SMM Base Metals Daily Review (2013-8-29)

SHANGHAI, Aug. 30 (SMM) – 

 

The most traded copper contract on the Shanghai Futures Exchange (SHFE) started RMB 310/mt lower at RMB 52,400/mt on Thursday. The contract trended lower after touching RMB 52,580/mt due to selloff, and sank further to RMB 51,950/mt in the afternoon. December copper on the SHFE did regain some earlier losses at the tail of the session as short sellers exited, closing at RMB 52,370/mt, down RMB 340/mt or 0.65%. Trading volumes of SHFE 1312 copper contracts increased by 54,578 lots, but positions decreased by 6,882 lots. Total trading volumes added 85,880 lots, compared with a decline of 16,840 lots in total positions. The most active SHFE copper contract has found strong support at the 20-day moving average, so investors need not be overt pessimistic. 

 

Spot copper in Shanghai was quoted at a premium of RMB 80-240/mt over SHFE 1309 copper contract on Thursday. Traded prices were RMB 52,680-52,760/mt for standard-quality copper, and RMB 52,760-52,900/mt for high-quality copper. Some traders rushed to sell in the morning. Spot premium fell all the way down. Downstream producers became more willing to buy now that copper prices have dropped for consecutive days, but transaction volumes were curbed by tight liquidity at the month’s end. With bearishness growing in the afternoon following a further decline in SHFE copper, cargo holders increased supplies, leaving spot copper premiums unimproved at RMB 80-230/mt. Traded prices, however, fell to RMB 52,600-52,950/mt.

 

The most active aluminum contract on the Shanghai Futures Exchange (SHFE), SHFE 1312 aluminum contract, started the day lower at RMB 14,415/mt on Thursday. The contract drifted all the way down as bearish sentiment ruled before finishing at RMB 14,350/mt, down RMB 90/mt or 0.62%. Trading volumes added 2,224 lots to 8,180 lots, while positions were also up 2,386 lots to 53,260 lots. The US dollar will remain firm in the near future as Syria concerns persist, so SHFE aluminum for December delivery is expected to dip to RMB 14,300/mt at the bottom. 

 

Falling SHFE 1309 aluminum contract sent spot aluminum in Shanghai down to RMB 14,370-14,380/mt on Thursday, a backwardation of RMB 0-10/mt over SHFE current-month aluminum contract. Producers and large traders finished delivery of long-term aluminum contracts, tightening aluminum supply in spot markets. Downstream producers bought as needed.  

   

The most active lead contract on Shanghai Futures Exchange (SHFE) gapped lower on Thursday at RMB 14,700/mt dragged by the falls in base metals on London Metals Exchange (LME) overnight. The price then hovered around the opening level but regained some losses in the afternoon propelled by buying activity of longs and the arrested decline in SHFE copper, and finally ended at RMB 14,730/mt, down RMB 5/mt from Wednesday. 134 lots in traded volumes were reported for the SHFE 1309 lead contracts, down 48 lots, and holdings also fell 10 lots to 1,938 lots. The new rules for SHFE lead contract will take effect next Monday, leaving market cautious. SHFE lead warrants further dropped by 351 mt to 94,232 mt. 

 

Most market players in spot lead markets were on the fence Thursday with SHFE lead prices consolidating after gapping lower. Buyers downstream mainly consumed existing inventories and had no appetite for making purchases. Warrants for Chengyuan’s goods were offered at RMB 14,740/mt, with a premium of RMB 40/mt over the SHFE 1309 lead contract price, while Yubei’s warrants were quoted at RMB 14,720/mt, RMB 20/mt higher than the SHFE current-month lead contract price. Resources of Hanjiang and Shenqian were quoted at RMB 14,710-14,720/mt, while Humon’s goods were offered at RMB 14,680/mt. Quotes for resources from Henan Jinli were at RMB 14,700/mt. Market was still influenced by the month-end tight financing, with trading muted. In the afternoon, price changed little with inquiries seldom heard. 

 

SHFE 1312 zinc contracts prices opened lower at RMB 15,005/mt, dragged down by LME zinc prices overnight, and falling to RMB 14,980/mt as large numbers of shorts rushed to the market, and then leveling out. In the afternoon, SHFE zinc prices fluctuated in a wider range, dipping to RMB 14,930/mt, and with the high end of RMB 15015/mt, and closing at RMB 14,965/mt, down RMB 165/mt, or 1.09%. Trading volumes decreased by 20,038 lots, to 55,432 lots, and positions decreased by 2,386 lots, to 107,220 lots. SHFE warrants were 98,404 mt.

 

#0 zinc prices were between RMB 14,990-15,020/mt, with spot premiums of RMB 10-40/mt against SHFE 1312 zinc contract prices, and #1 zinc prices were between RMB 14,950-14,970/mt. spot premiums reversed as SHFE 1312 zinc contract prices dropped below RMB 15,000/mt, dragging down spot prices by RMB 120/mt, to RMB 15,000/mt. Smelters remained willing to sell goods, and arbitrage traders moved goods modestly. But buyers and traders have little interest in buying due to cyclical month-end problem. Shuangyan brand zinc held around RMB 15,010/mt, and Yuguang brand prices were around RMB 15,000/mt, with overall transactions sluggish.

 

On August 29, mainstream spot tin prices in Shanghai drifted lower to RMB 141,800-143,500/mt, but quotes in the market varied largely, with some non-leading brands offered at RMB 141,500/mt. Some resources with low lead content from Yunnan Tin Group were still quoted high at RMB 144,000/mt, but overall trading remained quiet. The month-end tight financing pushed cargo holders to move goods aggressively, but a lack of demand kept driving prices down.

 

In Shanghai, #1 nickel prices were between RMB 99,800-100,800/mt. Traders lowered prices in the afternoon, with Jinchuan nickel prices were between RMB 100,400-100,600/mt, and Russian nickel prices between RMB 99,300-99,500/mt. Buyers purchased 15-20 mt goods, while traded reported end-user demand has been sluggish, with transactions mainly made among traders.