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SMM Base Metals Daily Review (2013-3-5)
Mar 6,2013 10:35CST
SMM Comments
As LME copper prices continued falling overnight, the most active SHFE 1306 copper contract opened RMB 280/mt down at RMB 56,700/mt Tuesday.

SHANGHAI, Mar. 6 (SMM) –

As LME copper prices continued falling overnight, the most active SHFE 1306 copper contract opened RMB 280/mt down at RMB 56,700/mt Tuesday. NPC and CPPCC meetings introduced favorable measures and helped Chinese A-shares rally from lows. In this context, SHFE copper prices rose gradually after testing a low at RMB 56,660/mt, and challenged resistance at RMB 57,000/mt in the afternoon, with a high touching RMB 57,020/mt. SHFE 1306 copper contract closed RMB 510/mt or 0.9% higher at RMB 56,930/mt, with trading volumes and positions down 143,000 lots and 11,868 lots, respectively. Short investors chose to leave markets following copper price rebounds, but SHFE copper prices will suffer resistance at the 5-day moving average over the short term. Hence, sustained rebound in copper prices remains to be seen.

SHFE copper prices rebounded, but speculators in spot markets held divergent views. Those speculators who entered markets at lows the previous trading day chose to move goods aggressively for cash, but some hedged copper cargo-holders held prices firm. Overall spot copper supply remained sufficient, though. Shanghai spot copper discounts were quoted between RMB 80-160/mt in the morning business. Traded prices for standard-quality copper were between RMB 56,380-56,420/mt, and RMB 56,430-56,500/mt for high-quality copper. Low-quality hydro-copper supply was limited. As market pessimism eased some, traders took opportunities to buy, and downstream producers also increased purchase volumes at lows. In this context, Shanghai spot copper market activity improved in the morning. In the afternoon, as SHFE copper prices marched higher with forward SHFE contracts seeing larger gains, speculators became more willing to buy spot copper and sell SHFE contracts. Market transactions increased from morning levels as a result. Mainstream copper discounts shrank to RMB 60-150/mt in the afternoon, but traded prices surged to RMB 56,500-56,650/mt, with some speculators still standing on the sidelines.  

SHFE 1305 aluminum contract opened slightly higher at RMB 14,630/mt on March 5, but slipped to RMB 14,600/mt in the morning session. In the afternoon, the Shanghai Composite Index staged a strong rally, triggering short-covering and helping the most active SHFE aluminum contracts recover losses. Finally, SHFE aluminum for May delivery closed at an intraday high of RMB 14,665/mt, up RMB 70/mt or 0.48%. Positions decreased 1,690 lots to 86,378 lots. Markets are confident about the central government’s economic work in 2013, counterbalancing worries from housing curbs. Nevertheless, investors were still cautious, limiting upside room of the most-traded SHFE aluminum, which should test support at RMB 14,600/mt in the short term. 

 Spot aluminum was mainly traded at RMB 14,330-14,350/mt in Shanghai on Tuesday, with discounts at RMB 80-100/mt. Low-iron aluminum was traded around RMB 14,450/mt. Prices of the most active SHFE aluminum contract met resistance at high levels, keeping a lid on spot aluminum prices. Most traders were eager to sell, but downstream demand remained tepid. Some brand deliverable aluminum ingot and low-iron aluminum ingot were quoted at higher prices due to tight supplies, but overall trading was quiet. In the afternoon, some traders held quotations at RMB 14,350/mt, but later stood on the sidelines as SHFE 1305 aluminum contract prices rose. Low buying interest from downstream producers and middlemen depressed overall trading.  

The SHFE 1305 lead contract price opened at RMB 15,000/mt on March 5 with resistance at the 5-day moving average and moved narrowly between RMB 14,900-14,930/mt due to strong wait-and-see sentiment during the NPC and CPPCC sessions. Despite the 2.33% rebound in domestic stock markets, weak demand in spot lead market limited increase in SHFE lead with prices ending at RMB 14,900/mt, up RMB 15/mt. Trading volumes fell 14 lots to 196 lots, while positions were up 52 lots to 2,078 lots.

Spot lead prices in China also remained low. Quotations for Chihong Zn & Ge were at RMB 14,680/mt, with spot discounts over the most active SHFE lead contract price expanding to RMB 250/mt after the SHFE 1305 lead contract became the most active one. Prices for Nanfang were offered at RMB 14,650/mt. Shenqian and Hanjiang were quoted at RMB 14,610-14,620/m. Cargo holders supplied goods normally and some downstream buyers purchased at low prices, but transactions were fewer than the previous trading day.

The Shanghai Composite Index ended the day 2.33% higher at 2,326.31 points on Tuesday, recovering most of the losses incurred yesterday. During Asian trading hours, LME zinc staged a strong rebound, giving a lift to SHFE zinc prices. SHFE 1306 zinc contracts, the most active one, started slightly lower at RMB 15,400/mt, but later trended up, moving in the range of RMB 15,435-15,460/mt in the morning session. SHFE 1306 zinc contract prices advanced further to RMB 15,520/mt near the end of the morning trading as longs jumped in, and fluctuated within RMB 15,485-15,500/mt in the afternoon. Finally, SHFE zinc for June delivery finished RMB 55/mt or 0.36% higher at RMB 15,485/mt. Trading volumes decreased 18,484 lots to 72,024 lots, while positions increased 4,168 lots to 96,938 lots.

SHFE three-month zinc contract prices drifted higher after opening slightly lower on Tuesday. Mainstream traded prices for #0 zinc were RMB 15,080-15,110/mt, with discounts over SHFE 1305 zinc contract prices at RMB 230-250/mt. #1 zinc was traded at RMB 15,050-15,080/mt. Smelters continued to hold back goods, with most seldom moving goods except for long-term contracts. Most of the goods available on the markets were supplied by traders. Zinc prices stopped falling for the moment, slightly improving downstream buying interest. Most downstream producers were cautious, so overall trading was up only marginally.

Spot tin prices in Shanghai fell on Tuesday with the some goods, mainly from Jinlong and Nanshan, traded as low as RMB 155,000/mt. Traded prices for Yunheng and Yunxiang were between RMB 155,500-156,000/mt, while a few goods from Yunxi were traded at RMB 156,500/mt. LME tin prices continued to vacillate, combined with the depressed downstream demand, spot tin market remained weak with transactions muted. 

In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were in the RMB 117,800-118,000/mt range, and mainstream traded prices of nickel from Russia were in the RMB 116,800-117,000/mt range. Downstream demand improved when nickel prices advance, but purchases were still made on an as-needed basis.

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