SMM Base Metals Market Daily Review (2014-3-12)

SHANGHAI, Mar. 13 (SMM) –

Copper
The most active SHFE 1406 copper contract dipped as low as RMB 43,890/mt, and ended down 4.28% at RMB 44,020/mt in Tuesday’s night trading session. During the night session, trading volumes surged to more than 700,000 lots, and positions rose by 77,496 lots, with a bearish mood prevailing in the market. SHFE copper prices fell by the daily downside limit to RMB 43,690/mt, and then hovered around RMB 44,300/mt due to a large number of short investors liquidating positions. The red metal rebounded at the tail of the trading, and finished down RMB 1,490/mt or 3.24% at RMB 44,500/mt. Trading volumes surged 678,000 lots to 2.24 million lots, while positions expanded 91,350 lots to 820,000 lots on Wednesday. Technical indicators remained bullish.

In the Shanghai physical copper market, prices were offered at a discount of RMB 60/mt to a premium of RMB 40/mt on Wednesday. Traded prices were RMB 44,240 -44,340/mt for standard-quality copper and RMB 44,320-44,440/mt for high-quality copper. After SHFE copper prices resumed trading in the wake of a plunge, spot copper began trading at a premium again. However, as hedged goods flowed into the physical copper market, spot premiums gradually narrowed, and some middlemen entered the market to purchase goods near the delivery time. Downstream producers refrained from buying raw material copper, while a number of domestic lead smelters were disinclined to trade on a wait-and-see attitude. The market was dominated by a bearish sentiment, with trading activity worse than Tuesday. SHFE copper prices continued to go down during the afternoon trading session, and the market was dominated by high-quality copper and hydro-copper held by speculators, with limited supply of standard-quality copper. Spot premiums later inched up, but ranged between a discount of RMB 50/mt and a premium of RMB 110/mt at the tail of the trading. Spot copper fell slightly to a RMB 44,050-44,350/mt band, and some middlemen entered the market to conduct purchases on Thursday.

Aluminum
SHFE 1406 aluminum contract started Tuesday’s night session at RMB 13,225/mt. The most active contract climbed to RMB 13,245/mt before falling back to RMB 13,155/mt, ending the session at RMB 13,170/mt. Trading volumes during the night hours totaled 5,026 lots, and positions added 302 lots to 102,908 lots. On Wednesday, the most active SHFE copper hit its downside limit, triggering selloffs in SHFE aluminum market. As a consequence, SHFE aluminum for June delivery fell to RMB 13,150/mt. The light metal, however, bounced back to RMB 13,255/mt after SHFE copper rallied, and finished RMB 35/mt higher at RMB 13,250/mt. Trading volumes during the daytime hours totaled 16,722 lots, and positions were up 594 lots to 103,502 lots. SHFE 1406 aluminum contract will unlikely break through moving averages, though, as bearishness still lingers.

Spot aluminum largely traded at RMB 12,660-12,680/mt in Shanghai on Wednesday, and RMB 12,690-12,700/mt in Wuxi and Hangzhou. Sellers held back goods now that SHFE 1403 aluminum contract has rebounded, but downstream producers showed little buying interest out of pessimism. In the afternoon, sellers raised prices slightly to RMB 12,680-12,690/mt, but trading came to a virtual standstill.

Lead
Dragged down by LME lead prices, the most active SHFE 1404 lead contract sank to RMB 13,705/mt after starting at RMB 13,710/mt, and ended down RMB 50/mt or 0.36% at RMB 13,710/mt in Tuesday’s night trading session. During the night session, trading volumes were only 52 lots, and positions were off 18 lots to 10,160 lots. SHFE 1404 lead contract prices stabilized at RMB 13,645/mt after dipping to RMB 13,595/mt due to a large number of short investors liquidating positions. The contract prices finished down RMB 105/mt or 0.76% at RMB 13,655/mt. Trading volumes gained 512 lots to 1,436 lots, and positions shed 740 lots to 9,438 lots. The most active SHFE lead contract has found some support at RMB 13,600/mt on Wednesday, with technical indicators in positive territory.

In the Shanghai physical lead market, goods from Chihong Zn & Ge traded on Wedneday at RMB 13,700/mt, a premium of RMB 35/mt over the most active SHFE lead contract. Nanfang resources were initially offered at RMB 13,700/mt, but later followed SHFE lead prices down to RMB 13,675/mt. Humon and Shuangyan were sold at RMB 13,680/mt and RMB 13,600/mt, respectively. Lead smelters moved goods in small amount, causing relatively tight supply in the market, while downstream producers turned more bearish after lead prices fell back on Wednesday, with trading activity fairly light.

Zinc
Dragged down by a plunge in LME zinc prices in US trading hours, the most active SHFE 1405 zinc contract dipped to RMB 14,755/mt after starting at RMB 14,920/mt in Tuesday’s night trading session. The contract prices closed down RMB 110/mt or 0.74% at RMB 14,765/mt. During the night session, trading volumes gained 4,470 lots to 33,522 lots, while positions increased 1,654 lots to 103,068 lots.

SHFE 1405 zinc contract prices opened flat at RMB 14,765/mt, and later dropped to RMB 14,750/mt, burdened by the most active SHFE copper contract falling by the daily downside limit. Boosted by LME zinc prices at the tail of the trading, SHFE zinc prices rebounded subsequently, and ended up RMB 10/mt or 0.07% at an intraday high of RMB 14,885/mt. Trading volumes contracted 3,160 lots to 49,250 lots, and positions shrunk 8,890 lots to 94,178 lots. SHFE zinc prices were more resistant to declines than LME zinc prices due to improved zinc fundamentals in China, but still faced some pressure at the RMB 15,000/mt mark on Wednesday.

Mainstream traded prices were RMB 14,730-14,770/mt for #0 zinc ingot, a discount of RMB 90-130/mt, and RMB 14,690-14,700/mt for #1 zinc ingot on Wednesday. Boosted by SHFE copper prices resuming trading in the morning, the most active SHFE zinc contract rebounded by RMB 1,850-1,870/mt after starting at RMB 14,785/mt. Zinc smelters were reluctant to move goods to hold prices firm, but a large amount of hedged goods flowed into the market, inflating spot zinc supply. Downstream producers had lower buying interest in a stronger wait-and-see attitude, with trading activity worse than previous two days. Traded prices were RMB 14,750-14,770/mt for Shuangyan branded #0 zinc, and RMB 14,730-14,760/mt for Jiulong, Qinxin, Feilong, and Baohui branded #0 zinc on Wednesday.

Tin
In Shanghai’s spot tin market, most transactions were between RMB 138,000-141,000/mt on Wednesday. Trading activity waned following modest stockpiling in the previous day.

Nickel
In Shanghai, SMM #1 nickel prices were between RMB 94,100-95,100/mt. Jinchuan raised nickel prices by RMB 100/mt, to RMB 96,000/mt. With large price spread between traders' and Jinchuan's nickel, transactions made by traders were brisk since end-users purchased actively, causing traded prices to rise to RMB 94,400-95,400/mt in the afternoon.