SMM Base Metals Daily Review (2013-6-27)

SHANGHAI, Jun. 28 (SMM) – 

 

With LME copper fluctuating weakly overnight, SHFE 1310 copper contract opened RMB 160/mt lower at RMB 48,300/mt on Thursday. The most active SHFE copper contract bounced back from lows thanks to dip-buying, but still failed to break through RMB 48,920/mt. In the afternoon, SHFE copper for October delivery hovered around the daily moving average before closing at RMB 48,780/mt, up RMB 320/mt or 0.66%. Trading volumes contracted 146,000 lots and positions were also down 33,122 lots. SHFE copper has not yet completely shaken off technical resistance and may move lower again.

 

Spot copper in Shanghai was offered at a discount of RMB 20-180/mt over SHFE 1307 copper contract prices on Thursday. Traded prices for standard-quality copper were between RMB 49,000-49,250/mt, and RMB 49,100-49,350/mt for high-quality copper. SHFE 1310 copper contract drifted higher after a low opening.  Cargo holders continued to aggressively move goods to generate cash, with offers lower than SHFE current-month copper contract prices. SHFE copper fell back from highs during the second trading session, stimulating a few middlemen to sell SHFE copper while buy spot copper. Downstream purchasing remained on an as-needed basis. In the afternoon, discounts for spot copper remained stable at RMB 50-150/mt, with traded prices at RMB 49,000-49,200/mt. 

 

SHFE 1310 aluminum contract broke through the 5-day moving average to an intraday high of RMB 14,320/mt after opening at RMB 14,245/mt on Thursday. Later, the struggle between longs and shorts left the most active SHFE aluminum contract hovering below the 5-day moving average. Finally, the most actively traded SHFE aluminum contract gained RMB 50/mt or 0.35% to end at RMB 14,290/mt. Trading volumes contracted 1,730 lots to 6,712 lots, but positions increased 582 lots to 70,448 lots. Absent positive news, SHFE aluminum for October delivery is expected to remain weak.

 

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,380-14,400/mt on Thursday, a discount of RMB 0-10 and a premium of RMB 0-10/mt over SHFE 1307 aluminum contract prices. Low-iron aluminum was traded around RMB 14,540/mt. Despite a slight rise in SHFE 1307 aluminum contract prices, downstream producers stayed out of the market against tightening liquidity crunch at the end of mid-year point. Traders became less eager to sell, but overall supply remained in surplus, keeping mainstream traded prices in check, with lowest traded price stagnant at RMB 14,380/mt. Trading is expected to turn even thinner tomorrow. In the afternoon, wait-and-see sentiment dominated spot market. Sparse quotations were reported at RMB 14,390/mt, but few deals were completed.   

 

The eased liquidity crunch in China alleviated investors’ concerns over Chinese economy, so Shanghai Composite Index stopped falling to hover around 1,950. Coupled with LME lead prices rising to head towards USD 2,060/mt, SHFE 1309 lead contract price opened at RMB 13,930/mt and moved narrowly around RMB 13,900/mt on Thursday, but climbed in the afternoon given buying support and finally closed up RMB 70/mt at RMB 13,940/mt, standing above the 5-day moving average. Trading volumes for the most active contract increased 26 lots to 148 lots, and positions increased 32 lots to 1,902 lots. Settlement price was slightly lower at RMB 13,922/mt. SHFE lead prices are expected to remain weak in the medium to long term due to sluggish demand and depressed economy. 

 

Price gap for difference brands in China’s spot lead prices narrowed, with prices of Nanfang, Shuikoushan, Mengzi, and Hanjiang between RMB 13,740-13,750/mt, with discount against the SHFE 1309 lead contract price expanding to RMB 150/mt. Lead from Jiangxi Copper was quoted RMB 15/mt lower at RMB 13,725/mt. Traders were more pessimistic to lead market as downstream buyers remained unwilling to purchase, and smelters under financial pressure still moved goods normally. 

 

SHFE 1310 zinc contract prices opened flat at RMB 14,370/mt. China's scale-efficiency industry enterprises realized RMB 470.55 billion in profits in May, up 15.5% YoY, inspiring the market. LME zinc prices strengthened and challenged USD 1,850/mt. SHFE zinc prices were pushed up by large numbers of longs, touching RMB 14,440/mt, and finally closing at RMB 14,420/mt, up RMB 50/mt or 0.35%. Trading volumes decreased by 23,292 lots, to 53,890 lots, and total positions increased by 1,258 lots to 159,386 lots.

 

#0 zinc prices were between RMB 14,470-14,500/mt, with spot premiums between RMB 80-100/mt against SHFE 1310 zinc contract prices. #1 zinc prices were between RMB 14,440-14,450/mt, with imported #0 zinc prices between RMB 14,700-14,800/mt. Cargo holders were actively moving goods as SHFE zinc prices opened low but moved higher, and smelters were also aggressively selling goods due to cash flow problems, while downstream buyers purchased on an as-needed basis, keeping transactions quiet. Trading inventories in Shanghai were removed by 3,000 mt/day. SHFE zinc prices continued to climb in the afternoon, and #0 zinc prices were between RMB 14,490-14,500/mt, with spot premiums narrowing to RMB 70-90/mt against SHFE 1310 zinc contract prices.

 

Traded prices for spot tin in Shanghai were mainly at RMB 138,000-139,000/mt Thursday morning, with a few deals done at RMB 137,500-137,800/mt, with trading still light. In the afternoon, the increase in LME tin prices shored up market sentiment, with goods quoted below RMB 138,000/mt rarely seen, purchases of downstream buyers and traders improved slightly. 

 

In Shanghai, Jinchuan nickel prices were between RMB 97,400-97,600/mt in the morning, and Russian nickel prices were between RMB 96,400-96,600/mt. Market confidence improved as LME nickel prices opened high and moved higher, causing transactions to increase. Pushed up by the rising LME zinc prices, Jinchuan nickel prices advanced to RMB 97,700/mt in the afternoon, and Russian nickel prices also rose to RMB 96,700/mt, with transactions stable.