SMM Base Metals Market Daily Review (2013-2-26)

SHANGHAI, Feb. 27 (SMM) –

Copper
As LME copper dropped after initially rising overnight, SHFE 1306 copper contract, opened RMB 230/mt down at RMB 57,070/mt Tuesday. The contract followed LME copper to stop falling and rose above the opening price, with a high at RMB 57,530/mt. But with long investors conducting profit-taking, SHFE copper prices were sent down to levels above the daily moving average. At the tail of trading, as the Shanghai Composite Index dipped below 2,300, SHFE copper prices surrendered all daily gains amid short selling and touched an intraday low at RMB 57,040/mt. SHFE 1306 copper contract ended RMB 170/mt or 0.3% lower at RMB 57,130/mt, with trading volumes and positions up 43,530 lots and 21,844 lots, respectively. With more severe struggle between long and short investors, SHFE copper prices will likely continue to test support at RMB 57,000/mt for the immediate future.

SHFE copper prices marched higher after starting lower, but spot copper cargo-holders held divergent views. Some cargo-holders were eager to move goods for cash and slashed price quotes, but others held prices firm. However, overall spot copper supply remained sufficient. Shanghai spot copper discounts were RMB 80-220/mt in the morning business. Traded prices for standard-quality copper were between RMB 56,870-56,970/mt, and RMB 56,950-57,070/mt for high-quality copper. Copper discounts remained basically stable in the morning, but expanded all the way near the midday when SHFE copper prices increased. Market activity improved as downstream buying increased. In the afternoon, SHFE copper prices slid from earlier highs, but spot copper market transactions were limited as some downstream producers entered markets at lows. Spot copper discount quotes were RMB 100-240/mt in the afternoon, but traded prices completely declined below RMB 57,000/mt. 
 
Aluminum
SHFE 1305 aluminum contract gaped lower at RMB 14,760/mt on February 26, but later found its high at RMB 14,855/mt thanks to dip-buying. In the afternoon, the most active aluminum contract edged down as long buying was limited. Finally, SHFE aluminum for May delivery shed RMB 30/mt or 0.20% at RMB 14,825/mt. Positions were up 700 lots to 89,760 lots. SHFE three-month aluminum contracts rose after a low opening, but still lacked upward momentum owing to soft Shanghai Composite Index and sluggish spot aluminum consumption. The most-traded SHFE aluminum contract should hover near RMB 14,800/mt in the near term.  

Spot aluminum was mainly traded at RMB 14,480-14,510/mt in Shanghai on Tuesday, with discounts at RMB 130-160/mt. Low-iron aluminum was traded around RMB 14,600/mt. SHFE 1305 aluminum contract prices fell at a lower pace, allowing cargo holders to hold offers firm. Middlemen were active in bargain-hunting, but downstream buying interest remained tepid, sending spot aluminum prices in east China down below RMB 14,500/mt. Overall trading did improve slightly from a day earlier, though. In the afternoon, prices of the most active SHFE aluminum contracts edged down, triggering strong wait-and-see sentiment in spot markets. Sparse offers were reported at RMB 14,500/mt, but few deals were done.

Lead
SHFE lead prices opened at RMB 15,050/mt on Tuesday and moved around the level in the morning trading session. In the afternoon, reports that Italy may fail to form new government and stronger expectation for another around of election added to market concerns, driving both LME lead and domestic stock market to fall. LME lead prices thus closed at RMB 14,970/mt, down RMB 205/mt or 1.35%. Trading volumes were up 8 lots to 204 lots, while positions were up 86 lots to 2,168 lots. Settlement price of SHFE lead was RMB 15,027/mt.

Cargo holders in spot lead market, expecting SHFE lead to stabilize, were reluctant to move goods, leaving quotations fewer than Monday. Prices for Chihong Zn & Ge were offered around RMB 14,850/mt, with spot discounts over the most active SHFE lead price at RMB 200/mt. Dongling and Shenqian were quoted at RMB 14,710-14,720/mt. Downstream buyers purchased at lows, with transactions improving slightly. In the afternoon, however, trading turned light again with strong wait-and-see sentiment.

Zinc
The most active 1305 zinc contract advanced to RMB 15,580-15,590/mt along with LME zinc price hike, and hit a high of RMB 15,635/mt after opening at RMB 15,550/mt on Tuesday. However, during the afternoon trading hours, LME zinc prices fell steadily as concern over the political condition in Italy exacerbated. In addition, Asian stock markets also fell, with the Shanghai Composite Index falling to test 2289.89 points, down 1.4%. SHFE zinc prices were thus weighed down. Finally, SHFE zinc prices closed at RMB 15,540/mt, down RMB 10/mt, or 0.06%. Trading volumes decreased by 4,345 lots to 73,640 lots, and positions added by 3,376 lots to 123,494 lots.

Traded prices for #0 zinc in spot market were largely between RMB 15,290-15,300/mt, with spot discounts over the 1305 SHFE zinc contract between RMB 280-300/mt. Traded prices for #1 zinc were around RMB 15,260/mt. Some smelters were reluctant to move goods at low prices, while downstream producers purchasing interest was low amid price decline, leaving trading sentiment quiet in the market. 

Tin
In Shanghai spot tin market, trading remained light on Tuesday with mainstream traded prices between RMB 155,500-157,000/mt. Some deals were made at RMB 155,000/mt, and transactions were mainly made for Yunxiang, Yunxi, and Yunheng. The continuous declines in tin prices undermined smelters’ selling interest, which was particularly evident for SMEs, leaving fewer goods available to the market. However, as supply remained sufficient, prices failed to obtain any support.

Nickel
Jinchuan Group cut ex-works nickel prices by RMB 8,000/mt to RMB 118,000/mt on Tuesday. During the morning trading hours, mainstream traded prices for nickel from Jinchuan Group were between RMB 118,300-118,500/mt, and mainstream traded prices of nickel from Russia were between RMB 117,300-117,500/mt. Transactions of nickel at RMB 118,300/mt were relatively brisk. Purchasing costs for Jinchuan Group nickel were between RMB 118,600-118,700/mt, so some traders were reluctant to move goods and kept offers firm at RMB 118,700/mt. However, as LME nickel prices fell steadily, mainstream offers of Jinchuan nickel fell rapidly to RMB 118,300-118,500/mt.