SMM Base Metals Market Daily Review (2013-7-23)

SHANGHAI, Jul. 24 (SMM)--

Copper:
SHFE 1311 copper contract opened RMB 170/mt higher at RMB 50,350/mt on Tuesday as LME copper extended gains overnight. The most active contract found its high at RMB 50,690/mt due to a wave of buying and a 2% rally in China's A-shares. In the afternoon, SHFE copper for November delivery  was pushed down by short selling to RMB 50,220/mt before closing at RMB 50,260/mt, up RMB 80/mt or 0.16%. Trading volumes shrank by 6,288 lots, but positions increased by 2,374 lots. SHFE copper for delivery in four months will continue to meet strong resistance at RMB 50,500/mt.    
 
Spot copper in Shanghai was offered at a premium of RMB 160-400/mt over SHFE 1308 copper contract prices on Tuesday. Traded prices for standard-quality copper were between RMB 51,150-51,250/mt, and RMB 51,320-51,480/mt for high-quality copper. SHFE 1311 copper contract drifted higher after a high opening. The price gap between standard-quality copper and high-quality copper widened further. Middlemen became reluctant to buy once prices rose above RMB 51,000/mt. Premium of RMB 400-420/mt was reported only for Guixi copper. Holders of standard-quality copper cut premium to RMB 160/mt from RMB 200/mt. Higher prices deterred downstream producers from buying. Market players are worried that copper prices may fall back following several consecutive days of gains given the anemic downstream demand. In the afternoon, selling interest among cargo holders increased, and premiums for spot copper remained little changed at RMB 170-370/mt, but transactions were limited, with traded prices were between RMB 51,050-51,300/mt. Although the high premiums for spot copper were viewed as a major support behind a rebound in copper prices, the weak consumption and risks arising from continuous price hikes left many market players on the sidelines. 
 
Aluminum:
SHFE 1310 aluminum contract opened higher at RMB 14,420/mt on Tuesday. The most active contract slipped below RMB 14,400/mt in the afternoon, but did recover most of earlier losses at the tail of the session due to dip-buying. SHFE aluminum for October delivery ended the day up RMB 45/mt or 0.31% at RMB 14,415/mt. Trading volumes increased, but positions decreased by 734 lots. SHFE three-month aluminum contract will test support at RMB 14,400/mt.

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,380-14,400/mt, RMB 0-20/mt lower than SHFE 1308 aluminum contract prices. Low-iron aluminum was traded around RMB 14,550/mt. SHFE 1308 aluminum contract was stagnant at RMB 14,400/mt, a reflection of pessimism over aluminum prices. Downstream producers and middlemen were little interested in buying, forcing traders to cut offers. Prices in Shanghai and Wuxi failed to rise above RMB 14,400/mt. Prices in Hangzhou did not advance sharply either, despite tighter supply. In the afternoon, the most active SHFE aluminum contract pared gains, causing some traders to remain eager to sell, with quotations reported at RMB 14,380/mt. Trading was muted, though.
 
Lead:
SHFE 1309 lead contract price opened higher at RMB 13,880/mt and went up to RMB 13,890/mt driven by buying support and rising Shanghai Composite Index. But prices lacked impetus to rise further and surrendered earlier gains with shorts entering the markets. However as support at the 5-day moving average is strong, the most active SHFE lead contract eventually closed at RMB 13,860/mt, down RMB 15/mt. Trading volumes fell 34 lots to 84 lots, and positions fell 24 lots to 2,550 lots. SHFE lead is expected to keep hovering at RMB 13,820-13,900/mt given the unimproved consumption in spot markets.
 
Quotes in China's spot lead markets rose RMB 20-30/mt with SMM average lead price up RMB 25/mt. Supplies from Chihong Zn & Ge remained low and quotes were firm at RMB 13,800/mt, with discount against the most active SHFE lead contract price narrowing to RMB 90/mt. Tongguan was traded at RMB 13,760/mt. Mengzi and Hanjiang were quoted at RMB 13,750/mt. Downstream buyers were still watching on the sidelines given higher lead prices, and smelters sold goods at proper prices, with trading showing no significant improvement. 
 
Zinc:
SHFE 1310 zinc contract prices opened RMB 30/mt higher at RMB 14,630/mt. China's central bank eliminated restrictions of loan interest rates for financial institutions, while news that refinancing of infrastructure construction was reported. China's A-shares rebounded, with short momentum waning. SHFE hovered around RMB 14,650/mt in the morning session. LME zinc prices fell in the afternoon, and longs left the market after profit-taking ahead of the release of HSBC's July PMI for China. SHFE zinc prices fell back to the 10 and 60-day moving average, finally closing at RMB 14,620/mt, up RMB 20/mt or 0.14%. Trading volumes of SHFE 1311 zinc contract decreased by 14,564 lots, to 19,172 lots, and total positions decreased by 2,340 lots, to 125,502 lots.

#0 zinc prices were between RMB 14,730-14,750/mt, with spot premiums of RMB 70-90/mt against SHFE 1310 zinc contract prices. #1 zinc prices were between RMB 14,700-14,710/mt. SHFE zinc prices opened high, and spot prices rallied to RMB 14,700/mt, boosting smelter willingness to move goods. But downstream buyers were cautious, purchasing as needed, leaving transactions quiet. Purchasing in North China was more active due to firm galvanized product prices, and transactions in East China were relatively brisk. SHFE zinc prices fell slightly in the afternoon, and #0 zinc prices were between RMB 14,720-14,730/mt, with spot premiums expanding to RMB 10-110/mt against SHFE 1310 zinc contract prices.
 
Tin:
In Shanghai tin market, spot prices were dragged lower on Tuesday by increasing low-priced resources. Only Yunnan Tin Group held prices firm at RMB 138,000-138,500/mt. Traded prices for Nanshan and Kaiyuan were mainly at RMB 135,700-136,000/mt, while transactions for Yunheng and Yunshan were made at RMB 136,500-137,000/mt. Transactions remained quiet.

Nickel:
In Shanghai, downstream buyers purchasing was muted as LME nickel prices lacked ability to rise, with transactions mainly made among traders. Jinchuan raised ex-works prices again by RMB 500/mt, to RMB 100,000/mt, but did not boost the market effectively. #1 nickel prices were between RMB 98,800-99,800/mt in the morning. As LME nickel prices fell in the afternoon, Russian nickel prices were between RMB 98,600-98,800/mt, and Jinchuan nickel prices were between RMB 99,600-99,800/mt