SMM Base Metals Market Daily Review (2014-7-3)

SHANGHAI, Jul. 4 (SMM) –

Copper
Prices for the most active SHFE 1409 copper contract started Wednesday’s night session significantly higher at RMB 50,700/mt, and then rose above the RMB 51,000/mt mark. SHFE copper prices steadied later after touching a high of RMB 51,150/mt, and finished up RMB 860/mt at RMB 51,090/mt. During the night session, trading volumes for the most active contract reached some 300,000 lots, and positions spiked by 20,556 lots.

On Thursday, SHFE copper prices hovered mostly around RMB 51,100/mt, climbing to as high as RMB 51,220/mt, and closed up RMB 870/mt, or 1.73%, at RMB 51,100/mt. Trading volumes for the SHFE 1409 copper contract gained by 182,000 lots, and positions added by 16,334 lots. There is still upside room for SHFE copper prices for the near term given encouraging technical indicators and economic data.

In the Shanghai physical market, copper was offered Thursday between a RMB 20/mt discount and a RMB 220/mt premium over the SHFE 1407 copper contract. Traded prices were RMB 51,880-52,060/mt for standard-quality copper and RMB 51,980-52,260/mt for high-quality copper.

SHFE copper prices rebounded sharply by more than RMB 600/mt on Thursday, leaving some hedged supply tied up to the futures market. Cargo holders began moving goods at high prices, but trading activity weakened at prices above RMB 52,000/mt. As supply was sufficient in the market, cargo holders cut physical premiums to make deals, with prices for imported copper down significantly. Some standard-quality copper was quoted at a discount by the midday. A proportion of middlemen bought physical copper and sold off futures contracts after a new round bank loans flowed in the market. Meanwhile, downstream producers barely entered the market out of fears that prices could fall in the future, with supply outstripping demand on Thursday.

As SHFE copper prices hovered at high levels during the afternoon trading session, cargo holders continued to move goods, adding to pressure from rising supply, with a variety of brands available in the market. High quality copper was traded at a lower premium, while standard-quality copper was sold at a higher discount. During the trading session, physical copper was offered between a RMB 50/mt discount and a RMB 130/mt premium and traded at RMB 51,850-52,100/mt. A rebound in copper prices, combined with the arrival of a low demand season, means that consumption will become even more sluggish, leaving the market dominated by a wait-and-see sentiment.

Aluminum
On Wednesday night, SHFE 1409 aluminum contract advanced to RMB 1,675/mt after starting at RMB 13,575/mt, and finished the night session at RMB 13,645/mt. Trading volumes totaled 71,470 lots, with positions up 7,496 lots to 150,004 lots. On Thursday, the most active contract rose further to RMB 13,710/mt on positive technical indicators. Trading volumes totaled 69,446 lots, with positions up 4,804 lots to 154,808 lots.

Spot aluminum largely traded between RMB 13,440-13,450/mt in Shanghai and Wuxi on Thursday, a discount of RMB 60-70/mt over SHFE 1407 aluminum contract, versus RMB 13,460-13,470/mt in Hangzhou. Sellers raised offers sharply after July aluminum on the SHFE punched through RMB 13,500/mt. High offers scared most buyers away. In the afternoon, most sellers held back in hopes of better prices on the way after SHFE aluminum prices gathered more steam.

Lead
Prices for the most active SHFE 1408 lead contract started Wednesday’s night session at RMB 14,130/mt, and then closed up RMB 165/mt, or 1.18%, at RMB 14,175/mt, boosted by LME lead prices. During the night session, trading volumes for the most active contract totaled only 112 lots, and positions gained 38 lots to 6,632 lots.

SHFE lead prices rose to as high as RMB 14,250/mt during the morning trading session, but later fell back slightly to end up RMB 170/mt at RMB 14,180/mt. Trading volumes for the SHFE 1408 lead contract totaled 1,584 lots, and positions added 96 lots to 6,690 lots.

In the Shanghai physical lead market, goods from Chihong Zn & Ge traded Thursday at RMB 13,970-13,980/mt, a RMB 210 discount over the most active SHFE 1408 lead contract. Traded prices were RMB 13,950-13,970/mt for Tongguan brand, RMB 13,930/mt for Hanjiang brand, and RMB 13,910/mt for Humon brand. Lead ingot supply was limited since lead smelters did not ramp up deliveries and traders were actively buying. Meanwhile, downstream producers expressed little buying interest after physical lead prices rose sharply on Thursday.

Zinc
SHFE 1409 zinc contract prices opened at RMB 15,865/mt on Wednesday evening, then rose to RMB 16,130/mt, and closing at RMB 16,085/mt, up RMB 280/mt or 1.77%. SHFE 1409 zinc contract prices opened at RMB 16,085/mt on Thursday, and once touched RMB 16,300/mt. but as a large number of investors left the market after profit-taking, SHFE 1409 zinc contract prices lacked momentum to rise further, fluctuating between RMB 16,200-16,300/mt, and closing at RMB 16,210/mt, up RMB 405/mt or 2.56%. Trading volumes increased by 168,102 lots, to 316,316 lots, and total positions of SHFE 1409 zinc contracts increased by 36,838 lots to 220,184 lots. Total trading volumes increased by 318,752 lots to 539,942 lots.

#0 zinc prices were between RMB 16,030-16,070/mt, with spot discounts of RMB 200-170/mt against SHFE 1409 zinc contract prices. #1 zinc prices were between RMB 15,930-15,970/mt. A limited amount of lower-priced goods were released in the morning, with #0 zinc prices between RMB 15,890-16,000/mt. SHFE 1409 zinc contract prices rose to RMB 16,250/mt, causing arbitrage investors to hold onto goods. When combined with limited supply and Yuguang branded #0 zinc and decreased imported zinc supply, market supply was tight. SHFE 1409 zinc contract prices jumped to a record high, and spot discounts expanded, allowing traders to purchase actively. But downstream buyers purchased as needed since zinc prices were above RMB 16,000/mt. Shuangyan branded #0 prices were between RMB 16,050-16,070/mt, and RMB 16,030-16,040/mt for Yuguang branded #0 zinc. Prices for AZ brand were RMB 16,000/mt. SHFE 1409 zinc contract prices hovered narrowly in the afternoon, with #0 zinc prices between 16,040-16,070/mt.

Tin
In Shanghai physical tin market, mainstream traded prices rose to RMB 139,000-140,000/mt on Thursday. A few suppliers raised offers to as much as RMB 140,500/mt. Low availability in the market allowed prices to move higher, despite soft demand.

Nickel
SMM #1 nickel prices were quoted between RMB 134,700-135,200/mt. Jinchuan raised nickel prices by RMB 4,500/mt to RMB 135,000/mt. Transactions were brisk in the morning, with prices continuing to rise to RMB 134,400-134,900/mt. But trading volumes decreased, with prices between RMB 131,000-131,200/mt in the afternoon, and end-users purchasing modestly.