SMM Base Metals Market Daily Review (2013-9-3)

SHANGHAI, Sept. 4 (SMM)--

Copper
The most traded copper contract on the Shanghai Futures Exchange (SHFE) started Tuesday RMB 130/mt higher at RMB 52,580/mt. The contract climbed to RMB 52,750/mt before surrendering earlier gains due to short sellers closing positions. The Shanghai Composite Index rallied over 1%, but this failed to offer rising impetus to the red metal. December copper on the SHFE hovered around RMB 52,300/mt for most of the afternoon session, with the low-end price at RMB 52,220/mt. Finally, the most active contract lost RMB 90/mt or 0.17% to close at RMB 52,360/mt. Trading volumes and positions shrank by 119,000 lots and 1,422 lots, respectively. SHFE 1312 copper contract will test support at the 20-day moving average in the near term.
 
Spot copper in Shanghai was quoted at a backwardation of RMB 100-250/mt over SHFE 1309 copper contract on Tuesday. Traded prices were RMB 52,720-52,840/mt for standard-quality copper, and RMB 52,820-53,000/mt for high-quality copper. SHFE copper fell back after hitting high, leaving cargo holders anxious to sell at highs. The price spread between imported and domestic copper widened, leaving little room for arbitrage. As such, traders stayed out of the market. Downstream producers shied away from high prices, leaving transactions limited. Quotes for spot copper remained unchanged in the afternoon, and trading was even lighter.
 
Aluminum
The most active aluminum contract on the Shanghai Futures Exchange (SHFE), SHFE 1312 aluminum contract, moved lower to RMB 14,255/mt after a flat opening at RMB 14,300/mt on Tuesday. Longs increased positions at RMB 14,270/mt, preventing the contract from dropping further. Finally, SHFE aluminum for December delivery finished RMB 5/mt higher at RMB 14,275/mt. Trading volumes contracted 8,400 lots to 8,900 lots, but positions increased 2,784 lots to 63,322 lots.
Mainstream traded prices for spot aluminum in Shanghai were RMB 14,330-14,340/mt, a backwardation of RMB 30-40/mt over SHFE 1309 aluminum contract. The uptick in aluminum prices was primarily contributed by tight supply. Downstream producers were willing to buy at RMB 14,340/mt, but lost interest once prices rose further. Overall trading picked up from yesterday.
 
Lead
SHFE lead fluctuated around RMB 14,620/mt after opening at the price mark. Plagued by falling LME lead prices, SHFE lead market drifted lower at midday, down by RMB 60/mt to RMB 14,560/mt. In the afternoon session, the market extended declines, falling below the 20-day moving average, down to RMB 14,435/mt, a new low since August 15. SHFE lead market stabilized at the tail of trading and finally closed at RMB 14,485/mt, down RMB 155/mt or 1.06%. Transactions were down 200 lots to 280 lots, while positions were down 30 lots to 9,490 lots.
 
Compared with other base metals, SHFE lead market posted the largest price decline on Tuesday. Lead prices will likely extend losses due to potential output increases from the easing of raw material shortage and weak demand.  
 
In Shanghai's spot lead market, prices for Tongguan and Shuikoushan were RMB 14,650/mt, and RMB 14,620/mt for Hanjiang, with premiums between RMB 30/mt-RMB 0/mt over the most active SHFE lead contract. Warehouse receipts for Chengyuan and Nanfang were quoted at RMB 14,610/mt, RMB 40/mt lower than SHFE three-month lead, and RMB 14,630/mt for Yubei, RMB 10/mt higher than SHFE 1309 lead contract. As SHFE lead market prices dove near 11:00 am, quotes for warehouse receipts were little changed, while spot lead prices were down by RMB 20-30/mt. A strong wait-and-see attitude prevailed in the market. Quotes were rarely heard in the afternoon with SHFE lead losing more ground. 
 
Zinc
SHFE 1312 zinc contracts prices opened slightly higher at RMB 14,900/mt, boosted by LME zinc prices overnight. But as a large number of shorts rushed to the market, SHFE zinc contract prices were pushed down. Sliding LME zinc prices also weighed on SHFE zinc prices, dipping to the 30-day moving average, and closing at RMB 14,870/mt, down RMB 40/mt or 0.27%. Trading volumes decreased by 23,000 lots, to 46,648 lots, and positions increased by 1,696 lots, to 109,032 lots.

#0 zinc prices were between RMB 14,930-14,950/mt, with spot premiums of RMB 40-50/mt against SHFE 1312 zinc contract prices, and #1 zinc prices were between RMB 14,890-14,910/mt. Imported #0 zinc prices were between RMB 14,900-14,910/mt, with spot premiums around RMB 20/mt against SHFE 1312 zinc contract prices. SHFE zinc price opened slightly higher but fell back to RMB 14,900/mt, with spot premiums narrowing with the lack of buyers. At the end of the morning trading, SHFE zinc prices slid further, dragging down #0 zinc prices to RMB 14,900-14,920/mt, with spot premiums between RMB 40-60/mt. Some smelters were affected but most were still moving goods actively, but arbitrage traders became cautious, with downstream buyers taking a wait-and-see attitude, leaving overall transactions quiet.
 
Tin
In Shanghai, transaction prices for spot tin were mainly at RMB 140,300-142,500/mt Tuesday, little changed from a day earlier. The directionless LME tin left most cargo holders in China's spot tin markets on the sidelines, with limited resources available in the market. In the afternoon, some Jiangxi's brands were traded lower at RMB 140,000/mt. Consumption downstream remained tepid.
 
Nickel
In Shanghai, transactions were extremely muted as traders and buyers had purchased the day before, with #1 nickel prices between USD 96,300-97,500/mt. As LME nickel prices closed down for six consecutive days, traders believed prices will rebound so they held prices firm. Russian nickel was traded around RMB 96,400/mt and Jinchuan nickel prices were around RMB 97,600/mt.