SMM Base Metals Daily Review (2013-8-16)

SHANGHAI, Aug. 19 (SMM) – 

Copper
November copper on the Shanghai Futures Exchange (SHFE) opened RMB 140/mt higher at RMB 52,510/mt on Friday. The contract climbed to RMB 53,310/mt at the tail of the session as A-shares surged unexpectedly to 2,200 points near mid-day. SHFE 1311 copper contract ended the day up RMB 850/mt or 1.62% at RMB 53,220/mt. December copper on the SHFE closed RMB 880/mt or 1.68% higher at RMB 53,130/mt, with the highest and lowest prices for the day at RMB 53,240/mt and RMB 52,320/mt, respectively. Trading volumes and positions of SHFE 1312 copper contracts, the new most active contract, increased by 259,000 lots and 25,336 lots, respectively.
 
Spot copper in Shanghai was quoted at a backwardation of RMB 120-260/mt over SHFE 1309 copper contract on Friday. Traded prices were RMB 53,050-53,400/mt for standard-quality copper, and RMB 53,150-53,550/mt for high-quality copper. Cargo holders held prices firm now that SHFE 1309 copper contracts have become the new current-month copper contract and since they were optimistic over future prices. The supply of high-quality copper was ample, while that of standard-quality copper and hydro-copper was limited. Middlemen went bargain hunting, while downstream producers shied away from high prices. In the afternoon, backwardation for spot copper narrowed to RMB 120-220/mt, with traded prices flat at morning session’s levels. Trading waned prior to the weekend. SHFE copper stocks increased 10,743 mt last week, as downstream buyers were unwilling to purchase after copper prices rebounded and copper imports entered into domestic markets.

Aluminum
The most active aluminum contract on the Shanghai Futures Exchange (SHFE), SHFE 1311 aluminum contract, opened higher at RMB 14,465/mt last Friday. SHFE aluminum for November delivery, however, failed to touch RMB 14,500/mt before finishing at RMB 14,475/mt, up RMB 50/mt or 0.35%. Trading volumes surged by more than 13,000 lots. The US dollar index will remain weak amid the Fed’s unclear stance over monetary policy, which will help SHFE 1311 aluminum contract challenge resistance at RMB 14,500/mt in the coming week. SHFE aluminum inventories decreased 15,146 mt to 334,033 mt.

Mainstream traded prices for spot aluminum in Shanghai were RMB 14,400-14,410/mt, a contango of RMB 0-20/mt and backwardation of RMB 0-10/mt over SHFE 1309 aluminum contract. Rising SHFE aluminum prices enabled spot aluminum suppliers to hold prices firm. Middlemen went bargain hunting, while downstream producers were little interested in building up stocks, leaving prices stagnant at RMB 14,400/mt. In the afternoon, suppliers and buyers stayed out of the market. 

Lead
The most active SHFE lead contract price increased RMB 370/mt or 2.56% Friday. SHFE 1309 lead contract price started at RMB 14,505/mt and went up to RMB 14,680/mt driven by buying activities. In the afternoon session, brisk trading continued to push up the prices to close at RMB 14,850/mt. SHFE lead is expected to extend rises and test resistance at RMB 15,000/mt. Traded volumes fell 222 lots to 154 lots, and positions dropped 70 lots to 2,510 lots.

SHFE lead prices rose after opening higher on Friday, and resources in spot lead market remained tight due to limited supply from lead smelters. Quotes for lead of Nanshan and Shuikoushan were around RMB 14,700/mt, while goods of Chihong Zn & Ge were offered at RMB 14,650/mt. Chengyuan and Shuangyan were quoted at RMB 14,670/mt, but transactions were seldom made due to high prices. Some resources of Hanjiang were traded at RMB 14,550/mt. Cargo holders remained bullish and were reluctant to sell at lows, and downstream buyers only purchased according to production needs. SHFE lead continued to rise in the afternoon, but inquiries in spot markets were limited ahead of the weekend.

Zinc
SHFE 1311 zinc contract prices opened RMB 50/mt higher at RMB 14,975/mt, boosted by LME zinc prices overnight, and breaking through RMB 15,000/mt after opening. The Shanghai Composite Index jumped, inspiring the market and pulling up LME zinc prices. SHFE zinc prices continued to climb, touching RMB 15,210/mt, and closed at RMB 15,170/mt, up RMB 245/mt or 1.64%. Trading volumes increased by 47,962 lots, to 95,024 lots, and total positions decreased by 270 lots, to 107,000 lots. Trading volumes of SHFE 1312 zinc contracts increased by 84,594 lots, to 109,000 lots, and total positions increased by 31,146 lots, to 106,000 lots.

#0 zinc prices were between RMB 15,110-15,180/mt, with spot discounts of RMB 20-40/mt against SHFE 1311 zinc contract prices, and #1 zinc prices around RMB 15,050/mt. SHFE zinc prices opened high and then leveled out, with spot premiums of #0 zinc against SHFE 1311 zinc contract prices narrowing to RMB 70/mt, and prices between RMB 15,110-15,140/mt. During the second session, the rising Shanghai Composite Index pushed up SHFE 1311 zinc contract prices to RMB 15,200/mt, with spot premiums of #0 zinc switched to discounts between RMB 0-40/mt, and prices between RMB 15,110-15,180/mt. Smelters were actively moving goods, but did not increase supply significantly due to market optimism, and traders were also aggressively moving goods, with purchasing also increased as spot premiums switched to discounts. Downstream buyers purchased on an as-needed basis, with transactions improving. SHFE zinc prices edged up, but #0 zinc prices remained flat at RMB 15,140-15,170/mt.

Tin
Mainstream traded prices in Shanghai tin market were RMB 142,500-144,000/mt on Friday, and trading was light. The rallying LME tin prices failed to give any boost to spot tin. A few downstream buyers replenished stocks, but strong wait-and-see sentiment prevailed in the market.

Nickel
In Shanghai, #1 nickel prices were between RMB 102,100-103,500/mt. As prices rose, some traders were holding to their goods in the afternoon, with Jinchuan nickel prices between RMB 103,900-104,200/mt, and Russian nickel prices between RMB 102,700-103,000/mt. Transactions were mainly made among traders.