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SMM Base Metals Market Daily Review (2013-2-28)
Mar 1,2013 12:31CST
SMM Comments
With LME copper hovering near current levels overnight, the most active SHFE 1306 copper contract opened flat at RMB 57,600/mt Thursday.

SHANGHAI, Mar. 1 (SMM) –

With LME copper hovering near current levels overnight, the most active SHFE 1306 copper contract opened flat at RMB 57,600/mt Thursday. The contract fluctuated at highs after the opening, and tested a low at RMB 57,520/mt before the midday. However, as the Shanghai Composite Index surged by 2.3% in the afternoon, SHFE copper prices rose to an intraday high of RMB 58,850/mt. As short investors entered markets again, SHFE copper prices edged down before fluctuating near the daily moving average of RMB 57,700/mt. Narrowing daily gains, SHFE 1306 copper contract closed at RMB 57,680/mt, still up RMB 80/mt or 0.14%. Trading volumes and positions for the most active copper contract increased by 19,172 lots and 8,520 lots, respectively. SHFE copper prices have stood above the 5-day moving average and are likely to rebound for the near future, with the low-end price rising gradually.

SHFE copper prices held flat, but spot copper supply remained sufficient at the month’s end, causing spot copper discounts to expand. Shanghai spot copper discounts were largely between RMB 150-270/mt in the morning business. Traded prices for standard-quality copper were between RMB 57,050-57,150/mt, and RMB 57,100-57,250/mt for high-quality copper. Cargo-holders expressed slight reluctance in moving goods at lows near the midday when copper prices dropped rapidly, and led market supply to decrease. As a result, copper discounts shrank marginally. Some speculators entered markets, but downstream buying was limited due to tight cash flows. Hence, overall market transactions were limited in the morning. In the afternoon session, since SHFE copper prices saw no major changes, spot copper offers and traded prices both held virtually flat with morning levels. Nonetheless, market activity remained muted at the month’s end.

SHFE 1305 aluminum contract opened at RMB 14,850/mt on February 28. The most active aluminum contract met strong resistance at the 5-day moving average as shorts increased, and later dived below RMB 14,800/mt. Finally, SHFE aluminum for May delivery shed RMB 55/mt or 0.37% to close at RMB 14,795/mt. Positions were up 1,124 lots to 89,858 lots. Growing expectation for favorable policies from the upcoming the National People's Conference (NPC) and the Chinese People's Political Consultative Conference (CPPCC) sessions helped the Shanghai Composite Index recover almost all of this week’s losses, but market responses were lukewarm, with SHFE aluminum the worst performer among base metals. The most-traded SHFE aluminum contract should struggle at RMB 14,800/mt in the short term.

Spot aluminum was mainly traded at RMB 14,460-14,480/mt in Shanghai on Thursday, with discounts at RMB 120-140/mt. Low-iron aluminum was traded around RMB 14,580/mt. SHFE 1305 aluminum contract prices led losses among base metals, sending spot aluminum prices down below RMB 14,500/mt again. Cargo holders were eager to sell, but downstream purchases remained limited. Most offers were reported at RMB 14,470/mt and overall trading was light. In the afternoon, spot markets were quiet. Prices of the most active SHFE aluminum contracts remained weak, triggering strong wait-and-see sentiment. Investors are eyeing consumption in March. 

SHFE lead prices opened at RMB 15,050/mt on February 28 and moved around RMB 15,020/mt in the morning trading hours with resistance at the 5-day moving average. In the afternoon, lower positions and weakening power of longs, combined with sluggish demand, hurt market confidence and drove SHFE lead prices to fall to close at RMB 14,990/mt, down RMB 40/mt. Trading volumes were dropped 48 lots to 148 lots, while positions were down 8 lots to 2,124 lots.

Spot lead prices in China remained unchanged, and quotations for Chihong Zn & Ge were around RMB 14,850/mt, with spot discounts over the most active SHFE lead contract price at RMB 200/mt. Shuangyan and Hanjiang were quoted at RMB 14,720-14,740/mt, while offers for Shenqian were firm at RMB 14,710/mt. Downstream buyers purchased according to production needs, and cargo holders held prices high with bullish outlook, leaving trading unimproved.

LME zinc prices overnight dipped by USD 23.5/mt. SHFE 1305 zinc contract prices opened RMB 35/mt lower at RMB 15,635/mt, and were generally resistant to declines. Despite the Shanghai Composite leaped 2.26%, investor confidence did not improve. With strong short momentum, SHFE 1305 zinc contract prices fluctuated between RMB 15,660-15,680/mt, and closed at RMB 15,665/mt, down RMB 15/mt, or 0.1%. Trading volumes of SHFE 1305 zinc contract decreased by 8,342 lots, to 50,708 lots, and total position decreased by 7,822 lots to 111,376 lots.

SHFE three-month zinc contract prices opened lower and then inched down today. Discounts of #0 zinc against SHFE 1305 zinc contract prices narrowed to RMB 300/mt, with traded prices between RMB 15,350-15,370/mt. #1 zinc prices were RMB 15,300-15,320/mt. Some smelters continued to hold onto their goods, but as arbitrage traders released goods due to narrowing spot discounts, goods supply was sufficient. Downstream buyers took a wait-and-see attitude, keeping transactions muted.
In Shanghai tin market, spot prices were mainly between RMB 155,500-156,500/mt Thursday morning, with some goods traded at RMB 155,000/mt. Although LME tin prices rose slightly, spot prices did not increase significantly given depressed demand. In the afternoon, LME tin prices increased to hit the 10-day moving average, enlivening spot trading. Downstream buyers were more willing to purchase but cargo holders and smelters became reluctant to move goods and raised quotations to RMB 156,000-157,500/mt.

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were in the RMB 118,800-119,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 117,800-118,000/mt range. Downstream still remained weak, but traders were eager to move goods. As a result, mainstream offers were flat from a day earlier. However, supply of low-priced goods increased. Some cargo holders supplied Jinchuan Group nickel at RMB 118,800/mt and Russian nickel at RMB 117,800/mt. According to some market players, some stainless steel mills were under cash flow pressure and eager to lower inventories, showing low purchasing interest for nickel in late February.


SHFE base metals
SHFE copper prices

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