SMM Base Metals Daily Review (2013-7-5)

SHANGHAI, Jul. 8 (SMM) –

Copper
SHFE 1310 copper contract opened RMB 130/mt lower at RMB 50,110/mt on Friday. The most active SHFE copper contract retreated from RMB 50,000/mt to RMB 49,500/mt after its opening due to massive selloff of SHFE forward-month copper contracts, and dipped further to RMB 49,390/mt in the afternoon. Finally, SHFE copper for October delivery finished at RMB 49,440/mt, down RMB 800/mt or 1.59%. Trading volumes and positions of SHFE 1310 copper contracts shrank 57,802 lots and 28,632 lots, respectively, while trading volumes and positions of SHFE 1311 copper contracts increased 53,230 lots and 25,688 lots, respectively. Selling pressure for futures copper is expected to escalate.

Spot copper in Shanghai was quoted at a discount of RMB 0-40/mt and premium of RMB 0-80/mt over SHFE 1307 copper contract prices on Friday. Traded prices for standard-quality copper were between RMB 50,050-50,200/mt, and RMB 50,130-50,350/mt for high-quality copper. SHFE copper moved trimmed almost 1.5% after a low opening, driving spot copper suppliers to sell at highs. Traders held offers firm towards mid-day as SHFE copper stopped falling. High-quality copper continued to gain favor, but the increase in premium was limited. Downstream producers increased purchases only slightly for the coming weekend. In the afternoon, trading activity in spot copper market was more brisk, with premiums up to RMB 0-100/mt and traded prices at RMB 50,050-50,250/mt. SHFE copper inventories fell sharply 9,472 lots to 173,021 lots. Some holders of imported copper in urgent need of cash flow lower premiums, especially for hydro copper, to promote sales. In this context, some downstream buyers purchasing as needed favored low-priced resources, driving down copper inventories.

Aluminum
SHFE 1310 aluminum contract started flat with the previous day at RMB 14,335/mt last Friday. Shorts dominated the market, sending the most actively traded SHFE aluminum contract down to RMB 14,280/mt. Finally, SHFE aluminum for October delivery ended the day at RMB 14,300/mt, down RMB 30/mt or 0.21%. Trading volumes contracted 466 lots to 13,704 lots, but positions increased 640 lots to 209,688 lots. Worries over possible scaling back of QE3 by the US Federal Reserve later this year and strengthening US dollar against the euro dampened investor sentiment. SHFE 1310 aluminum contract is expected struggle at RMB 14,300/mt in the coming week. 

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,390-14,400/mt on Friday, a discount of RMB 0-10/mt and premium of RMB 0-10/mt over SHFE 1307 aluminum contract prices. Low-iron aluminum was traded around RMB 14,550/mt. Spot aluminum followed SHFE aluminum down below RMB 14,400/mt due to only moderate stockpiling downstream. Further price declines are expected next week. In the afternoon, spot market turned quiet, with sparse quotations reported at RMB 14,400/mt.  

Lead
SHFE 1309 lead contract price opened RMB 15/mt lower at RMB 13,905/mt on July 5, and hovered around RMB 13,900/mt in the morning trading session. Investors took profits and exited the market in the afternoon given the upcoming weekend, driving SHFE lead to dip to a low of RMB 13,840/mt, only RMB 20/mt higher than the yearly low. However, price for the most active contract stabilized at the tail of trading to finally ended at RMB 13,880/mt, down RMB 65/mt. The Shanghai Composite Index moved narrowly after standing above 2,000 on the previous trading day and closed the week at 2,007, lending little support to SHFE lead prices. Trading volumes for the most active SHFE lead contract increased 50 lots to 156 lots, while positions were up 116 lots to 2,122 lots. Settlement price was RMB 13,889/mt.
 
Spot lead prices edged RMB 20-30/mt lower from the previous trading day. Mengzi was offered at RMB 13,730/mt, and Hanjiang was quoted at RMB 13,725/mt. Warrants for Yubei were offered at RMB 13,720/mt, with premiums of RMB 20/mt over SHFE 1307 lead contract price. Lower lead prices caused some smelters to cut supplies, while downstream buyers still purchased to orders. Transactions between traders were also quiet.

Zinc
SHFE 1310 zinc prices, the most actively traded contract, opened slightly lower at RMB 14,520/mt on July 5th. The contract fell below RMB 14,500/mt during the trading as LME zinc moved lower and investors sold off before the release of US non-farm payrolls. The contract generally fluctuated in the RMB 14,485-14,500/mt range before finally closing at RMB 14,470/mt, down RMB 70/mt or 0.48%. Transactions were up 748 lots to 46,480 lots, and positions were up 1,948 lots to 156,588 lots. Sell orders were 27,900 lots, accounting for 60%.
 
In the spot market, #0 zinc traded at RMB 14,570-14,600/mt, with premiums over SHFE three-month zinc contract between RMB 80-110/mt. Traded prices for #1 were around RMB 14,540/mt. SHFE zinc market drifted lower after a low opening last Friday, with SHFE 1310 zinc prices struggling at RMB 14,500/mt. Falling prices reduced smelters’ enthusiasm in sales, and downstream buying interest improved slightly in late week. However, the increment was limited. Narrow price fluctuations restricted room for trading among traders. As a result, overall trading was thin.  In the afternoon business, #0 traded between RMB 14,570-14,590/mt, with premiums over SHFE three-month zinc prices between RMB 90-110/mt. Trading saw no improvement.

Tin
In Shanghai tin market, traded prices were mainly between RMB 139,000-139,500/mt last Friday. Producers for non-leading brands rarely supplied goods recently, leaving low-priced goods limited in the market. LME tin prices again fell below USD 20,000/mt, hurting market sentiment, dampening transactions.

Nickel
Traded prices of Jinchuan nickel were RMB 97,500-97,700/mt last Firday morning, and RMB 96,500-96,700/mt for imported nickel, flat with the previous day. In the afternoon, trading turned brisk as there was room for arbitrage. #1 refined nickel was traded between RMB 96,700-97,700/mt, but transactions were muted once LME nickel fell to USD 13,681/mt. Jinchuan nickel and Russian nickel were both in ample supply, with the price gap remaining at RMB 1,000/mt. Premium at bonded zone is now at USD 110-120/mt.