SMM Base Metals Daily Review (2013-6-21)

SHANGHAI, Jun. 24 (SMM) – 

 

Falling LME copper caused SHFE 1310 copper contract to open RMB 960/mt lower at RMB 48,960/mt on Friday. After its opening, the most active SHFE copper contract plunged to RMB 48,390/mt on sell-off, but then rebounded to near RMB 49,500/mt on long buying, with resistance at RMB 49,700/mt. Finally, SHFE copper for October delivery ended the day down RMB 270/mt or 0.54% at RMB 49,650/mt, with trading volumes up 250,000 lots and positions up 6,852 lots. The most active SHFE copper contract is still under downward track after hitting the lowest in 20 months. 

 

Spot copper in Shanghai was offered at a premium of RMB 100-300/mt over SHFE 1307 copper contract prices on Friday. Traded prices for standard-quality copper were between RMB 49,600-50,250/mt, and RMB 49,680-50,300/mt for high-quality copper. SHFE 1310 copper contract trimmed more than 2% in the morning, causing traders to actively move goods. Middlemen went bargain hunting, but sold goods after copper prices rebounded. This caused spot copper supply to surge, pushing premium down. High-quality copper was offered RMB 150-180/mt higher than SHFE 1307 copper contract, while standard-quality copper was quoted at a premium of RMB 0-120/mt over SHFE current-month copper contract. There was a price gap of close to RMB 1,000/mt for the same variety of copper. Later, market turned quiet. Premiums for spot copper fell to RMB 20-120/mt, with traded prices at RMB 50,050-50,300/mt. SHFE copper inventories increased 5,799 mt to 189,209 mt last week as the rising SHFE/LME copper price ratio pushed up copper imports. 

 

Falling LME aluminum caused SHFE 1310 aluminum contract to open RMB 125/mt lower at RMB 14,280/mt last Friday. SHFE aluminum for October delivery dipped to RMB 14,220/mt shortly after its opening, but hit a high of RMB 14,400/mt in the afternoon as LME aluminum tried to regain USD 1,800/mt and due to short-covering and dip-buying by longs. Finally, the most active SHFE aluminum contract closed down RMB 40/mt or 0.28% at RMB 14,365/mt. Trading volumes decreased 2,004 lots to 14,396 lots, and positions added 3,058 lots to 63,710 lots. SHFE aluminum for October delivery will not be able to break through RMB 14,400/mt until more upward momentum is available. SHFE aluminum inventories shrank 4,676 mt to 418,323 mt.  

 

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,410-14,430/mt, a discount of RMB 20-40/mt over SHFE 1307 aluminum contract prices. Low-iron aluminum was traded around RMB 14,570/mt. SHFE 1310 aluminum contract opened lower, driving a few traders to sell at near RMB 14,400/mt. However, the most active SHFE aluminum contract rebounded during spot aluminum trading session, leaving traders to hold to the sidelines. Downstream producers purchased in modest amounts and middlemen evinced higher buying interest after SHFE aluminum rebounded, helping mainstream traded prices hold firm at RMB 14,420/mt. However, downstream producers shied away from higher prices, causing spot discount to expand to RMB 40/mt. In the afternoon, despite rising SHFE aluminum, suppliers and buyers generally stayed out of the market out of growing pessimism over future prices, with sparse quotations seen at RMB 14,440-14,480/mt.    

SHFE 1309 lead contract price gapped RMB 150/mt lower at RMB 13,915/mt on June 21 due to the 2% decline in LME lead prices overnight, a new low for the year. Later, as longs increased positions and shorts exited the market ahead of the weekend, SHFE lead moved up to RMB 14,005/mt before closing at RMB 13,980/mt, down RMB 15/mt. Trading volumes were down 324 lots t 178 lots, and positions were up 78 lots to 1,660 lots. The Shanghai/LME lead price ratio was 6.89 at the time of closing. Demand in spot lead markets remained sluggish and LME lead prices are unlikely to see uptick next week.

 

SHFE 1309 lead contract price edged up after gapping lower on Friday, and spot lead prices fell noticeably. Traders mainly sold down inventories ahead of the weekend, and downstream buyers purchased according to production needs. Most investors were still bearish to lead market. Chihong Zn & Ge was quoted at RMB 13,850/mt, with discount of RMB 110/mt against the most active SHFE lead contract price, but transaction was quiet. Shuikoushan and Nanfang were mainly offered at RMB 13,790/mt, and Hanjiang was offered at RMB 13,780/mt. Trading remained light on the whole.

 

SHFE 1310 zinc contract prices opened lower at RMB 14,315/mt, dragged down by LME zinc prices overnight. Due to strong selling pressure, SHFE zinc prices dipped to RMB 14,255/mt. But as shorts left the market after profit-taking and since some bargain hunters entered the market and due to rebounding LME zinc prices, SHFE zinc prices soared and touched RMB 14,470/mt, finally closing at RMB 14,440/mt, up RMB 30/mt or 0.21%. Trading volumes increased by 19,490 lots, to 88,146 lots, and total positions increased by 14,446 lots to 139,202 lots. 

 

#0 zinc prices were between RMB 14,450-14,490/mt, with spot premiums between RMB 50-90/mt against SHFE 1310 zinc contract prices. #1 zinc prices were between RMB 14,440-14,450/mt. SHFE zinc prices dipped before rallying today. Cargo holders’ confidence grew as SHFE zinc prices rebounded, and bargain hunters entered the market, pushing up spot premiums of #0 zinc against SHFE 1310 zinc contract prices to RMB 100/mt. During the second trading session, SHFE zinc prices fluctuated at high levels, but spot premiums of #0 zinc narrowed to RMB 50-90/mt due to sell-offs. Smelters were moving goods actively due to cash flow problems, but as downstream buyers remain cautious, overall transactions were muted. SHFE zinc prices continued to strengthen in the afternoon, and #0 zinc prices rose to RMB 14,500-14,510/mt, with spot premiums between RMB 60-80/mt against SHFE 1310 zinc contract prices.

 

In Shanghai spot tin market, traded prices fell to RMB 138,500-139,500/mt due to the slumping LME tin prices and depressed market sentiment. Smelters were reluctant to sell goods, with trading thin.

 

In Shanghai, spot Jinchuan nickel prices were around RMB 97,000/mt in the morning session, and Russian nickel prices were around RMB 96,000/mt. A wait-and-see attitude permeated in the market as prices continued to drop, keeping transactions quiet. Traders were unwilling to sell goods as the weekend neared, so Jinchuan nickel prices rose to RMB 97,400/mt in the afternoon, and Russian nickel prices fell to RMB 96,400/mt, with downstream buying interest low and transactions muted.