930/mt. Chihong Zn & Ge started selling goods July 24 with quotations relatively firm at RMB 15,150/mt. Cargo holders were unwilling to move goods.

Zinc

On Tuesday, SHFE 1211 zinc contract prices opened at RMB 14,440/mt and dipped to RMB 14,420/mt as large numbers of shorts sold off goods, and then stopped falling to move between RMB 14,500-14,560/mt. HSBC released China’s PMI during July was 49.5, the highest in five months, while manufacturing output index was 51.2, up from the 49.3 during June, and a record high in nine months. As a result, SHFE 1211 zinc contract prices climbed slightly, and rose further in the afternoon to touch RMB 14,585/mt due to the strong Shanghai Composite Index. Finally, SHFE 1211 zinc contract prices closed at RMB 14,560/mt, up RMB 10/mt or 0.07%. Trading volumes decreased by 34,598 lots to 117,440 lots, and total position decreased by 5,918 lots to 155,824 lots.

In domestic spot markets, discounts of #0 zinc were around RMB 30/mt in the morning session, with traded prices between RMB 14,480-14,490/mt. As SHFE zinc prices rose, discounts of #0 zinc expanded to RMB 50/mt, with traded prices between RMB 14,500-14,520/mt. Imported zinc was traded around RMB 14,450/mt, and the market preferred to buy #0 zinc. #1 zinc was traded around RMB 14,450/mt. Investors had replenished stocks at lower prices the previous trading day, and they took a wait-and-see attitude as prices rebounded yesterday, but traders continued to move goods, with transactions muted.

Tin

In Shanghai tin market, mainstream traded prices for spot tin were between RMB 146,000-147,500/mt, with trading still modest. LME tin prices plunged by USD 604/mt Tuesday, denting market sentiment. China’s spot tin market was dominated by wait-and-see sentiment. Transactions for Yunxi and Yunheng were between RMB 147,000-147,500/mt, while Yunxiang and Jinlong were traded between RMB 146,300-146,500/mt. Some deals for secondary tin were made at RMB 145,500/mt.

Nickel

On Tuesday, mainstream prices of Jinchuan nickel were between RMB 115,600-116,000/mt in the morning session, while mainstream Russian nickel prices were between RMB 113,700-114,000/mt. Transactions improved as both downstream buyers and traders increased purchases at lower prices. As of 4:00 pm, mainstream quotes for Jinchuan nickel fell to RMB 115,500/mt as LME nickel prices plunged, while quotes for Russian nickel were also lowered to RMB 113,500/mt, but Transactions were barely made. Plunging LME nickel prices did not affect transactions significantly.