SMM Base Metals Market Daily Review (2013-6-7)

SHANGHAI, Jun. 8 (SMM) – 

 

SHFE 1310 copper contract started Friday RMB 110/mt lower at RMB 52,980/mt as LME copper extended losses last night. After its opening, the most active SHFE copper contract swung violently before testing support at RMB 52,700/mt. Later, SHFE copper for October delivery bounced back to above the daily moving average, but was again weighed down by a 1.5% decline in the Shanghai Composite Index. SHFE 1310 copper contract did regain most of earlier losses at the tail of trading and hit RMB 53,150/mt due to position liquidation, and finally ended the day at RMB 53,050/mt, down RMB 40/mt or 0.08%. Trading volumes and positions contracted 101,000 lots and 12,460 lots, respectively. The most active SHFE copper contract moved between the 5-day and 20-day moving averages due to strong pre-holiday risk aversion, and LME copper prices during the three-day holiday in China will provide direction for post-holiday SHFE copper prices. 

 

Spot copper in Shanghai was offered at a discount of RMB 0-80 and premium of RMB 0-100/mt over SHFE 1306 copper contract prices on Friday. Traded prices for standard-quality copper were between RMB 53,400-53,550/mt, and RMB 53,500-53,700/mt for high-quality copper. SHFE 1310 copper contract prices inched down. Spot copper supply was plentiful and premium was stable. Some middlemen entered the market in the morning, but downstream producers continued to purchase based on orders. Spot copper was quoted at discount of RMB 50/mt to premiums of RMB 60/mt in the afternoon, with traded prices at RMB 53,450-53,600/mt, but trading was quiet. SHFE copper inventories increased 2,155 mt to 181,472 mt during the past week. Consumption remained soft given the large amount of imports and limited pre-holiday replenishments despite the upcoming holiday.

Production cuts at aluminum smelters and falling inventories in east and south China further boosted market sentiment. SHFE 1309 aluminum contract rose after opening at RMB 14,945/mt on Friday, but still failed to break through RMB 15,000/mt. In the afternoon, the most active SHFE aluminum contract sank to RMB 14,900/mt as investors closed positions to avoid risks ahead of three-day holiday, but immediately regained this mark. Finally, SHFE aluminum for delivery in four months closed at RMB 14,945/mt, up RMB 25/mt or 0.17%. Positions were down 2,428 lots to 39,286 lots, while trading volumes also fell 7,082 lots to 12,170 lots. SHFE aluminum for September delivery will be unable to reach RMB 15,000/mt following the holiday until more upward momentum is available.

 

Spot aluminum was traded at RMB 14,940-14,960/mt in Shanghai, a premium of RMB 30-40/mt over SHFE 1306 aluminum contract prices. Low-iron aluminum was traded around RMB 15,070/mt. SHFE 1306 aluminum contract prices extended gains for a tenth straight trading day, pushing spot aluminum up to RMB 14,950/mt. Traders raised offers at premium of RMB 30/mt over SHFE current-month aluminum contract prices, while downstream producers continued to purchase in modest amounts, leaving trading brisk. Trading will be light this Saturday and Sunday as both suppliers and buyers will be on holiday.

 

Although LME lead prices fell 1.47% overnight, SHFE 1306 lead contract price was relatively resilient and started slightly lower at RMB 14,015/mt no Friday to move around RMB 14,000-14,040/mt. Prices finally closed at RMB 14,045/mt, down RMB 20/mt from a day earlier. Most investors left the market prior to the Chinese Dragon Boat Festival. Trading volumes for the most active SHFE lead contract fell 48 lots to 56 lots, and positions were down 16 lots to 1,818 lots. 

 

The LME three-month lead contact was USD 2,193.4/mt as of 15:00 June 7, with Shanghai/LME lead price ratio at 6.4. The SHFE will be closed for the first three days next week, with increase in lead prices slowing, SHFE lead prices are expected to hover around RMB 14,000/mt next week.

 

In China’s spot lead markets, bullish cargo holders held prices firm before the Chinese Dragon Boat Festival. Downstream buyers had already completed replenishments, leaving selling interest low and transactions limited. Tongguan was quoted at RMB 14,000/mt, flat with the most active SHFE lead contract price. Quotes for Hanjiang and Dongling were around RMB 13,970/mt, but no deals were made. Lead prices in Henan were reported at RMB 13,850-13,900/mt, RMB 25/mt lower than the previous trading day. In the afternoon, both sellers and buyers left the market for the upcoming holiday. 

 

SHFE 1309 zinc contract prices opened at RMB 14,845/mt. The Shanghai Composite Index plunged 1.5%, and the SZSE Component Index also plummeted by 2.64%, distressing market sentiment. But zinc prices resisted both increases and declines due to market caution before the holiday, fluctuating around RMB 14,840/mt, and finally closing at RMB 14,840/mt, close to the settlement price on Thursday. Trading volumes of SHFE 1309 zinc contracts decreased by 20,936 lots, to 41,182 lots, and positions decreased by 4,408 lots to 119,450 lots. Trading volumes decreased by 33,828 lots, to 74,682 lots, and total positions decreased by 6,816 lots to 286,960 lots.

 

SHFE zinc prices opened flat today. #0 zinc prices ranged from RMB 20/mt below to RMB 20/mt above SHFE 1309 zinc contract prices, with traded prices between RMB 1,820-1,860/mt. #1 zinc prices were between RMB 14,800-14,820/mt. Cargo holders were actively moving goods prior to the holiday, but traders stood on the sidelines, while downstream buyers purchased modestly, keeping transactions quiet. In the afternoon, cargo holders were holding prices firm, and some downstream buying interest improved, with spot premiums of #0 zinc against SHFE 1309 zinc contract prices RMB 0-30/mt, and with traded prices between RMB 14,840-14,870/mt, and transactions improving.

Mainstream traded prices for spot tin in Shanghai fell to RMB 141,500-143,500/mt on Friday, and brands from Jiangxi were mainly traded at RMB 141,500-142,000/mt. Despite the approaching Chinese Dragon Boat Festival, purchases downstream were still limited and only improved slightly from the previous trading day.

 

In Shanghai, Jinchuan nickel prices were between RMB 106,200-106,400/mt in the morning session, while Russian nickel prices were between RMB 105,200-105,400/mt. Traders began to hold back goods and raised their quotes in the afternoon, with Jinchuan nickel prices up to RMB106,400-106,600/mt, and Russian nickel prices rising to RMB 105,400-105,600/mt. After the adjustment, transactions made around RMB 105,400/mt and RMB 106,400/mt were active, while high-price resources were unpopular.