SMM Base Metals Daily Review (2013-10-23)

SHANGHAI, Oct. 24 (SMM) – 

Copper
Copper for delivery in January on the Shanghai Futures Exchange (SHFE) started RMB 280/mt higher at RMB 52,490/mt on Wednesday, driven by rising LME copper overnight. The red metal crept higher to RMB 52,560/mt, but wiped out gains before noon since pervasive caution prompted longs to close positions or sell at highs and since China’s A-shares lost over 1%. SHFE 1401 copper contract fell further to RMB 52,030/mt in the afternoon before closing the day at RMB 52,100/mt, down RMB 110/mt or 0.21%. Trading volumes and positions were up 63,244 lots and 5,322 lots, respectively.
 
In Shanghai spot markets, cargo holders were in a rush to sell, dragging down quotes for spot copper, with only prices for hydro copper holding steady due to limited supply. Spot copper was mainly quoted between a contango of RMB 150/mt and a backwardation of RMB 50/mt over SHFE 1311 copper contract in the morning. Traded prices were RMB 52,200-52,400/mt for standard-quality copper, and RMB 52,270-52,550/mt for high-quality copper. A small number of traders went bargain hunting, while downstream producers were cautious about buying, keeping trading muted. The further weakening of SHFE copper kept goods holders active in selling in the afternoon, and quotations remained flat with levels in the morning. Traded prices fell to RMB 52,100-52,250/mt. Downstream buyers remained unwilling to purchase.

Aluminum
December aluminum on the Shanghai Futures Exchange (SHFE) opened higher at RMB 14,450/mt on Wednesday. Longs took profits at highs, causing positions of SHFE 1312 aluminum contract to contract by over 3,000 lots before noon. As a result, SHFE 1401 aluminum contract became the most active one, which started higher at RMB 14,410/mt on market optimism that the US Federal Reserve will delay QE3 exit. SHFE aluminum for January delivery hit a high of RMB 14,430/mt in the morning session, but sank to RMB 14,380/mt in the afternoon due to the Shanghai Composite Index’s retreat from 2,200 points. Finally, SHFE 1401 aluminum contract ended up RMB 30/mt at RMB 14,395/mt. Trading volumes added 5,352 lots to 8,808 lots, and positions also grew 324 lots to 58,950 lots.

SHFE 1311 aluminum contract hovered near RMB 14,510/mt in the morning session after opening at RMB 14,500/mt on Wednesday. Spot aluminum in east China followed SHFE 1311 aluminum contract up RMB 50/mt. Prices were RMB 14,520-14,530/mt in Shanghai, RMB 14,510-14,520/mt in Wuxi, and RMB 14,500-14,510/mt in Hangzhou. Cargo holders were actively selling at highs, but higher offers watered down buying interest. Prices in Shanghai were firm at RMB 14,530/mt, but prices in Wuxi and Hangzhou may drop. In the afternoon, SHFE 1311 aluminum contract dropped, sending spot aluminum down. However, lower prices failed to stoke buying interest.   

Lead
The most active SHFE lead contract prices opened higher at RMB 14,550/mt on Wednesday. Later in morning trading hours, however, SHFE lead prices dipped to RMB 14,430/mt with longs taking profits. Transactions were light in afternoon trading session, since cautious shorts refused to enter the market after a drop of more than RMB 100/mt in a single day, leaving SHFE lead prices basically flat between RMB 14,420-14,430/mt. SHFE lead for December delivery finally ended at RMB 14,430/mt, down RMB 60/mt. Trading volumes dropped 682 lots to 1,242 lots, while positions added 30 lots to 10,582 lots.
 
Spot lead prices in Shanghai fell back following initial rises. Goods of Jinsha were offered at RMB 14,350/mt, with a discount of RMB 160-170/mt against the most active SHFE lead prices, but with thin transactions. Supply for goods from Chengyuan was few, with quotations between RMB 14,300-14,330/mt, while Mengzi and Hanjiang both were traded at RMB 14,300/mt. Quotes for Humon were initially at RMB 14,250/mt, but later lowered to RMB 14,220/mt. The fall of SHFE lead prices restrained downstream purchases, further dampening transactions. Spread between prices in Jiangxi, Hunan, Henan and those in the Shanghai market continued to widen, with most resources in the three provinces sold below RMB 14,250/mt.

Zinc
SHFE 1401 zinc contract prices opened at RMB 15,150/mt. During the first session, SHFE zinc prices touched RMB 15,160/mt, then fluctuated around RMB 15,125/mt. The Shanghai Composite Index soared initially in the morning but then dropped, down 1%, dragging down SHFE zinc prices. As a large number of investors left the market after profit-taking, SHFE zinc prices inched down and move between RMB 15,055-15,085/mt in the afternoon, and closed at RMB 15,040/mt, down RMB 35/mt or 0.23%. Trading volumes increased by 15,100 lots, to 62,016 lots, and total positions decreased by 15,902 lots, to 136,990 lots.

#0 zinc prices were between RMB 15,100-15,170/mt, with spot premiums between RMB 30-70/mt against SHFE 1401 zinc contract prices. #1 zinc prices were around RMB 15,050/mt. Cargo holders were actively moving goods, keeping supply ample, while downstream buyers purchased on an as-needed basis, with transactions muted. SHFE zinc prices opened high and soared in the first session, then leveling out at RMB 15,130/mt, with #0 zinc prices between RMB 15,130-15,190/mt. Shuangyan branded #0 zinc prices were between RMB 15,170-15,190/mt, and other regular #0 zinc prices were RMB 15130-15150/mt, with spot premiums between RMB 0-50/mt. Dragged down by LME zinc prices, SHFE zinc prices fell during the second session, pushing down spot zinc prices. Shuangyan branded #0 zinc prices dropped to RMB 15,150-15,160/mt, and other brands fell to RMB 15,100-15,120/mt, with spot premiums expanding to RMB 30-80/mt.

Tin
In Shanghai spot tin market, prices drifted higher to RMB 147,000-151,000/mt on October 23 helped by rising LME tin overnight. Major tin smelters raised quotations, leaving limited cheap goods available in the market, but demand was unimproved. In the afternoon, traders increased low end price to RMB 145,000/mt, but the subsequent falls in LME tin dragged spot prices back to RMB 147,000/mt. Trading waned in the afternoon, and most traders found it difficult to push up prices against the tepid consumption downstream.

Nickel
In Shanghai, Jinchuan raised nickel prices by RMB 2,300/mt, to RMB 102,500/mt. SMM #1 zinc prices were between RMB 101500-102500/mt, with transactions of Russian nickel more brisk than Jinchuan nickel. As nickel prices dropped in the afternoon, traders were actively moving goods, but transactions were muted as downstream buyers purchased on an as-needed basis.