SMM Base Metals Daily Review (2013-3-28)

SHANGHAI, Mar. 29 (SMM) –

Copper
SHFE 1307 copper contract started the day RMB 180/mt higher at RMB 55,820/mt on Thursday, thanks to a rebound in LME copper overnight. The Shanghai Composite Index lost more than 3% and LME copper retreated from USD 7,600/mt in the afternoon, dragging the most active SHFE copper contract to a low of RMB 55,200/mt. SHFE copper for July delivery stopped falling after shorts closed positions, and finally ended the day down RMB 340/mt or 0.61% at RMB 55,300/mt. Trading volumes and positions of SHFE 1307 copper contracts increased 66,686 lots and 3,404 lots, respectively. Trading volumes and positions of SHFE 1308 copper contracts were also up 37,584 lots and 10,836 lots, respectively. SHFE copper is expected to sink to RMB 55,000/mt at the bottom.

Spot copper discounts were RMB 0-30/mt and premiums RMB 0-80/mt in Shanghai on Thursday. Traded prices for standard-quality copper were between RMB 55,630-55,700/mt, and RMB 55,680-55,850/mt for high-quality copper. A plunging Shanghai Composite Index drove prices for the most active SHFE copper contracts down after a high opening. Cargo holders were aggressively selling for cash. Imported copper flooded in, pushing spot copper premiums all the way down. High-quality copper was quoted at a slight premium over SHFE 1304 copper contract near mid-day, while standard-quality copper was offered at discounts. Quotations for wet-processed copper were almost flat with standard-quality copper due to extremely tight supply. A limited number of middlemen entered the market in the morning. Downstream producers were little interested in buying as liquidity crunch bit in, leaving transactions muted. It is widely believed among market players that spot copper premiums will hardly be seen next week. Cargo holders’ opinions varied with SHFE copper prices slipping noticeably in the afternoon, but most of them refused to offer quotes and sell goods. Spot copper was quoted from discount of RMB 50/mt to premiums of RMB 30/mt, and traded prices were down to RMB 55,350-55,550/mt, with transactions quieter.

Aluminum
SHFE 1306 aluminum contract opened at RMB 14,655/mt on Thursday. The contract found its high at RMB 14,725/mt before immediately falling back. Longs took profits, weighing down the most active SHFE aluminum contract, which finally finished RMB 45/mt or 0.31% lower at RMB 14,620/mt. Positions increased 96 lots to 94,592 lots. A plunging Shanghai Composite Index has dampened market sentiment, causing SHFE aluminum to extend losses. With investors taking a wait-and-see stance, SHFE aluminum for June delivery is expected to test support at RMB 14,600/mt.

Spot aluminum was mainly traded at RMB 14,480-14,500/mt in Shanghai on Thursday, a discount of RMB 60-80/mt over SHFE 1304 aluminum contract prices. Low-iron aluminum was trade around RMB 14,680/mt. SHFE 1306 aluminum contract prices met resistance, sending spot aluminum down below RMB 14,500/mt. Traders in Shanghai lowered the end-price to RMB 14,480/mt, while those in Wuxi and Hangzhou held offers firm at RMB 14,500/mt. Downstream producers and middlemen evinced little buying interest, depressing overall trading. In the afternoon, prices of the most active SHFE aluminum contracts remained weak. A small number of traders remained anxious to sell at RMB 14,480/mt. Inquiries were rarely heard due to tight cash flows and growing bearishness over future prices. 

Lead
SHFE 1305 lead contract price opened lower at RMB 14,460/mt on March 28 since LME lead prices ended down overnight and since domestic stocks gapped lower. The Shanghai Composite Index fell as much as 3%, prompting investors to book profits and exit the market. Thus, SHFE 1305 lead contract price moved between RMB 14,430-14,480/mt before closing at RMB 14,430/mt, down RMB 20/mt from a day earlier. Traded volumes were up 16 lots to 248 lots, and positions fell 116 lots to 192 lots.

As this quarter came to an end and as Thursday was the last trading day for LME lead before the Easter holiday, cargo holders cut prices to sell goods in order to avoid risk caused by high inventories. Branded lead, such as Chihong Zn & Ge and Nanfang, was quoted at RMB 14,350-14,360/mt, with spot discounts over the most active SHFE lead contract price at RMB 100/mt. Tongguang was offered at RMB 14,330/mt, and Mengzi was quoted at RMB 14,300/mt. Prices for Yuguang were around RMB 14,400/mt, with premiums of RMB 10/mt over the SHFE 1304 lead contract price. Falling prices largely hurt market confidence and undermined the buying interest.

Zinc
SHFE 1306 zinc contract prices opened slightly higher at RMB 14,885/mt today. It was reported China's central bank would repurchase RMB 30 billion today, with net withdrawal of RMB 57 billion this week. Besides, new regulations to bank financial products dragged down securities and financial shares. The Shanghai Composite index opened low, and SHFE zinc prices plunged to RMB 14,850/mt. In the afternoon, SHFE 1306 zinc contract prices dropped further along with falling LME zinc prices, to RMB 14,810-14,820/mt, and finally closed at RMB 14,800/mt, down RMB 60/mt or 0.4%. Trading volumes decreased by 18,986 lots, to 35,440 lots, and total positions decreased by 3,224 lots to 123,306 lots. Total positions of SHFE 1307 zinc contracts increased by 4,866 lots, to 94,708 lots.

SHFE 1306 zinc contract prices opened higher but plunged later in the day. Discounts of #0 zinc against SHFE 1306 zinc contract prices were RMB 130-150/mt, with traded prices around RMB 14,700-14,720/mt. #1 zinc prices were RMB 14,680/mt. Smelters continued to hold goods, and some of them cut zinc ingot output, and purchase zinc ingot to produce zinc alloy. Downstream buying interest was low due to negative situations, keeping overall transactions did not improve

Tin
Mainstream traded prices were between RMB 150,500-152,500/mt in Shanghai on Thursday, and a few goods of Yunxiang were traded at RMB 150,000/mt. Trading was modest on the whole. The continued fluctuation in LME tin prices failed to give any guides to domestic spot tin prices, combined with anemic demand downstream, spot tin prices in China were hard to rise due to resistance but also found support which prevented prices from falling sharply.

Nickel
During the morning trading hours in the Shanghai nickel spot market, mainstream offers of nickel from Jinchuan Group were between RMB 117,800-118,000/mt, and mainstream traded prices of nickel from Russia were between RMB 116,800-117,100/mt. During the afternoon trading hours, wait-and-see sentiment grew when LME base metal prices fell across the board. In response, traders lowered Jinchuan nickel prices to RMB 117,700/mt and Russian nickel prices to RMB 116,800/mt. However, price cut still failed to boost transactions.