SMM Base Metals Market Daily Review (2012-12-6)

SHANGHAI, Dec. 7 (SMM) –

Copper
With LME copper stabilizing overnight, SHFE 1303 copper contract, the most active one, opened slightly RMB 60/mt up at RMB 57,700/mt Thursday. The contract then hovered narrowly around the opening price before rising to a high of RMB 57,920/mt during early second trading session. However, as investors closed positions at prices around RMB 58,000/mt, SHFE copper prices dropped rapidly to the previous trading day's low of RMB 57,280/mt but stopped falling after gaining support at around the 5-day moving average. SHFE 1303 copper contract closed RMB 240/mt or 0.42% lower at RMB 57,400/mt, with trading volumes down 26,182 lots but positions up 1,576 lots. SHFE copper prices suffered resistance at the 60-day moving average again and are likely to slip following continuous increases in the near future.

SHFE copper prices fluctuated near current levels, so spot copper discounts held stable. However, as SHFE copper prices rose rapidly during the second trading session, some hedged copper was locked in spot markets. In this context, spot copper supply decreased and helped copper discounts narrow marginally. Mainstream spot copper discounts were negative RMB 80-170/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 57,230-57,290/mt, and RMB 57,270-57,350/mt for high-quality copper. Cargo-holders became unwilling to move goods following drops in copper discounts, while downstream producers still refrained from buying at the highs. Market transactions remained limited in the morning as a consequence. In the afternoon, with SHFE copper prices slipping from earlier highs, cautious sentiment grew and depressed spot copper market activity. Copper discounts did not shrink further and were largely between negative RMB 70-140/mt, while traded prices dipped to RMB 56,880-57,100/mt. Market transactions in the afternoon remained limited.

Aluminum
The SHFE 1301 aluminum contract tumbled after opening at RMB 15,295/mt on December 6 as the longs exited the market. Finally, the three-month contract closed at an intraday low of RMB 15,205mt, down RMB 70/mt or 0.46%. Positions were down 356 lots to 48,874 lots. Market was cautious since gains of the Shanghai Composite Index were eroded and as LME aluminum prices pulled back. Along with little possibility of aluminum ingot purchase by the State Reserve Bureau in the short term, the most active SHFE aluminum contract closed down for four consecutive sessions. The contract for January delivery is expected to test support at RMB 15,200/mt in the near term.

Spot aluminum was mainly traded at RMB 15,100-15,120/mt in Shanghai on Thursday, with discounts at RMB 40-60/mt. Low-iron aluminum was traded at RMB 15,150-15,170/mt. The SHFE current-month aluminum contract moved at low levels, without upward momentum. Cargo holders still held back goods, helping aluminum prices stay firm at RMB 15,100/mt, except for the low price of RMB 15,090/mt in Wuxi. Downstream producers purchased as needed, while middlemen remained active in bargain hunting, leaving overall trading stable. In the afternoon, the most active aluminum contract on the SHFE expanded losses, dampening market sentiment. A limited number of traders who were eager to move goods lowered offers to RMB 15,080-15,100/mt. Buying interest was low, leaving overall muted.

Lead
The most active SHFE lead contract price opened at RMB 15,190/mt with few investors entering into the market Thursday, and fell rapidly to RMB 15,150/mt but gained strong buying support at the level. In the afternoon, SHFE lead prices followed a weak trend between RMB 15,145-15,155/mt before closing at 15,165/mt, down RMB 75/mt. Trading volumes were 96 lots, down 88 lots, and positions dropped 22 lots to 2,156 lots.

SHFE 1301 lead contract price opened lower and quotations in spot lead market in China were fewer on December 6. Chihong Zn & Ge was quoted at RMB 14,700/mt, with spot discounts of RMB 450/mt over the 1301 SHFE lead contract price. Quotations for Nanfang were RMB 14,680/mt, while quotations for Hengchang and Hanjiang were RMB 14,650/mt. Downstream buyers were more cautious with both supply and demand weak, leaving transactions limited.

Zinc
SHFE 1303 zinc contract became the most actively traded on Thursday. LME zinc prices overnight fluctuated narrowly after meeting resistance. SHFE three-month zinc contract prices opened at RMB 15,430/mt, and gained ground in the morning trading with strong long momentum, touching RMB 15,470/mt at noon. But due to the falling Shanghai Composite Index, SHFE zinc prices reversed early gains. Pushed down by large numbers of shorts, SHFE three-month zinc contract prices extended losses and dipped to RMB 15,320/mt, but rebounded at the end of trading, and finally closed at RMB 15,360/mt, down RMB 50/mt. Total position decreased by 2254 lots to 82,110 lots, and trading volumes decreased by 6,730 lots to 94,982 lots.

SHFE three-month zinc contract prices edged up in the morning trading. Discounts of #0 zinc against SHFE1302 zinc contract prices expanded from RMB 250-260/mt, to RMB 280/mt, with traded prices also up from RMB 15,060/mt, to RMB 15,090/mt. Discounts of #0 zinc against SHFE1302 zinc contract prices narrowed to RMB 250-270/mt at noon due to falling SHFE zinc prices, and traded prices were between RMB 15,070-15,080/mt. #1 zinc prices were concentrated between RMB 15,040-15,050/mt. Smelters continued to move goods modestly, and traders were selling goods actively, but downstream buyers only purchased as needed. Overall transactions were still muted.

Tin
In Shanghai tin market, mainstream traded prices fell to RMB 148,500-149,500/mt Thursday, as correction of LME tin prices dented domestic market confidence. That, combined with unimproved downstream demand, drove spot tin prices into declines. Traded prices for Yunxi and Yunheng were between RMB 149,000-149,500/mt, while those for Yunxiang and Jinlong were RMB 148,500-149,000/mt. A few goods were traded at RMB 148,000/mt. Trading remained light with investors waiting to see.

Nickel
During the morning trading hours in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 123,500-123,800/mt, and mainstream traded prices of nickel from Russia were between RMB 122,500-122,800/mt.  During the afternoon trading hours, Jinchuan Group raised ex-works nickel prices by RMB 500 to RMB 123,000/mt.  In response, traders hiked offers of nickel from Jinchuan Group to RMB 123,900/mt and Russian nickel prices to RMB 122,900/mt. However, the soft downstream demand weighed down prices later.