SMM Base Metals Daily Review (2013-11-13)

SHANGHAI, Nov. 14 (SMM) – 

Copper
SHFE 1401 copper contract prices gapped RMB 380/mt lower at RMB 51,080/mt on Wednesday. Selloff and plunging Chinese A-shares sent the red metal tumbling to RMB 50,550/mt. The contract shed RMB 840/mt or 1.63% to close at RMB 50,620/mt. Trading volumes and positions surged by 133,000 lots and 11,166 lots, respectively. Total positions for SHFE copper contracts increased by over 83,000 lots. The lower opening largely hurt market confidence and left most longs more cautious. SHFE copper will remain under great downward pressure on strong bearish sentiment.  
 
Spot copper in Shanghai was quoted at a premium of RMB 50-160/mt over SHFE 1311 copper contract on Wednesday. Traded prices were RMB 51,050-51,150/mt for standard-quality copper, and RMB 51,100-51,250/mt for high-quality copper. Growing supply compelled suppliers to cut offers. Traders held to the sidelines as there was little room for arbitrage. Downstream producers refrained from buying in the belief that prices would fall further. In the afternoon, the continued declines in SHFE copper further boosted arbitrage, raising oversupply pressure in spot market. In response, backwardation dropped to RMB 50-150/mt, and traded prices also fell to RMB 50,900-51,000/mt. Transactions were sparse.

Aluminum
January aluminum on the Shanghai Futures Exchange (SHFE), the most active one, opened at RMB 14,250/mt on Wednesday. Chinese A-share lost 40.67 points to 2,185.65 points, sending the light metal down to RMB 14,205/mt in the afternoon. SHFE 1401 aluminum contract ended RMB 30/mt lower at RMB 14,225/mt, down for a third straight day. Falling prices prompted some investors to close short positions. Trading volumes increased 2,938 lots to 8,496 lots, but positions contracted 314 lots to 42,650 lots. SHFE aluminum for January delivery may lose support at RMB 14,200/mt.

Spot aluminum prices were RMB 14,400-14,410/mt in Shanghai, a premium of RMB 20-30/mt over SHFE 1311 aluminum contract. Prices were RMB 14,410-14,420/mt and Wuxi, and RMB 14,390-14,400/mt in Hangzhou. Cargo holders were eager to sell, with some cutting offers slightly to lure buyers. However, downstream producers stayed out of the market in the belief that prices will fall further. In the afternoon, suppliers remained anxious to sell, but downstream producers still refrained from buying.

Lead
On November 13, the strong bearishness left SHFE lead powerless to resist declines and following LME lead down. SHFE 1312 lead contract price started lower at RMB 14,050/mt and moved lower to RMB 14,000-14,020/mt before finally ending at RMB 14,000/mt, a decline of RMB 105/mt. Traded volumes were up 632 lots to 1,248 lots, while open interest shrank 274 lots to 8,660 lots.
 
In Shanghai spot lead market, prices fell along with SHFE lead. Prices for Chihong Zn & Ge and Shuikoushan were between RMB 13,980-14,000/mt, a discount of RMB 0-20/mt against the most active SHFE lead contract price. Nanfang was offered at a discount of RMB 10/mt against SHFE 1311 lead contract price. Chengyuan’s prices were RMB 30/mt lower than SHFE 1312 lead contract price. Humon’s goods were sold at RMB 13,970/mt. The lower prices for well-known brands left poor sales for non-leading brands. Downstream buyers were more bearish following the slump, leaving trading thin.
 
Zinc
SHFE 1401 zinc contract prices opened low at RMB 14,810/mt, dragged down by falling LME zinc prices, then hovered between RMB 14,785-14,800/mt, and touching RMB 14,835/mt at noon. With prevailing market caution, SHFE zinc prices inched down in the afternoon and closed at RMB 14,765/mt, down RMB 80/mt. Trading volumes decreased by 7,374 lots, to 24,452 lots, and total positions decreased by 2,388 lots, to 98,758 lots.

#0 zinc prices were between RMB 14,900-14,940/mt, down RMB 30-40/mt, with spot premiums between RMB 100-140/mt against SHFE 1401 zinc contract prices. #1 zinc prices were around RMB 14,870/mt. Spot premiums of Belgian #0 zinc prices were RMB 60/mt, with RMB 14,850/mt, KZ #0 zinc prices were around RMB 14,900/mt, with premiums of RMB 100/mt. SHFE zinc prices fluctuated between the 30 and 60-day moving average. Continuously falling zinc prices forced more buyers out of the market, and traders were taking a wait-and-see attitude. Smelters were moving goods normally, but transactions were muted.

Tin
In Shanghai spot tin market, prices fell further on November 13 to RMB 144,000-147,000/mt. Transactions for Nanshan, Jinlong, Yunxiang, and Yinsheng were mainly concluded at RMB 144,000-144,500/mt, while goods of Yunheng and Yunshan were sold at RMB 145,000-146,000/mt. Resources of Yunnan Tin Group were traded at RMB 146,500-147,000/mt. The fragile LME tin prices left pessimism permeating in the market, and trading was thus rather light.

Nickel
In Shanghai, transactions improved slightly. Traders reported trading volumes were relatively high, but the room for hedging operation contracted. Downstream buyers purchased on an as-needed basis as they believe nickel prices may fall to a near-term low. SMM #1 nickel prices were between RMB 95,000-96,000/mt, with prices down RMB 100/mt in the afternoon.