SMM Base Metals Market Daily Review (2012-10-19)

SHANGHAI, Oct. 22 (SMM)--

Copper:
As LME copper prices fell after initially increasing overnight, SHFE 1301 copper contract, the most active one, started flat at RMB 59,150/mt last Friday. The contract dipped after temporarily rising to RMB 59,200/mt following the opening, and then fluctuated narrowly around RMB 59,060/mt in the first trading session. As Chinese A-shares slipped, SHFE copper prices continued falling in the second trading session and drifted lower to RMB 58,500/mt in the afternoon before touching an intraday trough at RMB 58,380/mt. Moving gradually away from the daily moving average, SHFE 1301 copper contract settled RMB 690/mt or 1.17% lower at RMB 58,460/mt, with trading volumes and positions up by 22,704 lots and 4,168 lots, respectively. The most active copper contract came under pressure at the 20-day moving average due to short selling and was likely to lose support at the 30-day moving average.
  
Spot copper discounts were negative RMB 60-240/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 58,580-58,780/mt, and RMB 58,680-59,020/mt for high-quality copper. As SHFE copper prices started flat and fluctuated, spot copper discounts stabilized between negative RMB 100-240/mt, and merely discounts for the “Guixi” brand were quoted negative RMB 80/mt but received little response from markets. At 11 am, SHFE copper prices were dragged down below RMB 59,000/mt owing to the falling Chinese A-shares, so some spot copper cargo-holders narrowed discounts to negative RMB 60-180/mt, but downstream producers awaited lower price levels. Near the midday, forward SHFE copper contracts gained falling momentum and compelled hedged traders to take profit-taking. Spot copper discounts thus remained between negative RMB 80-220/mt, still failing to entice market buyers. In the afternoon, SHFE copper prices slipped to RMB 58,600/mt, but declines in forward SHFE copper contracts narrowed, depressing hedged trading and helping spot copper discounts hold between negative RMB 50-200/mt. Traded prices fell to RMB 58,300-58,550/mt in the afternoon, but spot market activity was not seen to improve. SHFE copper stocks added by 15,196 mt to 196,710 mt last Friday, highlighting market oversupply.
 
Aluminum:
The SHFE 1212 aluminum contract opened slightly higher at RMB 15,510/mt on October 19. The most active contract stagnated in the session due to thin trading activity and failed to hold RMB 15,500/mt. Finally, the three-month contract shed RMB 15/mt or 0.10% to close at RMB 15,480/mt. Positions were down 532 lots to 57,326 lots. Investors lacked confidence due to bearishness in the market. However, news about strict control on newly-built projects in Xinjiang helped the most-traded SHFE aluminum contract resist declines compared with other base metals. The contract for December delivery is expected to remain weak in this coming week. Latest SHFE aluminum inventories increased by 24,172 mt to 434,363 mt.

Spot aluminum was mainly traded between RMB 15,300-15,330/mt in Shanghai last Friday, with discounts between RMB 100-120/mt. Low-iron aluminum was traded between RMB 15,380-15,390/mt. The most active SHFE aluminum contract proved resilient to declines compared with other base metals, prompting traders to aggressively move goods. However, limited restocking by downstream producers caused spot discounts to expand above RMB 100/mt. Trading was more active at lower prices. Overall trading was light. In the afternoon, the most active SHFE aluminum contract still had no upward momentum to rebound. Sellers and buyers showed little interest in entering the market as the weekend approached, with sparse quotations at RMB 15,300-15,310/mt. Most traders are pessimistic towards aluminum prices in this coming week.
 
Lead:
SHFE lead prices opened RMB 65/mt lower at RMB 15,690/mt on Friday. SHFE lead prices hovered around RMB 15,710/mt in the morning and fell to RMB 15,630/mt along with LME lead prices at midday, to finally close at RMB 15,600/mt, down RMB 155/mt or 1%. Trading volumes were up 36 lots to 92 lots, and positions were up 14 lots to 1,186 lots.

Trading in China's spot lead market was still thin despite lower prices. Well-known brands including Nanfang and Chihong Zn & Ge were quoted at RMB 15,500-15,520/mt, with spot discounts overt the SHFE 1212 lead contract price at RMB 150/mt. Mengzi was offered at RMB 15,400/mt. Quotations for Shenqian were at RMB 15,380/mt. Traders lowered prices but buying interest was low.

Zinc:
Last Friday, SHFE 1301 zinc contract prices opened at RMB 15,195/mt, and were weighed down after touching RMB 15,210/mt due to the falling LME zinc prices. SHFE 1301 zinc contract prices once stabilized between RMB 15,130-15,150/mt in the morning session, but lacked momentum to rise as large numbers of shorts entered the market. In the midday, the Shanghai Composite Index plummeted, so SHFE 1301 zinc contract prices once dipped to RMB 15,045/mt and finally closed at RMB 15,065/mt, down RMB 170/mt.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices remained between RMB 160-180/mt despite falling SHFE three-month zinc contract prices, with traded prices between RMB 14,980-15,000/mt. As SHFE zinc prices inched down, #0 zinc prices fell in response to RMB 14,930-14,950/mt. #1 zinc prices were between RMB 14,900-14,920/mt. Spot discounts narrowed slightly due to the falling SHFE zinc prices, allowing traders to arbitrage actively. But spot discounts did not narrow sharply due to ample goods supply, with transactions improving. 

Tin:
In Shanghai tin market, spot lead prices were mainly between RMB 151,500-153,500/mt with transactions still weakening. Market was dominated by wait-and-see sentiment with tin prices falling continuously. Only a few downstream enterprises purchased in limited amounts. Yunxi was traded at RMB 153,500/mt, Yunxiang and Nanshan were traded at RMB 151,500/mt, while traded prices for Nancang was RMB 150,500/mt.

Nickel:
During the morning trading hours in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 126,000-126,300/mt, and mainstream traded prices of nickel from Russia were between RMB 124,100-124,400/mt. As LME nickel prices slipped, downstream producers replenished stocks cautiously and transactions were muted. During the afternoon trading hours, traders lowered offers to promote transactions. Offers of nickel from Jinchuan Group were around RMB 125,900/mt and mainstream offers of nickel from Russia were around RMB 124,000/mt. However, transactions were still sluggish.