SMM Daily Review - 2012/7/25 Base Metals Market

SHANGHAI, Jul. 26 (SMM) --

Copper

As LME copper extended sluggishness overnight, SHFE 1211 copper contract, the most active one, started RMB 450/mt down at RMB 54,100/mt Wednesday. After the opening, the contract pared some of losses as LME copper prices rebounded on a falling US dollar index owing to technical resistance, and gradually climbed to a high RMB 54,650/mt, up from the daily moving average. Nevertheless, as LME copper prices retreated in the afternoon, the contract dropped below the daily moving average, and gained the falling momentum after dipping below the RMB 54,000/mt point, to as low as RMB 53,600/mt. Finally, the most active copper contract for November delivery settled RMB 920/mt or 1.69% lower at RMB 53,630/mt, with trading volumes and positions increasing by 11,932 lots, and 41,834 lots, respectively. Selling pressures grew after SHFE copper prices slipped below RMB 54,000/mt, and bearish sentiment also piled up. From technical indicators, SHFE copper prices have moved away from recent moving averages and are likely to fall further in the immediate future.

SHFE copper prices started down in the morning and helped cargo-holders of hedged copper in spot markets sell for cash. As the SHFE/LME copper price ratio improved further, cargo-holders of imported copper chose to reduce premiums to move goods. The price gap between imported and domestic copper widened. Spot copper premium quotes were between positive RMB 80-150/mt in the morning business. Traded prices for standard-quality copper were between RMB 54,850-54,900/mt, and RMB 54,900-55,000/mt for high-quality copper. Spot copper supply kept sufficient during the whole day. Near the midday, copper prices edged up, but spot copper premiums were little changed. Short-term traders met resistance to move goods, restricting market transactions. Downstream producers stuck to their source-to-need strategy, but overall market transactions were limited in the morning. In the afternoon, as SHFE copper prices retreated by over RMB 500/mt, hedged copper flew into spot markets in large quantities. However, spot copper premium quotes rose marginally in the afternoon, up to positive RMB 100-170/mt, while traded prices dropped to RMB 54,550-54,800/mt, with almost no downstream producers entering markets to buy amid growing bearish sentiment.

Aluminum

The most active SHFE aluminum contract for October delivery started lower at RMB 15,345/mt and dipped to a low of RMB 15,200/mt, leading losses among base metals, on Wednesday. Bargain-hunting helped it recover during later trading to close at RMB 15,260/mt, down RMB 140/mt or 0.91%. Strong resistance was met at the RMB 15,300/mt mark. Positions dropped 1,430 lots to 98,394 lots. As the falling Shanghai Composite Index dampens confidence, SHFE aluminum has seen successive days of losses, with the slide accelerating. Support for the most active SHFE aluminum contract at RMB 15,200/mt is expected to be even weaker after a shift in delivery month.

Spot aluminum traded at RMB 15,300-15,350/mt in Shanghai, at discounts of RMB 10-40/mt over current-month SHFE aluminum prices. Low-iron aluminum traded at RMB 15,350-15,400/mt. The market sentiment remains bearish as SHFE aluminum led losses of base metals. Its narrowing losses during spot trading hours led to strong unwillingness to sell at low prices, with only a few deals done at RMB 15,280-15,300/mt and quotations were hiked to above RMB 15,350/mt. The quotation hike led to low buying interest, however, with trading volumes dropping slightly from the previous trading day. The current-month SHFE aluminum contract moved narrowly within RMB 15,350-15,360/mt in the afternoon. Spot aluminum deals were rarely reported as both sellers and buyers moved aside, with sparse quotations of RMB 15,320-15,330/mt being heard.

Lead

Since the possibility for Greece to exit the euro zone is rising and since Moody’s changed the outlook on EFSF’s rating to negative, SHFE lead prices moved weakly between RMB 14,760-14,790/mt after opening at RMB 14,815/mt July 25. In the afternoon, SHFE lead prices continued to fall influenced by the LME lead prices and the bearishness in the market, to close at RMB 14,705/mt, down RMB 175/mt. Trading volumes were down 80 lots to 272 lots, while positions increased 120 lots to 2,738 lots.

SHFE lead prices rallied after dipping low July 25. In China’s spot lead market, Nanfang and Shuikoushan were quoted between RMB 14,950-14,960/mt, with spot premiums over the most active SHFE lead price expanding from RMB 100 to RMB 160/mt. Quotations for Yubei were at RMB 14,900/mt, with premiums over the SHFE 1209 lead contract price at RMB 90. Shenqian and Mengzi were quoted at RMB 14,930/mt, and Tianma was quoted at RMB 14,850/mt. Lead prices kept falling, leaving most investors bearish to market outlook. Trading was still quiet. In the afternoon, spot lead prices were down RMB 20/mt influenced by the falling SHFE lead prices, but market showed no strong response.

Zinc

On Wednesday, SHFE 1211 zinc contract prices opened at RMB 14,460/mt and touched an intraday high at RMB 14,520/mt as SHFE zinc prices rose due to the plummeting US dollar index, and then fluctuated above the moving average. In the afternoon, the US dollar index touched 84.052, pushing down LME zinc prices. As a result, SHFE 1211 zinc contract prices dipped to RMB 14,370/mt, and finally closed at RMB 14,380/mt, down RMB 155/mt or 1.07%. Trading volumes increased by 3,494 lots to 120,934 lots, and total position increased by 14,616 lots to 170,440 lots.

In domestic spot markets, discounts of #0 zinc were around RMB 30/mt in the morning session, with traded prices between RMB 14,420-14,430/mt. As SHFE zinc prices rose, discounts of #0 zinc expanded to RMB 40/mt, with traded prices as high as RMB 14,480-14,490/mt, but transactions limited. Mainstream prices were between RMB 14,450-14,470/mt. Imported zinc was traded between RMB 14,350-14,400/mt, and #1 zinc was traded between RMB 14,350-14,400/mt. Downstream buyers purchased actively in the morning session, but turned cautious as zinc prices rose. The market preferred imported zinc to domestic #1 zinc as their prices were close, keeping transactions of domestic #1 zinc quiet. As SHFE zinc prices fell in the afternoon, #0 zinc prices fell to RMB 14,400/mt, but downstream buying interest remained low.

Tin

In Shanghai tin market, spot tin prices were mainly between RMB 144,500-146,500/mt with strong wait-and-see sentiment in the market. LME tin prices slumped USD 691/mt Tuesday, intensifying market fears and driving spot prices to drop. However, most downstream enterprises opted to wait on the sidelines given the sharp decline, leaving only a few transactions done. In the afternoon, trading was even thinner, quotations for some goods were lowered again. Traded prices for Yunxi were between RMB 144,500-146,500/mt, and Nanshan was traded at RMB 144,500/mt. A few deals for secondary tin were done between RMB 143,000-143,500/mt.

Nickel

On Wednesday, mainstream prices of Jinchuan nickel were between RMB 115,600-115,800/mt in the morning session, while mainstream Russian nickel prices were between RMB 113,400-113,600/mt. inquiries in the spot market increased, but prices were pushed down. Downstream buyers were willing to replenish Russian nickel at RMB 113,000/mt, while traders were unwilling to sell goods, keeping transactions muted.