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SMM Base Metals Daily Review (2013-6-18)
Jun 19,2013 10:25CST
price review forecast
SHFE 1310 copper contract started RMB 120/mt lower at RMB 51,600/mt on Tuesday, dragged down by falling LME copper overnight.

SHANGHAI, Jun. 19 (SMM) –

SHFE 1310 copper contract started RMB 120/mt lower at RMB 51,600/mt on Tuesday, dragged down by falling LME copper overnight. After its opening, the most active SHFE copper contract moved lower due to sell-off, with the high-end price at RMB 51,720/mt. SHFE copper for October delivery stayed below the daily moving average most of the afternoon session, with the low-end price at RMB 50,960/mt. Finally, SHFE 1310 copper contract closed down RMB 690/mt or 1.33% at RMB 51,030/mt, with trading volumes up 221,000 lots and positions up 45,218 lots. Total trading volumes increased 277,000 lots, and total positions grew 44,998 lots. The most active SHFE copper will be vulnerable at RMB 50,000/mt once support at RMB 51,000/mt is lost.
Spot copper in Shanghai was offered at a premium of RMB 120-240/mt over SHFE 1307 copper contract prices on Tuesday. Traded prices for standard-quality copper were between RMB 51,800-51,930/mt, and RMB 51,900-52,300/mt for high-quality copper. SHFE 1310 copper contract prices trended down after opening lower. Cargo holders held offers firm after SHFE 1307 copper contracts became the new current-month contract. Middlemen moved goods aggressively, but downstream producers largely held to a wait-and-see stance out of growing pessimism, keeping supply in surplus. Spot copper supplies were still ample in the afternoon, and premiums only inched up to RMB 130-250/mt, with transactions limited. 
SHFE 1310 aluminum contracts became the new most active contract on Tuesday, which opened slightly lower at RMB 14,660/mt. Traded volumes surged to over 20,000 lots, and positions grew to more than 9,000 lots, sending SHFE aluminum for October delivery to RMB 14,490/mt. Finally, SHFE 1310 aluminum contract closed down RMB 185/mt or 1.26% at RMB 14,500/mt. Almost all SHE aluminum contracts fell back to RMB 14,500/mt, with the most traded SHFE aluminum contract expected to hover near RMB 14,500/mt ahead of the result of the US Fed policy meeting. 

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,660-14,680/mt on Tuesday, RMB 10-30/mt higher than SHFE 1307 aluminum contract prices. Low-iron aluminum was traded around RMB 14,820/mt. The plunge in SHFE 1309 aluminum contract prices triggered panic selling among spot aluminum traders, driving traded prices in Shanghai down from yesterday’s RMB 14,820/mt to RMB 14,670/mt. Downstream producers and middlemen purchased only as needed, capping prices in east China under RMB 14,700/mt. Bearish sentiment should continue to dominate the market for the remainder of the month. In the afternoon, traders held offers at RMB 14,670/mt, but trading was muted. 

SHFE 1307 lead contract price became the most active contract on June 18, and opened higher at RMB 13,990/mt, with support at the 20-day moving average. Prices were resilient due to the falling SHFE lead inventories and moved between RMB 13,970-13,985/mt. However, prices for the most active contract dropped RMB 20/mt at the tail of trading as both shorts and longs cut positions to finally settle at RMB 13,950/mt, down RMB 15/mt. Trading volumes for SHFE 1307 lead contract increased 80 lots to 140 lots, while positions fell 106 lots to 1,548 lots. The Shanghai/LME lead price ratio was 6.64 as of 15: 00, up from the 6.59 a day earlier. The depressed demand could not help bolster lead prices, but support from moving averages was strong. Lead prices are expected to keep vacillating before the Fed announces its decision on QE.

China’s spot lead market lowered quotes by RMB 30/mt due to limited transactions made at high prices on Monday. Chihong Zn & Ge was quoted at RMB 13,920/mt, with discount of RMB 50/mt against the most active SHFE lead contract price. Mengzi and Hanjiang were quoted at RMB 13,900/mt, while prices for Yunyue were offered at RMB 13,870/mt. Downstream consumption improved slightly from the previous trading day, and smelters moved goods normally. Quotes remained little changed in the afternoon, with consumption modest.

SHFE 1309 zinc contract prices opened RMB 10/mt lower at RMB 14,565/mt as LME zinc prices overnight dropped after Asian trading. SHFE copper and aluminum prices plunged by 1.33% and 1.26% respectively, and both SHFE and LME zinc prices soared before falling, distressing market sentiment, and causing longs to close positions. In this context, SHFE zinc prices found support at RMB 14,500/mt, and finally closed at RMB 14,515/mt, down RMB 60/mt or 0.41%.

Trading volumes of SHFE 1309 zinc contracts increased by 2,006 lots, to 26,264 lots, and positions decreased by 1,324 lots to 119,174 lots. Trading volumes of SHFE 1310 zinc contracts increased by 11,682 lots, to 73,100 lots, and total positions decreased by 2,774 lots to 305,452 lots.

#0 zinc prices were between RMB 14,650-14,680/mt, with spot premiums between RMB 90-110/mt against SHFE 1309 zinc contract prices. #1 zinc prices were between RMB 14,630/mt. Imported #0 zinc prices were around RMB 14,640/mt. Cargo holders were actively moving goods to generate cash as SHFE zinc prices inched down, but downstream buying interest weakened, keeping transactions quiet. With the exception of the Shuangyan brand, goods supply was tight, with the price spread with Shuangyan brand narrowing to RMB 10-20/mt. Imported zinc in Guangdong province squeezed market shares of domestic zinc, while downstream demand was also sluggish, with prices of Qilin brand between RMB 14,540-14,570/mt, and with the price spread with Shuangyan around RMB 100/mt. SHFE zinc prices continued to fall in the afternoon, with #0 zinc prices between RMB 14,630-14,660/mt, and transactions muted.

In Shanghai spot tin market, traded prices were mainly at RMB 140,000-141,500/mt on June 18, and some goods from Yunnan Tin Group with low lead content were traded at RMB 142,000/mt. A few transactions for Jiangxi’s brands were made at RMB 139,500/mt. The approaching low-demand season for downstream market left tin consumption sluggish, hurting market sentiment, with many investors bearish to market outlook. Thus, trading remained quiet despite lower prices, and spot tin prices may continue to fall.

Jinchuan lowered nickel ex-works prices to RMB 102,000/mt, down RMB 4,500/mt. In Shanghai, Jinchuan nickel prices were around RMB 101,200/mt in the morning session, and Russian nickel prices were around RMB 100,200/mt. But as Jinchuan lowered nickel prices and due to plunging LME nickel prices, spot Jianchuan nickel prices dropped to RMB 100,800/mt, while Russian nickel prices stood firm at RMB 101,000/mt. transactions among traders increased due to some arbitrage opportunities, but overall market sentiment was still cautious.


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