SMM Base Metals Market Daily Review (2013-2-6)

SHANGHAI, Feb. 7 (SMM) –
Copper
With LME copper hovering around current levels overnight, SHFE 1305 copper contract, the most active one, opened flat at RMB 59,850/mt Wednesday. The contract continued challenging RMB 60,000/mt following the opening due to buying support, with a high at RMB 60,160/mt, but edged down to around the RMB 60,000/mt point after suffering technical resistance. SHFE copper prices came under pressure near the midday when LME copper lost ground, and touched an intraday low of RMB 59,700/mt at the tail of trading. SHFE 1305 copper contract ended RMB 10/mt or 0.02% lower at RMB 59,840/mt, with trading volumes and positions down 253,000 lots and 5,346 lots, respectively. Despite support at the 5-day moving average, copper trading remained muted. As such, SHFE copper prices are unlikely to break existing trading range effectively for the near future.

SHFE copper prices dropped after initially rising, but spot copper discounts remained stable between negative RMB 100-250/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,900-58,980/mt, and RMB 59,000-59,100/mt for high-quality copper. As most cargo-holders left markets during the second trading session, spot copper supply decreased and helped copper discounts shrink. Discounts for high-quality copper were quoted merely negative RMB 100/mt near the midday. Despite muted market activity, spot copper prices held firm as speculators were wary of purchasing. In the afternoon, SHFE copper prices slipped. Standard-quality copper supply increased, while high-quality copper decreased further, causing the price difference between the two to expand to around RMB 150/mt. Mainstream copper discounts held between negative RMB 100-250/mt in the afternoon, but traded prices inched down to RMB 58,750-59,000/mt.

Aluminum
SHFE 1305 aluminum prices, the most actively traded contract, opened up slightly at RMB 15,285/mt on Wednesday. In the morning session, the contract was little changed, but moved lower in the afternoon session. Finally, SHFE three-month aluminum prices closed at RMB 15,230/mt, down RMB 35/mt or 0.23%. Positions were up 3,174 lots to 61,950 lots. Trading waned further as the Chinese New Year holiday is nearing. Trading volumes of SHFE three-month aluminum prices were down to around 10,000 lots. SHFE aluminum market is not expected to rebound during the last trading days ahead of the holiday, with prices expected around RMB 15,250/mt.

On Wednesday, traded prices in the Shanghai spot market were between RMB 14,860-14,880/mt, and spot discounts were in the RMB 90-70/mt range. Prices of low-Fe aluminum were around RMB 14,980/mt. Spot aluminum prices were refrained from rebounding as SHFE aluminum market was continuing to struggle at the existing price range. Traders were eager to move goods before the holiday, but no transactions were reported. Trading will remain tepid during the last two trading days before the Chinese New Year holiday.

Lead
The 1304 SHFE lead contract price started at RMB 15,500/mt on January 6 with resistance at the 5-day moving average. In the afternoon, as LME lead prices fell and as some investors booked profits and left the market, SHFE lead prices moved down to RMB 15,410/mt to finally end at RMB 15,400/mt with strong support at the 20-day moving average. Trading volumes fell 162 lots to 56 lots, while positions were up 10 lots to 2,442 lots.

Spot lead prices remained little changed with transactions scarce. Chihong Zn & Ge was still quoted at RMB 14,950/mt, with spot discounts over the most active SHFE lead contract price at RMB 500/mt. Quotations for Hanjiang remained around RMB 14,920/mt and those for Shenqian were at RMB 14,860/mt

Zinc
In China's domestic markets, the most active SHFE 1305 zinc contract started at RMB 16,050/mt Wednesday and temporarily increased to RMB 16,095/mt in the morning. However, the contract then dipped below the daily moving average as short investors gradually took the upper hand, with prices hovering around 16,045/mt. In the afternoon, with short investors imposing more selling pressures, SHFE zinc prices fell all the way and slipped to an intraday low of RMB 15,910/mt. Nevertheless, with temporary support at the 10-day moving average, SHFE 1305 zinc contract rebounded slightly at the tail of trading before settling RMB 85/mt lower at RMB 15,960/mt. As the 5-day moving average became the resistance level, positions for the most active SHFE 1305 zinc contract decreased 8,660 lots to 165,110 lots.

In spot markets, with SHFE zinc prices holding flat, discounts of #0 zinc against SHFE 1305 zinc contract remained between RMB 400-420/mt, with traded prices largely between RMB 15,630-15,670/mt. Traded prices for #1 zinc held between RMB 15,590-15,610/mt. Zinc smelters expressed low interest in moving goods, but traders became more willing to sell in the face of narrowing discounts. However, downstream consumers were already closed for the Chinese New Year holiday, so overall market activity remained lackluster in the morning. In the afternoon, as SHFE zinc prices maintained soft, discounts of #0 zinc against SHFE 1305 zinc contract shrank marginally to RMB 390-400/mt, with traded prices also drifting down to RMB 15,580-15,590/mt. Market transactions were still not seen to improve, however.

Tin
Spot tin market in Shanghai was rather quiet on January 6. Several traders still in operation reflected few inquiries with transactions hardly reported. Spot tin prices were mainly between RMB 161,000-162,500/mt.

Nickel
On Wednesday, mainstream traded prices for Jinchuan nickel were RMB 131,100-131,300/mt in the Shanghai nickel market, and RMB 129,900-130,100/mt for Russian nickel. Trading in spot market remained tepid on Wednesday. More and more traders were closing fore the holiday, with few quotations heard, and those quotations were little changed in response to light trading and no arbitrage opportunity.