SMM Base Metals Market Daily Review (2014-8-12)

SHANGHAI, Aug. 13 (SMM)--
Copper:
The most active SHFE 1410 copper contract started Monday's night session at RMB 49,930/mt, and then hovered largely between RMB 49,800-49,970/mt before ending down RMB 60/mt at RMB 49,870/mt. During the night session, trading volumes for the most active contract tumbled to around 60,000 lots, and positions rose slightly by 158 lots.

On Tuesday, SHFE copper prices fell to as low as RMB 49,470/mt due to broad sell-offs, and fluctuated largely around RMB 49,600/mt during the afternoon trading session. The price of the red metal followed SHFE zinc prices up to recoup most losses to finish down RMB 140/mt, or 0.28%, at RMB 49,790/mt. Trading volumes for the SHFE 1410 copper contract added by 37,974 lots, and positions increased by 11,358 lots.

In the Shanghai physical market, copper was offered Tuesday between a RMB 40/mt discount and a RMB 40/mt premium over the SHFE 1408 copper contract. Traded prices were RMB 50,080-50,140/mt for standard-quality copper and RMB 50,120-50,180/mt for high-quality copper.

A sharp fall in SHFE copper prices and a wider RMB 300/mt gap between the SHFE 1408 and 1409 copper contracts gave cargo holders an incentive to step up moving goods. As a result, physical supply continued to grow, with a variety of copper brands available in the market. Meanwhile, middlemen barely entered the market on limited profit margins. Downstream producers slightly increased purchases after copper prices fell to around RMB 50,000/mt, but held a wait-and-see attitude towards prices. Trading activity was relatively sluggish on Tuesday, with supply outstripping demand notably.

As SHFE copper prices leveled out during the afternoon trading session, the price gap between the SHFE 1408 and 1409 copper contracts remained at RMB 250/mt. The price of standard-quality copper was level with that of high-quality copper. Physical copper was largely offered between a RMB 50/mt discount and a RMB 10/mt premium and traded slightly higher at RMB 50,100-50,300/mt on Tuesday.
 
Aluminum:
On Monday night, SHFE 1410 aluminum contract moved sidelines after starting higher at RMB 14,170/mt, and finished the night session at RMB 14,155/mt. Trading volumes totaled 23,106 lots, with positions up 3,170 lots to 147,762 lots.
 
On Tuesday, the most active contract climbed to RMB 14,230/mt as some long buyers jumped in, but then pared gains to end at RMB 14,170/mt since some investors closed long positions. Trading volumes totaled 74,632 lots, with positions up 1,548 lots to 149,310 lots.
 
Spot aluminum largely traded at RMB 13,990-14,000/mt in Shanghai and Wuxi on Tuesday, a discount of RMB 30-40/mt over SHFE 1408 aluminum contract, versus RMB 14,010-14,020/mt in Hangzhou. SHFE 1408 aluminum contract fell after opening higher, causing some sellers to cut offers by RMB 10/mt. Trading was thin. In the afternoon, suppliers held back goods after SHFE aluminum rallied, with few deals completed.
 
Zinc:
SHFE 1410 zinc contract prices opened higher at RMB 16,725/mt Monday evening, but dipped to RMB 16,625/mt due to selling pressure, and closing at RMB 16,630/mt, down RMB 25/mt or 0.15%. Trading volumes decreased by 18,346 to 177,850 lots, and total positions grew by 7,116 to 239,540 lots. SHFE 1410 zinc contract prices opened at RMB 16,630/mt on Tuesday, falling to a three-week low of RMB 16,560/mt in the morning, dragged down by falling LME zinc prices. But since a large number of longs rushed to the market, SHFE 1410 zinc contract prices clawed back early gains and touched RMB 16,815/mt, and closing at RMB 16,760/mt, up RMB 105/mt or 0.63%. Trading volumes increased by 152,826 lots, to 633,080 lots, and total positions increased by 36,198 lots to 268,622 lots. SHFE 1410 zinc contract prices are expected to test the 5 and 10-day moving average due to the entrance of longs and since LME zinc prices edged higher during European trading hours.

#0 zinc prices were between RMB 16,600-16,650/mt, with spot prices RMB 10-40/mt above SHFE 1410 zinc contract prices. #1 zinc prices were between RMB 16,590-16,610/mt. SHFE 1410 zinc contract prices bottomed and rallied to RMB 16,620-16,630/mt, with spot premiums between RMB 10-40/mt. The price spread between Shanghai and Guangdong expanded to RMB 100/mt, attracting some investors to sell in Shanghai whilst buying in Guangdong. Expanding spot premiums combined with the nearing of delivery date allowed cargo holders to sell actively, leading to sufficient supply. Purchases are mainly for long-term contract delivery and from downstream buyers, and speculators purchased at lower prices, causing transactions to improve. Shuangyan branded #0 zinc prices were RMB 16,620-16,650/mt, with RMB 16,600-16,630/mt for Yuguang, Qinxin, Qilin, Tiefeng and Jiulong zinc. AZ #0 zinc was traded between RMB 16,590-16,620/mt. SHFE 1410 zinc contract prices surged to RMB 16,815/mt in the afternoon, with spot premiums inverting to discounts of RMB 50/mt against SHFE 1410 zinc contract prices, leaving cargo holders and speculators both cautious.
 
Lead:
The most active SHFE 1410 lead contract skidded to as low as RMB 14,705/mt during Monday's night session after starting at RMB 14,765/mt, and closed flat at RMB 14,725/mt. During the night session, trading volumes for the most active contract were 15,134 lots, and positions added 130 lots to 34,326 lots.

On Tuesday, SHFE lead prices initially sank to as low as RMB 14,605/mt, but followed LME lead prices up during the afternoon trading session to close up RMB 55/mt at RMB 14,780/mt. The rise in the price of the soft metal is likely to be a result of speculative operations.

In the Shanghai physical lead market, goods from Chihong Zn & Ge were initially offered Tuesday at RMB 14,550/mt, but later traded lower at RMB 14,510/mt, an around RMB 140/mt discount over the most active SHFE 1410 lead contract. Nanfang and Chengyuan resources were quoted at RMB 14,510-14,530/mt, but were barely sold. Traded prices were largely RMB 14,500/mt for Humon brand and RMB 14,490/mt for Shuangyan brand.

Lead smelters were reluctant to move goods on Tuesday since they considered prices too low, but traders were actively moving arbitraged supply into the physical market. Trading activity was extremely quiet as some downstream producers only bought to need on bearish sentiment and others preferred to use secondary lead to cut costs.
  
Tin:
In Shanghai spot tin market, mainstream traded prices remained stable between RMB 139,500-141,500/mt on Tuesday. Trading activity at the lower end of the price range thinned compared with yesterday. Downstream producers generally watched from the sidelines. 
     
Nickel:
SMM #1 nickel prices were between RMB 129,400-129,800/mt, with spot trading improving in the morning, and traded prices between RMB 129,500-129,900/mt. Prices of 1409 nickel contract on the Wuxi electronic trading rose to RMB 131,150/mt in the afternoon, causing spot trading to grow, with prices between RMB 129,800-130,200/mt. End-user demand remained sluggish, with trading mainly made between traders.