SHANGHAI, Feb. 20 (SMM) –

Copper
With LME copper extending losses overnight, SHFE 1305 copper contract, the most active one, opened RMB 330/mt down at RMB 58,840/mt Tuesday. The contract continued to slide following the opening, but stabilized after gaining temporary support at the 30-day moving average. SHFE copper prices gradually pared daily losses as investors bought at lows, but with strong resistance at around RMB 59,100/mt. In the afternoon, as LME copper dropped from highs and lost USD 8,100/mt, and since the Shanghai Composite Index dipped below 2,400, SHFE copper prices slipped below the daily moving average and touched a low at RMB 58,700/mt. SHFE 1305 copper contract settled RMB 390/mt or 0.66% lower at RMB 58,780/mt, with trading volumes down 31,364 lots and positions up 1,938 lots. As SHFE copper market trading sentiment abated, and since LME copper prices completely lost the 30-day moving average, SHFE copper prices are likely to get back to a downside track after testing support at the 30-day moving average for the immediate future.

SHFE copper prices extended weakness, but spot copper discounts returned following the delivery for SHFE 1302 copper contracts. Hedged copper flew into spot markets and kept spot copper supply plentiful. In this context, copper discounts widened all the way, largely between RMB 130-250/mt in the morning business. Traded prices for standard-quality copper were between RMB 58,330-58,370/mt, and RMB 58,400-58,470/mt for high-quality copper. Domestic standard-quality copper cargo-holders became more willing to move goods for cash, so the price gap between standard and high-quality copper expanded. Traders' buying interest abated, however, while downstream producers have yet to get back to markets. Actual market activity remained lackluster in the morning as a result. In the afternoon, SHFE copper prices continued weakness, but copper consumption dropped, causing copper discounts to expand to RMB 180-300/mt. Traded prices also declined to RMB 58,150-58,350/mt in the afternoon, but supply surplus was still pronounced.

Aluminum
SHFE 1305 aluminum contract prices extended losses after starting lower at RMB 15,120/mt on February 19, dragged down by short selling. In the afternoon, the most active aluminum contract dropped further below RMB 15,100/mt, and finally finished RMB 115/mt or 0.76% lower at RMB 15,090/mt. Positions were up 7,314 lots to 82,244 lots. The Shanghai Composite Index retreated from 2,400 points, triggering market pessimism. SHFE three-month aluminum contracts tumbled in the afternoon and dropped most sharply among base metals. SHFE aluminum for May delivery should struggle at RMB 15,100/mt in the short term. 

Spot aluminum was mainly traded at RMB 14,720-14,750/mt in Shanghai on Tuesday, with discounts at RMB 150-170/mt. Low-iron aluminum was traded around RMB 14,840/mt. High inventories caused SHFE aluminum prices to extend losses. Cargo holders were eager to move goods at lower prices, but downstream purchases remained limited, causing spot discounts to expand to RMB 170/mt after SHFE 1303 aluminum contracts became the current-month contract. Growing spot discounts attracted some middlemen to buy spot aluminum while selling SHFE aluminum. Overall trading remained light, though up from a day earlier. In the afternoon, SHFE 1305 aluminum contract prices dropped further. Some traders remained active in selling at RMB 14,720/mt, but few deals were done due to a lack of buying interest.

Lead
SHFE lead prices started at RMB 15,320/mt on Tuesday. As the Shanghai Composite Index fell below 2,400 points with the loss exceeding 1%, marker sentiment were depressed, dragging down base metals. In the afternoon, SHFE lead prices dropped below RMB 15,300/mt to finally end at RMB 15,290/mt, down RMB 40/mt. Trading volumes were down 96 lots to 1ots, while positions were up 96 lots to 2,540 lots.

In China's domestic spot market, quotations for spot lead were lowered by cargo holders. Chihong Zn & Ge was quoted at RMB 14,930/mt, with spot discounts of RMB 400/mt over the most active SHFE lead contract price, traded prices were mainly at RMB 14,900/mt. Hanjiang was quoted at RMB 14,880/mt and Dongling was quoted at RMB 14,850/mt. Quotes for Shenqian remained at RMB 14,820-14,830/mt. Downstream buying interest was low, leaving transactions limited. Quotes and inquiries were rare in the afternoon with SHFE lead prices falling.

Zinc
The most active SHFE 1305 zinc contract started slightly lower at RMB 15,750/mt on February 19. The contract drifted higher with long investors entering markets but then came under pressure at the 5-day moving average since both LME zinc and Chinese A-shares fell sharply, with prices between RMB 15,810-15,830/mt in the morning. In the afternoon, SHFE 1305 zinc contract dropped further and settled at RMB 15,785/mt, a decline of RMB 35/mt or 0.22%. Trading volumes decreased by 18,576 lots to 59,138 lots, but positions added by 2,276 lots to 147,142 lots.

Traded prices for #0 zinc in spot market were largely between RMB 15,500-15,520/mt, with spot discounts over the 1305 SHFE zinc contract at RMB 300-310/mt. Traded prices for #1 zinc were RMB 15,460-15,470/mt. But spot zinc market activity remained quiet since market participants expressed low trading interest. Most downstream producers have yet to resume production, and some producers in north China even said they will restart operations following the Lantern Festival. In the face of persistently soft zinc prices, downstream consumers have been inactive in replenishing stocks. However, zinc market activity may improve later in the week.

Tin
Trading in Shanghai tin market remained weak on February 19. Spot tin prices fell further given the higher selling interest, the fallback LME tin prices and weak demand. Mainstream traded prices were between RMB 159,000-160,000/mt in the morning. Only a few goods from Yunnan Tin Group were traded at RMB 161,000/mt. In the afternoon, the sagging demand and slumping LME tin continued to drove down spot prices, leaving some transactions done at RMB 158,000/mt. The falling prices in Wuxi also dragged tin prices down.

Nickel
Jinchuan Group cut ex-works nickel prices by RMB 2,000/mt to RMB 126,000/mt on Tuesday. During the morning trading session in the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were in the RMB 126,800-127,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 125,700-125,900/mt range. Market transactions were quiet amid strong wait-and-see sentiment. Following Jinchuan Group's price cut, Jinchuan nickel spot prices fell to RMB 125,500/mt and Russian nickel spot prices fell to RMB 124,500/mt. Price decline fueled market concern and depressed transactions.