SMM Base Metals Market Daily Review (2012-10-23)

SHANGHAI, Oct. 24 (SMM)--

Copper:
SHFE 1301 copper contract, the most active one, started slightly RMB 90/mt up at RMB 57,860/mt Tuesday. The contract slipped rapidly following the opening. As Chinese A-shares fell, SHFE copper prices completely dipped below RMB 57,500/mt in the afternoon, coming under pressure at the daily moving average and gradually moving away from this price mark. SHFE 1301 copper contract finished RMB 490/mt or 0.85% lower at an intraday trough of RMB 57,280/mt, with trading volumes and positions adding by 14,902 lots and 1,618 lots, respectively. The most active copper contract continued to shift. As short selling increased, SHFE copper prices tended to lower and test support at the 60-day moving average of RMB 56,800/mt.

As SHFE copper prices moved lower all the way, market pessimism in spot markets grew and hedged traders were eager to make profit-taking. Spot copper discounts thus expanded, largely between negative RMB 20-150/mt in Shanghai in the morning. Traded prices for standard-quality copper were between RMB 57,650-57,780/mt, and RMB 57,700-57,900/mt for high-quality copper. Traders lacked buying interest, but downstream producers opted to buy at the lows near the midday, resulting in modest market transactions in the morning. In the afternoon, SHFE copper prices staged weak performance, but spot copper cargo-holders continued moving goods aggressively, causing copper discounts to rise to negative RMB 100-180/mt. Traded prices fell to RMB 57,550-57,700/mt in the afternoon, but market transaction were not seen to increase.  
 
Aluminum:
The SHFE 1212 aluminum contract opened slightly lower at RMB 15,425/mt on Tuesday. The most active contract rebounded somewhat after a sudden drop, but retreated below RMB 15,400/mt due to a lack of confidence. Finally, the three-month contract shed RMB 70/mt or 0.45% to close at RMB 15,370/mt. Positions were down 390 lots to 57,080 lots. With market aversion dominating the market, copper prices dropped, dragging down aluminum prices. Investors should be cautious before the US Fed interest rate meeting concludes, so the most-traded contract is expected to meet growing resistance at RMB 15,400/mt in the short term.
Spot aluminum was mainly traded between RMB 15,270-15,290/mt in Shanghai on Tuesday, with discounts between RMB 80-100/mt. Low-iron aluminum was traded between RMB 15,340-15,350/mt. The current-month contract rebounded immediately after a sharp fall and was resilient to declines compared with other base metals, so spot aluminum prices had limited downside space, but resistance at RMB 15,300/mt remained strong. Downstream processors purchased as needed against ample supply, leaving trading light. In the afternoon, the current-month trimmed gains seen in the morning session, triggering strong bearish sentiment in spot market. Some traders were actively moving goods, with quotations averaging RMB 15,260-15,270/mt. Downstream producers and middlemen generally watched from the sidelines, depressing trading.  
 
Lead:
SHFE lead prices gapped lower at RMB 15,430/mt and presented a weak trend on Tuesday as LME lead prices dropped nearly 2% overnight. In the afternoon, SHFE lead prices fell again to RMB 15,320-15,370/mt as LME lead prices slumped and Chinese stocks fluctuated down, to finally close at RMB 15,305/mt, down RMB 215/mt. Trading volumes were up 146 lots to 226 lots, and positions were up 32 lots to 1,232 lots.

Spot lead prices in China's domestic spot markets kept falling. Well-known brands, including Chihong Zn & Ge, were quoted at RMB 15,300-15,320/mt, with spot discounts over the SHFE 1212 lead contract price at RMB 110/mt. Mengzi and Hanjiang were offered at RMB 15,270/mt. Quotations for Tongguan were at RMB 15,230-15,240/mt, and those for Dongling and Shenqian were RMB 15,200-15,220/mt. Smelters lowered prices noticeably for sales due to month end financial pressures, but most downstream buyers only purchased as needed, believing prices will fall further.

Zinc:
On Tuesday, SHFE 1301 zinc contract prices opened at RMB 14,895/mt. Despite rising LME zinc prices, the Shanghai Composite Index was still weak, so SHFE 1301 zinc contract prices fluctuated around RMB 14,900/mt in the morning trading. In the midday, the US dollar index rose, pushing down LME zinc prices. The Shanghai Composite Index entered downward track as shorts entered the market. As a result, SHFE 1301 zinc contract prices plunged and finally closed at RMB 14,785/mt, down RMB 175/mt.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were around RMB 120/mt, with traded prices between RMB 14,770-14,790/mt. SHFE zinc prices fell in the midday, and discounts were only between RMB 100-110/mt, #0 zinc prices fell in response to RMB 14,730-14,750/mt. #1 zinc prices were around RMB 14,730/mt, with supply tight. Smelters continued to hold onto their goods, but goods supply was still ample due to arbitrage opportunities. Downstream buyers mainly remained cautious in the morning, but as SHFE zinc prices fall further at noon, downstream inquiries increased. Transactions were concentrated at noon, and overall transactions did not improve from the previous day. 

Tin:
In Shanghai tin market, spot tin prices were mainly between RMB 148,500-151,500/mt, with trading light. Despite the limited goods supply, wait-and-see sentiment prevailed in the market and purchases were rare. The sharp decline in LME tin prices also affected tin consumption. Yunxi was traded at RMB 150,500-151,500/mt, Yunxiang was traded at RMB 149,000/mt, and Nanshan was traded at RMB 148,300-148,500/mt.

Nickel:
In the Shanghai nickel spot market, mainstream prices of nickel from Jinchuan Group were in the RMB 122,300-122,500/mt range, and mainstream offers of nickel from Russia were between RMB 120,900-121,200/mt. Trading sentiment improved due to dip-buying from downstream producers. However, traders were still cautious amid bearish sentiment. Although inquires from downstream producers increased, overall trading sentiment did not increase significantly.