SMM Base Metals Market Daily Review (2014-8-7)

SHANGHAI, Aug. 8 (SMM) –

Copper
The most active SHFE 1410 copper contract vacillated by less than RMB 200/mt after starting Wednesday’s night session at RMB 49,520/mt, meeting resistance at RMB 49,720/mt, and closed down RMB 350/mt at RMB 49,650/mt. During the night session, trading volumes for the SHFE 1410 copper contract rose slightly to around 150,000 lots, and positions fell by 17,662 lots. After SHFE copper prices fell below the RMB 49,700-49,800/mt, some longs began liquidating positions to minimize losses.

On Thursday, SHFE copper prices leveled out, rising to as high as RMB 49,960/mt, but fell slightly at the tail of the trading to end down RMB 250/mt, or 0.5%, at RMB 49,750/mt. Trading volumes for the SHFE 1410 copper contract shrank by 59,308 lots, and positions contracted by 19,430 lots. SHFE copper prices were more resistant to declines than LME copper prices, finding some support at RMB 49,500/mt.

In the Shanghai physical market, copper was offered Thursday at a RMB 0-80/mt premium over the SHFE 1408 copper contract. Traded prices were RMB 50,200-50,260/mt for standard-quality copper and RMB 50,260-50,320/mt for high-quality copper.

Although SHFE copper prices extended losses, the SHFE front-month copper contract prices were resistant to declines. Physical copper traded in the morning trading hours at a low premium, with some standard-quality copper sold still at a discount. Some middlemen entered the market to buy low-priced goods actively, causing hydro-copper and standard-quality copper prices to hold firm. All copper brands were quoted at a premium subsequently, but trading activity slowed. The price gap between high- and standard-quality copper narrowed further. Downstream producers snapped up goods after copper prices fell to around RMB 50,000/mt, with trading activity improving appreciably on Thursday.

As SHFE copper prices rallies during the afternoon trading session, physical copper was mostly offered between a RMB 20/mt discount and a RMB 50/mt premium and traded at the same levels as the morning trading session. Only a small number of middlemen entered the market to buy standard-quality copper and hydro-copper on Thursday.

Aluminum
On Wednesday night, SHFE 1410 aluminum contract followed LME aluminum up to RMB 14,155/mt after starting at RMB 14,030/mt, and finished the night session at RMB 14,145/mt. Trading volumes totaled 68,662 lots, with positions up 6,536 lots to 157,332 lots.

On Thursday, the most active contract fluctuated between RMB 14,105-14,145/mt before closing at RMB 14,085/mt. Trading volumes were up 39,368 lots to 108,030 lots, with positions down 9,412 lots to 147,920 lots.

Spot aluminum largely traded at RMB 14,000-14,020/mt in Shanghai and Wuxi on Thursday, a discount of RMB 20-40/mt over SHFE 1408 aluminum contract, versus RMB 14,010-14,030/mt in Hangzhou. Rising SHFE aluminum pushed spot aluminum up RMB 50-60/mt. Traders showed high buying interest, while downstream producers bought only to need. In the afternoon, trading activity in spot markets waned after August aluminum on SHFE pared gains.

Lead
Lead for October delivery, the most active contract, rose to as high as RMB 14,780/mt on the Shanghai Futures Exchange after opening Wednesday’s night session at RMB 14,620/mt. SHFE lead prices later fell slightly, pressured by the 5-day moving average, and finished up RMB 30/mt at RMB 14,765/mt. During the night session, trading volumes for the SHFE 1410 lead contract were 40,412 lots, and positions expanded 326 lots to 39,416 lots. Total trading volumes reached 41,214 lots, and positions increased 182 lots to 56,156 lots.

On Thursday, SHFE lead prices surged initially to as high as RMB 14,810/mt, but later dipped to RMB 14,715/mt before ending flat at RMB 14,735/mt. Trading volumes for the most active SHFE 1410 lead contract were 61,246 lots, and positions were off 2,694 lots to 36,396 lots. The price of the soft metal is highly likely to fall further in the near term due to relatively weak buying force.

In the Shanghai physical lead market, goods from Chihong Zn & Ge, Nanfang, and Chengyuan were initially offered at RMB 14,670/mt, a RMB 120-130/mt discount over the most active SHFE 1410 lead contract. Quotations for these lead brands fell later to RMB 14,650/mt, RMB 120/mt below the price of the most active contract. Humon resources were quoted at RMB 14,620/mt, but were sold lower at RMB 14,600-14,610/mt. Lead smelters remained reluctant to move goods due to low prices, while traders sold off lead supply for arbitrage, dragging down quotations. Meanwhile, lead-acid battery producers bought only to need, with overall trading activity light on Thursday.

Zinc
SHFE 1410 zinc contract prices opened lower at RMB 16,755/mt on Wednesday evening, and rallied to RMB 16,880-16,940/mt due to strong long momentum, and closing at RMB 16,905/mt. Trading volumes grew by 34,100 to 262,180 lots, and total positions increased by 10,204 to 284,130 lots. SHFE 1410 zinc contract prices opened at RMB 16,900/mt on Thursday, and edged up to an intraday high of RMB 17,040/mt due to rising LME zinc prices, but met resistance at the 10-day moving average, and closed at RMB 16,960/mt, up RMB 40/mt or 0.24%. Trading volumes increased by 79,950 lots, to 505,750 lots, and total positions decreased by 7,980 lots to 265,946 lots. SHFE 1410 zinc contract prices met resistance at the 10-day moving average, and are expected to test support from the 20-day moving average this evening. As LME zinc prices weakened during European trading hours, SHFE 1410 zinc contract prices should test support from the 5 and 20-day moving average this evening.

#0 zinc prices were between RMB 16,970-17,000/mt, with spot prices RMB 0-30/mt below SHFE 1410 zinc contract prices. #1 zinc prices were between RMB 16,930-16,960/mt. SHFE 1410 zinc contract prices opened at RMB 16,755/mt and rose to RMB 17,000/mt, followed by spot zinc prices, leaving spot discounts little changed. As zinc prices advanced, cargo holders began to hold goods. When combined with limited supply from smelters, speculators purchased actively. But downstream buying interest was weak as zinc prices climbed above RMB 17,000/mt. Transactions improved and were mainly made among traders. Shuangyan branded #0 zinc prices were RMB 16,940-16,960/mt in the morning, with RMB 16,930-16,950/mt for other regular brands. During 10:30-11:30 am, Shuangyan branded #0 zinc prices were RMB 16,990-17,000/mt. Prices for Yuguang, Qinxin, Qilin and SMC brand zinc were RMB 16,970-16,990/mt. SHFE 1410 zinc contract prices fell to RMB 16,960-17,000/mt in the afternoon, with spot discounts narrowing to RMB 0-20/mt against SHFE 1410 zinc contract prices.

Tin
In Shanghai spot tin market, most deals closed between RMB 139,500-142,000/mt on Thursday. Falling LME tin prompted bearish sellers in domestic markets to cut offers and cooled downstream demand. Yunnan Tin Group still held offers firm at RMB 143,000/mt, depressing buying interest.

Nickel
SMM #1 nickel prices were between RMB 129,100-129,600/mt, with spot trading quiet in the morning. Domestic traders took a wait-and-see posture, with traded prices between RMB 129,200-129,800/mt. As prices on the Wuxi electronic trading rose with LME nickel prices in the afternoon, cargo holders were unwilling to quote due to market optimism, causing traded prices to rise to RMB 130,500-131,000/mt. But transactions muted, with end-user demand expected to remain soft in August.