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SMM Base Metals Market Daily Review (2012-10-25)
Oct 26,2012 09:58CST
price review forecast
SHFE 1301 copper contract started RMB 150/mt up at RMB 57,540/mt Thursday.

SHANGHAI, Oct. 26 (SMM)--

SHFE 1301 copper contract started RMB 150/mt up at RMB 57,540/mt Thursday. Following the opening, the contract fell all the way owing to increasing short-term selling pressures, with a high at merely RMB 57,620/mt, but stopped slipping after testing support at around RMB 57,150/mt. At the tail of trading, LME copper stabilized due to a dipping US dollar, so SHFE copper prices pared some of declines before returning to around the daily moving average of RMB 57,400/mt. SHFE 1301 copper contract ended RMB 80/mt or 0.14% lower at RMB 57,230/mt. Touching a high at RMB 57,610/mt and a low at RMB 57,110/mt, SHFE 1302 copper contract settled RMB 80/mt or 0.14% lower at RMB 57,200/mt. Trading volumes and positions for SHFE 1301 copper contract  decreased by 57,840 lots and 4,030 lots, respectively, while those for SHFE 1302 copper contract added by 26,818 lots and 16,496 lots, respectively. The most active copper contract was thus shifted to SHFE 1302 copper contract. SHFE copper prices found some support at RMB 57,000/mt and exhibited noticeable resilience.

As SHFE copper prices slipped all the way after starting higher, pessimism grew in spot markets, and some traders tried to bid down prices to buy. Spot copper discounts expanded continuously as a result, largely between negative RMB 150-280/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 57,050-57,170/mt, and RMB 57,150-57,170/mt for high-quality copper. Buying increased at prices around RMB 57,000/mt near the midday, helping improve market transactions. In the afternoon, SHFE copper prices stopped retreating and began stabilizing, but spot copper cargo-holders continued widening discounts to promote transactions, with discounts for high-quality copper quoted at negative RMB 200/mt and mainstream discount offers between negative RMB 170-300/mt. Traded prices were RMB 57,050-57,250/mt in the afternoon.   
The SHFE 1212 aluminum contract opened at RMB 15,385/mt on October 25. The most active contract hovered around RMB 15,400/mt, with trading volume a mere 2,610 lots due to thin trading activity. Finally, the three-month contract shed RMB 5/mt to close at RMB 15,385/mt. Positions were up 258 lots to 56,770 lots. With bearish sentiment dominating the market, the contract for December delivery should meet stronger resistance at RMB 15,400/mt in the immediate term.

Spot aluminum was mainly traded between RMB 15,230-15,270/mt in Shanghai on Thursday, with discounts between RMB 110-70/mt. Low-iron aluminum was traded near 15,330/mt. The SHFE 1212 aluminum contract was resilient to declines, but rose slower than other base metals. Consumption of spot aluminum was persistently sluggish and pressure from overcapacity grew. Cargo holders were eager to move goods at lower prices due to cash tightness at the month's end, but downstream producers purchased only limitedly at low prices, causing spot discounts to expand to RMB 100/mt. In the afternoon, the SHFE 1212 aluminum contract remained stagnant. Bearish mood remained, with sparse quotations between RMB 15,240-15,250/mt. Holders of certain brand goods even moved goods at RMB 15,200/mt. Deals were rarely done. 
SHFE lead prices fell to RMB 15,255/mt after opening at RMB 15,305/mt Thursday since LME lead prices dropped overnight. Later, however, SHFE lead gained buying support increased to RMB 15,370/mt and then moved around RMB 15,330/mt due to persistent pessimism in the market, with prices ending at RMB 15,300/mt, down RMB 30/mt. Trading volumes were up 16 lots to 192 lots, while positions were up 42 lots to 1,232 lots.

Spot lead prices in China inched down, but downstream consumption remained feeble, with transactions scarce. A few goods from Nanfang and Jinsha were traded at RMB 15,180/mt, with spot discounts over the SHFE 1212 lead contract price at RMB 180/mt. Wanyang and Mengzi were offered at RMB 15,100/mt, and quotations for Shenqian and Baiyin fell to RMB 15,080/mt.

On Wednesday, SHFE 1301 zinc contract prices opened at RMB 14,885/mt. In the morning trading, market confidence was depressed as America's central bank did expand QE3 in interest rates decision for October, so SHFE 1301 zinc contract prices fluctuated around RMB 14,865/mt. In the midday, the Shanghai Composite Index plunged. As a result, SHFE 1301 zinc contract prices dipped to RMB 14,830/mt, but then rallied and touched RMB 14,920/mt, and finally closed at RMB 14,860/mt, up RMB 10/mt.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were around RMB 120/mt in the morning trading. Dragged down by the falling Shanghai Composite Index, SHFE three-month zinc contract prices dipped, but discounts did not narrow significantly, with traded prices of #0 zinc between RMB 19,710-19,740/mt. #1 zinc prices were between RMB 14,700-14,720/mt, with supply tight. Smelters began to sell goods due to cash flow problems at the end of the month, while downstream buyers remained on the sidelines. SHFE three-month zinc contract prices rose at the end of trading, but traders began to hold goods, with transactions muted.

In Shanghai tin market, spot tin prices were mainly between RMB 148,000-150,000/mt, with transactions still limited. Downstream enterprises purchased as needed with demand remaining weak. Traders were actively selling goods but market was dominated by wait-and-see sentiment. Smelters still limited supply. Some goods were quoted as low as RMB 147,500/mt. Yunxi was traded at RMB 149,500-150,000/mt, Yunheng was traded at RMB 148,500/mt, transactions for Nanshan and Yunxiang were mainly concluded at RMB 148,000/mt.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 119,200-119,500/mt and mainstream traded prices of nickel from Russia were between RMB 117,900-118,200/mt.As arbitrage opportunity merged during the morning trading hours, a few traders conducted transactions. However, downstream demand still remained weak. In general, trading sentiment was still cautious.

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