SMM Base Metals Daily Review (2013-1-18)

SHANGHAI, Jan. 21 (SMM) –

Copper
With LME copper prices increasing above USD 8,000/mt overnight, SHFE 1304 copper contract, the most active one, started RMB 100/mt up at RMB 58,170/mt January 18. With positive Chinese economic data released, the contract hovered narrowly in the morning, with a fluctuating band of merely around RMB 100/mt. In the afternoon, SHFE copper followed Chinese A-shares and LME copper to touch a high at RMB 58,500/mt before suffering selling pressures at highs, with prices between RMB 58,300 -58,400/mt. SHFE 1304 copper contract finally closed RMB 660/mt or 1.14% higher at RMB 58,380/mt, with trading volumes down 1,110 lots but positions up 6,130 lots. Trading volumes and positions for SHFE 1305 copper contract added by 18,290 lots and 13,144 lots, respectively. This indicated that the most active copper contract tended to shift to SHFE 1305 copper contract. SHFE copper prices rallied above all recent moving averages following increases during the day, but faced great pressure at RMB 58,500/mt.
   
As SHFE copper prices rebounded, some hedged copper was locked out of spot markets, helping copper discounts stabilize between negative RMB 100-220/mt in the morning business. Traded prices for standard-quality copper were between RMB 57,580-57,640/mt, and RMB 57,650-57,720/mt for high-quality copper. Market players held divergence over future copper prices. Most cargo-holders chose to sell for cash ahead of the Chinese New Year holiday, while downstream producers still sourced to need at lows. Market deals thus were largely contributed by traders. In the afternoon, more hedged copper was locked out of spot markets now that SHFE copper prices drifted higher, with mainstream copper discounts between negative RMB 120-220/mt. Traded prices surged to RMB 57,650-57,800/mt in the afternoon, and downstream producers refrained from buying at highs, resulting in muted market activity. SHFE copper stocks decreased by 528 mt to 208,568 mt in the week ending January 18.

Aluminum
SHFE 1303 aluminum contract prices opened slightly higher at RMB 15,190/mt on January 18. The contract struggled at RMB 15,170/mt in the session, with strong resistance at RMB 15,200/mt as longs and shorts mostly exited the market. Finally, the March aluminum on the SHFE closed at RMB 15,190/mt, up RMB 55/mt or 0.36%. Positions were down 1,656 lots to 59,004 lots. Markets remained cautious as China’s economic data failed to cheer investors up. Weak fundamentals eroded gains of SHFE aluminum prices. The most-traded SHFE aluminum contract is expected to hover at RMB 15,150/mt this week. Latest SHFE aluminum inventories were down 5,197 mt to 440,467 mt.

Spot aluminum was mainly traded at RMB 14,940-14,970/mt in Shanghai last Friday, with discounts at RMB 110-130/mt. Low-iron aluminum was traded at RMB 15,050-15,060/mt. China’s 4Q GDP was in line with market expectations, failing to pushing SHFE 1303 aluminum contract prices up appreciably. Some small and medium downstream producers have already closed early for Chinese New Year, causing demand to decline. Cargo holders were eager to sell, causing spot discounts to expand to RMB 130/mt. Prices of some high-quality brand aluminum ingot were firm at RMB 14,970/mt. In the afternoon, prices of the most active SHFE aluminum contracts remained weak. A few cargo holders were eager to sell, with offers at RMB 14,940-14,950/mt. Downstream producers and middlemen seldom entered the market, leaving overall trading muted.

Lead
The SHFE 1303 lead contract price gapped nearly RMB 100/mt higher at RMB 15,195/mt on January 18 influenced by positive economic data in the US overnight. Later, as China’s 4Q GDP growth and industrial production data were reported above expectations and previous figures, SHFE lead prices moved between RMB 15,160-15,190/mt before closing at RMB 15,190/mt, up RMB 90/mt. Trading volumes were down 46 lots to 70 lots, and positions increased 30 lots to 2,204 lots.

In China’s spot lead market, lead prices only moved up slightly on Friday despite positive economic data as buying interest downstream remained low ahead of weekend. Chihong Zn & Ge was quoted at around RMB 14,770/mt, with spot discounts of RMB 400/mt over the 1303 SHFE lead contract price. Quotations for Dongling, Hanjiang, and Shenqian were mainly at RMB 14,660-14,680/mt. Cargo holders still moved goods actively but transactions fell from the previous trading day.

Zinc
LME zinc prices last Friday soared by 1.21%. SHFE 1304 zinc contract prices opened higher at RMB 15,370/mt, generally fluctuating between RMB 15,360-15,380/mt in the morning trading. In the afternoon, as both LME zinc prices and domestic stocks markets climbed, SHFE 1304 zinc contract prices inched up and touched RMB 15,430/mt, and finally closed at RMB 15,420/mt, up RMB 180/mt or 1.18%. Trading volumes increased by 6,430 lots, to 68,160 lots, and total position decreased by 8,470 lots to 93,316 lots.

SHFE three-month zinc contract prices fluctuated narrowly after opening higher. Discounts of #0 zinc against SHFE three-month zinc contract prices expanded to RMB 250-270/mt, with traded prices RMB 15,110-15,130/mt. #1 zinc prices were around RMB 15,080/mt. Good supply increased slightly, but a few smelters continued to hold goods. Traders sold goods actively, but arbitrage traders lacked opportunities due to narrow spot discounts. As downstream buyers remained cautious , transactions were quiet.

Tin
In Shanghai tin market, mainstream traded prices were mainly between RMB 159,500-160,500/mt on Friday, with trading improved slightly from Thursday. Yunxi and Yunheng were traded at RMB 160,000-160,500/mt, while transactions for Nanshan and Guangsheng were concluded at RMB 159,500-160,000/mt. Downstream buyers continued to stay out of the market with no intention to replenish stocks for the Chinese New Year holiday. Market was waiting for guides from LME tin price trends.

Nickel
In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 124,000-124,200/mt, and mainstream traded prices of nickel from Russia were between RMB 123,000-123,200/mt. Downstream demand was still soft, while traders only replenished goods at low prices in limited amount, with quiet trading sentiment reported.