SMM Base Metals Market Daily Review (2013-1-10)

SHANGHAI, Jan. 11 (SMM) –

Copper
With LME copper prices still lacking directions overnight, SHFE 1304 copper contract, the most active one, opened slightly RMB 40/mt up at RMB 58,300/mt Thursday. Chinese stock markets were boosted by favorable Chinese trade data, helping LME copper prices rebound. In this context, SHFE copper prices rose all the way before reaching an intraday high at RMB 58,820/mt. SHFE 1304 copper contract ended RMB 520/mt or 0.89% higher at RMB 58,780/mt, with trading volumes and positions increasing 90,178 lots and 21,540 lots, respectively. Total trading volumes on the SHFE added by 136,000 lots, and total positions were up 26,228 lots. Bullish sentiment increased, and low-support for prices rose to RMB 58,200/mt. As such, SMM believes that SHFE copper prices will move towards RMB 59,200/mt for the foreseeable future.

SHFE copper prices rebounded, so some hedged copper was locked out of spot markets, leading spot copper supply to decrease. Cargo-holders thus narrowed discounts to move goods. Shanghai spot copper discounts were quoted between negative RMB 20-140/mt in the morning business. Traded prices for standard-quality copper were between RMB 57,600-57,640/mt, and RMB 57,660-57,740/mt for high-quality copper. Speculators made purchases in small quantities ahead of deliveries for SHFE 1301 copper contracts, while downstream producers still conducted limited transactions. Hence, market deals were largely contributed by traders. In the afternoon, as SHFE copper prices continued moving up, hedged copper was still locked out of markets, leading spot copper supply to decrease further. Copper discounts thus held flat with morning levels, while traded prices rose to RMB 57,650-57,800/mt.

Aluminum
Prices of SHFE 1303 aluminum contracts, the most active one, opened at RMB 15,255/mt on January 10 and saw little movement in the session. Finally, the March aluminum on the SHFE gained RMB 15/mt or 0.10% to finish at RMB 15,270/mt. Positions were down 284 lots to 62,494 lots. The most-traded SHFE aluminum contract should meet strong resistance at RMB 15,300/mt in the near term as longs are cautious of buying at higher prices.

Spot aluminum was mainly traded at RMB 15,030-15,050/mt in Shanghai on Thursday, with discounts at RMB 0-20/mt. Low-iron aluminum was traded at RMB 15,090-15,110/mt. SHFE 1303 aluminum contract prices moved at low levels, dampening market sentiment. Traders were anxious to move goods prior to the delivery date of the SHFE 1301 aluminum contracts. Limited purchases by downstream producers and middlemen brought traded prices down to RMB 15,050/mt. Overall trading was moderate. 
 
Lead
The most active SHFE lead contract price started at RMB 15,120/mt on January 10 given the positive foreign trade data for December. Prices then moved between RMB 15,150-15,170/mt and closed at RMB 15,200/mt, up RMB 75/mt. Longs showed strong trends boosted by favorable reports. Trading volumes were up 12 lots to 136 lots, and positions fell 12 lots to 2,198 lots.

SHFE lead prices moved up due to better-than-expected trade data for December and investors were optimistic to spot lead market. Chihong Zn & Ge was quoted at RMB 14,780/mt, with spot discounts of RMB 380/mt over the most active SHFE lead contract price. Quotations for Hanjiang were mainly at RMB 14,690/mt, and those for Shenqian were around RMB 14,640/mt. Downstream buyers mainly purchased as needed.

Zinc
LME zinc prices overnight plunged at the end of trading, rolling back intraday gains. SHFE 1304 zinc contract prices opened lower at RMB 15,410/mt, rebounding to RMB 15,470/mt after briefly dipping to RMB 15,400/mt in the morning trading. China’s trade totaled USD 31.6 billion in December, much higher than the USD 20 billion expected. As a result, the Shanghai Composite surged, and SHFE 1304 zinc contract prices inched up. As LME zinc prices soared in the afternoon, and combined with mounting long momentum, SHFE 1304 zinc contract prices  advanced and broke through the 5-day moving average, touching RMB 15,530/mt, and finally closed at RMB 15,525/mt, up RMB 95/mt. Total position increased by 2,898 lots to 94,314 lots.

SHFE three-month zinc contract prices edged up today. Discounts of #0 zinc against SHFE three-month zinc contract prices were RMB 310-330/mt, with traded prices between RMB 15,120-15,140/mt. #1 zinc prices were RMB 15,100-15,110/mt. Goods supply tightness kept #1 prices firm, with price spread against #0 zinc narrowing. A few smelters still lacked interest to move goods. Despite pessimism, some arbitrage traders purchased goods due to low discounts. But downstream buyers were still cautious, keeping overall transactions muted.

Tin
In Shanghai tin market, quotations for spot tin prices continued to rise to RMB 158,000-160,500/mt, but traders’ confidence was cooled, with trading volumes down. Traded prices for Yunxi and Yunheng were between RMB 159,500-160,000/mt, and a few deals for Yunxiang and Nanshan were made at RMB 157,500-168,500/mt. Downstream buyers remained cautious due to high prices and purchased in limited amounts.

Nickel
Jinchuan Group raised ex-works nickel prices by RMB 2,000/mt to RMB 123,000/mt on Thursday. In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 123,600-123,800/mt, and mainstream traded prices of nickel from Russia were between RMB 122,600-122,800/mt. Transactions were moderate before price adjustment, but turned muted after Jinchuan Group nickel prices rose to RMB 124,000/mt and Russia nickel prices rose to RMB 123,000/mt.