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SMM Base Metals Daily Review (2013-2-5)
Feb 7,2013 09:13CST
price review forecast
With LME copper giving up some of increases overnight, SHFE 1305 copper contract, the most active one, opened RMB 340/mt down at RMB 59,710/mt Tuesday.

SHANGHAI, Feb. 6 (SMM) –
With LME copper giving up some of increases overnight, SHFE 1305 copper contract, the most active one, opened RMB 340/mt down at RMB 59,710/mt Tuesday. The contract hovered around the daily moving average of RMB 59,850/mt following the opening, with a fluctuating band of merely RMB 300/mt. In the afternoon, as Chinese stock markets increased, SHFE copper prices challenged resistance at RMB 60,000/mt, but then suffered pressure at RMB 60,030/mt after long investors took profit-taking. Testing a low at RMB 59,700/mt, SHFE 1305 copper contract finally settled RMB 300/mt or 0.5% lower at RMB 59,750/mt, with trading volumes down 30,998 lots but positions up 370 lots. Long and short investors were wary of copper price corrections now that the resistance level at RMB 60,000/mt still can not be neglected.

SHFE copper prices slipped slightly, but spot copper cargo-holders took the last chance to sell goods ahead of the Chinese New Year holiday, leading copper discounts to expand to negative RMB 140-280/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,800-58,850/mt, and RMB 58,870-58,950/mt for high-quality copper. Cargo-holders of standard-quality copper became reluctant to insist on firm prices, so the price gap between standard and high-quality copper widened. Nevertheless, spot copper supply decreased after cargo-holders became less eager to move goods, which helped copper discounts shrink. More traders and downstream producers opted to exit from markets, turning market activity more lackluster in the morning. In the afternoon, as SHFE copper prices came under pressure with SHFE forward copper contracts seeing larger declines, spot copper cargo-holders expanded discounts to negative 200-300/mt. Traded prices were RMB 58,750-58,900/mt in the afternoon, but market transactions remained limited.

SHFE 1305 aluminum contract, the most actively traded aluminum contract, opened lower at RMB 15,300/mt on Tuesday. The contract dived to RMB 15,190/mt in early trading, down by almost 1%. Later, the contract pared some losses, but failed to return to RMB 15,300/mt due to the struggles between longs and shorts. Finally, SHFE 1305 aluminum contract closed at RMB 15,275/mt, down RMB 65/mt or 0.42%. Positions were up 3,664 lots to 58,776 lots. High spot inventories caused SHFE aluminum market to be vulnerable to declines and resistant to increases. Bargain-hunting after SHFE three-month aluminum prices slid helped prevented the contract from weakening further. SMM expects SHFE 1305 aluminum prices to struggle at RMB 15,300/mt for the foreseeable future.

On Tuesday, traded prices in the Shanghai spot market were between RMB 14,870-14,880/mt, and spot discounts were in the RMB 80-70/mt range. Prices of low-Fe aluminum were around RMB 14,980/mt. Lower opening in the SHFE aluminum market dragged down spot aluminum prices below RMB 14,900/mt, a new low for 2013, and the lowest since late July 2010. Market pessimism caused traders to reduce inventories, but generated little buying interest with the approach of the Chinese New Year holiday. In general, market trading stagnated.

As LME lead prices closed lower overnight due to the political instability in the eurozone, the 1304 SHFE lead contract price gapped RMB 100/mt lower at RMB 15,470/mt on Tuesday. Combined with the quiet trading ahead of the Chinese New Year holiday, SHFE lead prices presented a weak trend between RMB 15,440-15,470/mt despite the rising Shanghai Composite Index to finally close at RMB 15,450/mt, down RMB 85/mt. Trading volumes fell 118 lots to 218 lots, while positions were up 14 lots to 2,432 lots.

In China’s spot lead market, most investors were on the sidelines and quotations from cargo holders were also few but still held firm. Chihong Zn & Ge was reportedly traded at RMB 14,950/mt, with spot discounts over the most active SHFE lead contract price at RMB 500/mt. Quotations for Hanjiang were around RMB 14,920/mt and those for Shenqian remained at RMB 14,8700/mt. Trading was thin ahead of the holiday.

In China's domestic markets, the most active SHFE 1305 zinc contract started RMB 95/mt down at RMB 16,100/mt, and basically hovered around the 5-day moving average in the morning. In the afternoon, despite rising Chinese A-shares, SHFE zinc prices drifted down and dipped to RMB 15,960/mt, as LME zinc prices continued the losing streak, and since short investors began to exert more selling pressures. SHFE 1305 zinc contract closed RMB 210/mt or 1.3% lower at RMB 15,985/mt, with trading volumes down 8,288 lots to 129,222 lots, and positions down 8,686 lots to 173,770 lots. Both long and short investors kept cautious during the day. SMM believes that SHFE zinc prices are likely to fall to RMB 15,850/mt once losing the RMB 16,000/mt point for the immediate future.
In spot markets, with SHFE zinc prices slipping noticeably, discounts of #0 zinc against SHFE 1305 zinc contract prices shrank to RMB 370-390/mt, with traded prices largely between RMB 15,650-15,670/mt. In the afternoon, as SHFE zinc prices trended down, traded prices for #0 zinc were RMB 15,570-15,580/mt. Discounts narrowed slightly as some hedged zinc flew out of markets, but traders expressed low buying interest with the Chinese New Year holiday drawing near. Downstream consumers also refrained from purchasing at highs, resulting in muted market activity during the day, although some cargo-holders in the afternoon raised discounts to around RMB 400/mt. 

In Shanghai tin market, trading was light on January 5 with suppliers and buyers closing for holiday. Traders were not willing to move goods and held prices firm, with only a few deals done at RMB 161,000-162,000/mt.

On Tuesday, mainstream traded prices for Jinchuan nickel were RMB 130,800-131,000/mt in the Shanghai nickel market, and RMB 129,500-129,800/mt for Russian nickel. Downstream producers and traders are now closing for the holiday, and meanwhile the lack of arbitrage opportunity in domestic electronic trading further reduced the already light trading sentiment, a sign of strong holiday sentiment. 

SMM base metals daily review
China base metals market

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