SMM Base Metals Daily Review (2013-3-13)

SHANGHAI, Mar. 14 (SMM) –

Copper

With LME copper rebounding significantly overnight, the most active SHFE 1306 copper contract opened RMB 310/mt up at RMB 56,910/mt Wednesday. The contract tested a low at RMB 56,750/mt before stabilizing, and broke resistance at the RMB 57,000/mt point, driven by rising LME copper. However, SHFE copper prices then hovered narrowly at current levels after suffering resistance at RMB 57,160/mt. In the afternoon, as the Shanghai Composite Index fell by more than 1%, SHFE copper prices declined below the daily moving average of RMB 56,950/mt. Giving up some of daily gains, SHFE 1306 copper contract closed at RMB 56,850/mt, still up RMB 250/mt or 0.44%, with trading volumes and positions down 21,412 lots and 14,058 lots, respectively. Short and long investors chose to close positions when SHFE copper stabilized. SHFE copper prices won temporary support at the 10-day moving average, but still suffered high pressures.  

SHFE copper prices marched higher after starting up, so hedged copper was still locked out of spot copper markets. The price gap among forward SHFE copper contracts expanded to nearly RMB 300/mt, enticing some speculators to buy at lows. However, these speculators chose to sell after copper prices rose, causing spot copper premiums to shrink all the way. Shanghai spot copper premiums were quoted largely between RMB 0-100/mt in the morning business. Traded prices for standard-quality copper were between RMB 56,750-56,930/mt, and RMB 56,800-57,050/mt for high-quality copper. Standard-quality copper saw a rapid decline in premiums, down to around RMB 0/mt, increasing its price gap with high-quality copper. Most downstream producers and traders took a wait-and-see posture before delivery for SHFE 1303 copper contract, leading to quiet market activity. In the afternoon, with some cargo-holders stepping up sale volumes, copper premiums continued narrowing, and standard-quality copper offered discounts. Mainstream copper offers were between discounts RMB 40/mt and premiums RMB 60/mt in the afternoon, while traded prices inched down to RMB 56,700-56,900/mt, depressing market optimism over future copper prices.

Aluminum

SHFE 1306 aluminum contract prices opened at RMB 14,860/mt on March 13. The State Reserve Bureau (SRB) will invite tenders to buy aluminum ingot on Friday, enticing longs to increase buying. In this context, the most active SHFE aluminum contract climbed above RMB 14,900/mt, and finally closed RMB 65/mt or 0.44% higher at RMB 14,925/mt. Positions increased 3,988 lots to 97,582 lots. However, longs were limited, so the most-traded SHFE aluminum should stagnate at RMB 14,900/mt in the short term.

Spot aluminum was mainly traded at RMB 14,540-14,550/mt in Shanghai on Wednesday, with discounts at RMB 70-90/mt. Low-iron aluminum was traded around RMB 14,700/mt. SHFE 1306 aluminum contract prices shot up, but spot aluminum prices rose only slightly, with strong resistance felt at RMB 14,550/mt due to sluggish consumption. Only middlemen were modestly interested in bargain-hunting amid high discounts, leaving overall trading moderate. In the afternoon, prices of the most active SHFE aluminum contracts remained firm. Sparse offers were reported at RMB 14,560/mt, but few deals were completed.

Lead

SHFE 1305 lead contract price opened slightly higher at RMB 14,780/mt on March 13 influenced by the increase in LME lead prices overnight. However, the depressed demand and decline in domestic stock markets weighed down SHFE lead prices, and drove the prices to fall to RMB 14,760/mt before closing at RMB 14,750/mt, up RMB 30/mt. Trading volumes were down 30 lots to 110 lots, and positions were down 38 lots to 2,334 lots.

Quotations in domestic spot lead market increased with the approach of the delivery date. Quotations for Chihong Zn & Ge and Yubei were flat at the SHFE 1303 lead contract price. Chihong Zn & Ge was quoted at RMB 14,640/mt, with spot discounts over the most active SHFE lead contract price at RMB 130/mt. Tongguang was quoted at RMB 14,620/mt, while Shuangyan was offered at RMB 14,530/mt. Downstream buyers only purchased at low prices, and smelters moved goods cautiously, leaving trading muted.
 
Zinc

SHFE 1306 zinc contract prices opened at RMB 15,275/mt, standing above the 5-day moving average. Due to the news that the State Reserve will build zinc reserves, SHFE zinc prices only dropped by RMB 15,240/mt in the morning trading, and then climbed to RMB 15,330/mt, despite the Shanghai Composite fell immediately following opening. In the afternoon, SHFE 1306 zinc contract prices generally fluctuated between RMB 15,280-15,310/mt in the afternoon, and finally closed at RMB 15,290/mt, up RMB 75/mt, or 0.72%. Total position decreased by 3,138 lots to 122,866 lots.

SHFE three-month zinc contract prices opened slightly higher and then inched up today. Discounts of #0 zinc against SHFE 1305 zinc contract prices were to RMB 190-210/mt, with traded prices between RMB 14,980-15,010/mt. #1 zinc prices were RMB 14,960-14,980/mt. SMM sources report the State Reserve Bureau plans to build 50,000 mt of zinc ingot reserves, and will invite bidding this Friday. The market took a wait-and-see attitude. Smelters continued to hold goods, while downstream buying interest was weak, keeping overall transactions quiet.

Tin

In Shanghai tin market, mainstream traded prices were between RMB 153,500-155,500/mt on March 13, with some goods traded at RMB 153,000/mt. Spot tin prices continued to fall with trading quiet as the increase in LME tin prices failed to give any support to spot prices. The overcapacity and low buying interest in domestic tin market forced cargo holders to lower selling prices. Poor orders at downstream enterprises and unstable tin prices undermined buying interest downstream. In this context, spot tin prices will continue to fall if LME tin fails to break above the resistance.

Nickel

Jinchuan Group raised ex-works nickel prices by RMB 1,000/mt, to RMB 118,000/mt on Tuesday. 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 117,700-118,000/mt range. As LME nickel prices made significant breakthrough, bullish sentiment grew. Traders actively replenished stocks as a result, boosting transactions.