SMM Daily Review - 2012/10/26 Base Metals Market

SHANGHAI, Oct. 29 (SMM) –

Copper
Last Friday, SHFE 1302 copper contract prices opened RMB 270/mt lower at RMB 57,050/mt. After opening, some shorts once pushed down SHFE copper prices to RMB 56,900/mt. But copper prices then rallied to the moving averages, with the high end of the price range of RMB 57,250/mt. The Shanghai Composite Index plummeted by nearly 2% in the afternoon, pushing down LME zinc prices to USD 7,800/mt. SHFE copper prices inched down, with the low end of the price range RMB 56,670/mt. Finally, SHFE three-month zinc contract prices closed at RMB 56,680/mt, down RMB 640/mt or 1.12%. Trading volumes of SHFE three-month zinc contract increased by 61,660 lots, and total position increased by 10,466 lots.

In domestic spot markets, SHFE copper prices opened lower and moved weakly. Cargo holders maintained discounts unchanged between RMB 150-270/mt. Traded prices of standard-quality copper were between RMB 56,950-57,000/mt, and traded prices for high-quality copper were between RMB 57,000-57,100/mt. But cargo holders of standard-quality copper were unwilling to expand discounts and kept prices firm, allowing the price spread with high-quality copper to narrow. Many investors continued to purchase at lower prices. Purchases by downstream buyers increased below RMB 57,000/mt, with transactions improving. SHFE copper prices extended declines in the afternoon, while cargo holders were unwilling to the sell goods, with mainstream discounts between RMB 80-170/mt, and with traded prices between RMB 56,750-56,950/mt. Downstream buyers were more cautious. SHFE copper inventories last week fell by 3,949 mt, to 192,761 mt, showing there were buyers at lower prices. That will allow domestic copper prices to resist declines.

Aluminum
The SHFE 1212 aluminum contract opened slightly lower at RMB 15,370/mt on October 26. In the afternoon session, the three-month contract expanded losses along with other base metals to a low of RMB 15,305/mt. The most-traded aluminum contract on the SHFE regained some losses at the tail of trading before finally closing at RMB 15,330/mt, down RMB 60/mt or 0.39%. Positions were down 880 lots 55,890 lots. The Shanghai Composite Index retreated below 2,100 points again, souring sentiment. Market was awaiting guidance from the US 3Q GDP last Friday night. Trading should remain bleak in SHFE aluminum market and the contract for December delivery is expected to test support at RMB 15,300/mt. Latest SHFE aluminum inventories increased by 10,879 mt to 445,242 mt. 

Spot aluminum was mainly traded between RMB 15,220-15,240/mt in Shanghai last Friday, with discounts between RMB 90-70/mt. Low-iron aluminum was traded between RMB 15,280-15,300/mt. SHFE 1212 aluminum contract prices extended losses, fueling bearish sentiment in spot aluminum market. Cargo holders became less willing to move goods at lower prices, while downstream consumption remained sluggish, causing mainstream traded prices to fall to year’s low of RMB 15,220/mt. Spot aluminum prices should test support at RMB 15,200/mt due to weak fundamentals. In the afternoon, the most active SHFE aluminum contract dropped further, fueling strong bearish mood in spot aluminum market. Some traders, who were eager to move goods, lowered offers to RMB 15,200-15,210/mt, but inquiries were rarely heard, leaving trading extremely quiet.

Lead
SHFE lead prices opened at RMB 15,260/mt and fluctuated between RMB 15,230-15,250/mt on October 26. As the US will announce its 3Q GDP data, market risk appetite was lower. In the afternoon, LME lead prices began falling, and stock markets also staged sharp declines. SHFE lead prices closed at an intraday low of RMB 15,140/mt, down RMB 160/mt or 1.05%. Trading volumes were up 78 lots to 270 lots, while positions were down 28 lots to 1,204 lots.

Spot lead prices in China dropped further on October 26. Cargo holders were actively moving goods, with prices for some brands slipping below RMB 15,000/mt, but downstream buying interest remained low. Jinsha was quoted at RMB 15,130/mt, with spot discounts over the SHFE 1212 lead contract price at RMB 120/mt. Dongling was offered at RMB 15,040/mt. Quotations for Wanyang and Jinli were RMB 15,000/mt, and those for Shenqian were RMB 14,950/mt. In the afternoon, SHFE lead prices extended declines, and quotations for Jinsha were lowered to RMB 15,060/mt.

Zinc
Last Friday, SHFE 1301 zinc contract prices opened lower at RMB 14,800/mt, and touched RMB 14,825/mt in the morning trading, and then continued to fluctuate low around RMB 14,750/mt. The Shanghai Composite Index fell below 2,100 and continued to fall during the day. Besides, LME zinc prices only touched the 5-day moving average in the morning trading, and then plunged as shorts entered the market. In this context, SHFE 1301 zinc contract prices fell as soon as opening, and finally closed at RMB 14,645/mt, down RMB 225/mt compared to the previous trading day.

In domestic spot markets, discounts of #0 zinc against SHFE three-month zinc contract prices were between RMB 110-120/mt, with traded prices between RMB 14,620-14,660/mt. #1 zinc prices were around RMB 14,610/mt, with tight supply. There was some un-known brands of #1 zinc available in the market, with prices RMB 160/mt below #1 zinc prices or even lower, and was popular with downstream buyers. In general, smelters were holding onto their goods, while downstream buying interest improved. As the Shanghai Composite Index fell below 2,100, SHFE three-month zinc contract prices dipped to a one-week low in the afternoon. Mainstream traded prices of #0 zinc fell to RMB 14,580-14,590/mt, and transactions did not improve.

Tin
In Shanghai tin market, spot tin prices were mainly between RMB 147,000-149,000/mt on October 26, with trading light. In the afternoon, LME tin prices dropped below the 60-day moving average, further dampening transactions. Purchases downstream were weaker ahead of the weekend. Yunxi was traded at RMB 149,000/mt, traded prices for Jinlong, Yunheng, and Yunxiang were RMB 148,000/mt, and Nanshan was traded at RMB 147,000/mt. Transactions were rarely reported.

Nickel
During the morning trading hours in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 118,600-118,800/mt, and mainstream traded prices of nickel from Russia were between RMB 117,300-117,500/mt. During the afternoon trading hours, LME nickel prices slipped, dragging down Jinchuan Group nickel prices to RMB 118,300-118,500/mt and Russian nickel to RMB 117,000/mt.Some bargain hunters replenished stocks during the morning traders, boosting trading sentiment. However, when LME nickel prices slumped during the afternoon trading hours, overall trading sentiment was strong and transactions were limited.