SMM Base Metals Market Daily Review (2014-9-3)

SHANGHAI, Sept. 4 (SMM) –

Copper
The most active SHFE 1411 copper contract rallied after starting Tuesday’s night session at RMB 49,520/mt, but later surrendered some gains to end up RMB 140/mt at RMB 49,780/mt. During the night session, trading volumes for the most active contract rose slightly to more than 140,000 lots, and positions added by 9,002 lots.

On Wednesday, SHFE copper initially dipped to RMB 49,570/mt, and later advanced to RMB 49,900/mt before ending up RMB 40/mt, or 0.08%, at RMB 49,680/mt. Trading volumes for the SHFE 1411 copper contract expanded by 47,270 lots, and positions increased by 14,648 lots. The price of the red metal is fluctuating in a narrower range, meeting strong resistance at the 10-day moving average.

In the Shanghai physical market, copper was offered Wednesday at a RMB 100-230/mt premium to the SHFE 1409 copper contract. Traded prices were RMB 50,250-50,450/mt for standard-quality copper and RMB 50,300-50,550/mt for high-quality copper. As SHFE copper bottomed out, cargo holders continued to move goods at a premium close to Tuesday’s level, with sufficient supply and a variety of copper brands available in the market. Trading activity improved slightly on Wednesday since some large downstream producers began building raw material stocks before the Mid-Autumn festival. Middlemen showed moderate interest in entering the market on Wednesday.

As SHFE copper inched up during the afternoon trading session, physical copper was offered mostly at a RMB 120-240/mt premium and traded slightly higher at RMB 50,250-50,550/mt. Cargo holders continued to hold prices firm, although supply remained sufficient on Wednesday.

Aluminum
On Tuesday night, SHFE 1411 aluminum contract started at RMB 14,860/mt. Investors did not open more long positions as LME aluminum prices were resistant to prices, but long buyers did not exit, either, keeping prices hovering at high levels. The light metal finished the night session at RMB 14,895/mt. Trading volumes totaled 110,006 lots, with positions up 4,756 lots to 217,440 lots.

On Wednesday, the most active contract rose to RMB 15,010/mt, but fell back immediately due to profit-taking, closing at RMB 14,875/mt. Trading volumes totaled 201,178 lots, with positions up 17,256 lots to 234,696 lots. Long buyers refrained from opening more positions, but did not exit aggressively, meaning that chances of dramatic price fall are slim.

Spot aluminum largely traded at RMB 14,980-15,030/mt in Shanghai on Wednesday, a discount of RMB 0-20/mt and a premium of RMB 0-10/mt over SHFE 1409 aluminum contract, versus RMB 14,990-15,080/mt in Wuxi and RMB 14,990-15,020/mt in Hangzhou. SHFE 1409 aluminum contract failed to break through RMB 15,000/mt, turning sellers in spot market less optimistic. Some thus became eager to sell, but buyers still stayed out of the market. In the afternoon, cargo holders cut offers to RMB 14,930-14,940/mt out of bearishness after SHFE 1409 aluminum contract retreated to RMB 14,900/mt, but trading remained thin.

Lead
US ISM manufacturing index, published on Tuesday, was reported at 59, its highest since March 2011, sending aluminum and zinc prices up sharply. In response, the most active SHFE 1410 lead contract touched a high of RMB 14,560/mt after starting Tuesday’s night session at RMB 14,440/mt, and finished up RMB 90/mt, or 0.63%, at RMB 14,470/mt. During the night session, trading volumes for the most active contract added 1,242 lots to 4,908 lots, but positions lost 142 lots to 22,402 lots.

On Wednesday, SHFE lead initially hovered between RMB 14,450-14,500/mt, but sank to RMB 14,360/mt subsequently to close down RMB 10/mt, or 0.07%, at RMB 14,370/mt. Trading volumes for the SHFE 1410 lead contract shrank 1,772 lots to 10,266 lots, while positions contracted 1,952 lots to 20,592 lots. The price of the soft metal has fallen below the 60-day moving average, and should remain weak for the foreseeable future.

In the Shanghai physical lead market, goods from Chihong Zn & Ge traded Wednesday at a RMB 200/mt discount to the most active SHFE 1410 lead contract. Resources from Humon and Hanjiang were sold at RMB 14,230/mt. Physical supply was largely from lead smelters on Wednesday. Traders were reluctant to move goods due to the expanding discounts, and curtailed purchases on a bullish view towards lead prices. There were no reports of downstream producers building raw materials on Wednesday, with overall trading volumes down.

Zinc
SHFE 1411 zinc contract prices opened at RMB 16,980/mt on Tuesday evening, and touched RMB 17,155/mt with the entry of longs, then hovered around RMB 17,100/mt at one point, and closing at RMB 17,085/mt, up RMB 205/mt or 1.21%. Trading volumes soared 120,068 lots to 256,012 lots, and total positions decreased by 3,546 to 288,928 lots. SHFE 1411 zinc contract prices opened at RMB 17,100/mt on Wednesday, then held stable around RMB 17,100/mt due to strengthening LME zinc prices. In the afternoon, SHFE 1411 zinc contract prices plunged below RMB 16,900/mt, losing early gains and closing at RMB 16,930/mt, up RMB 50/mt or 0.3%. Trading volumes increased by 52,828 lots, to 576,302 lots, and total positions decreased by 19,644 lots to 272,830 lots. SHFE 1411 zinc contract prices are expected to fall as a large number of longs will leave the market after taking profit.

#0 zinc prices were between RMB 17,050-17,100/mt, with spot prices RMB 20/mt below or RMB 10/mt above SHFE 1411 zinc contract prices. #1 zinc prices were between RMB 17,000-17,020/mt. SHFE 1411 zinc contract prices hovered around RMB 17,080/mt. cargo holders held prices firm due to limited supply and rising SHFE zinc prices, bolstering spot premiums around RMB 20/mt. Traders were unwilling to purchase on market caution, leaving trading muted. Shuangyan branded #0 zinc prices were RMB 17,080-17,100/mt, with RMB 17,060-17,080/mt for Yuguang zinc. Hongye, Jiulong, Qilin and Baohui #0 zinc prices were 17,050-17,070/mt. Belgian #0 zinc prices were RMB 17,020-17,050/mt. SHFE 1411 zinc contract prices plunged to RMB 16,900-16,930/mt after hovering around RMB 17,000/mt in the afternoon, causing cargo holders to sell actively, and with spot premiums expanding to RMB 30/mt. Some traders lacked interest in buying goods, and downstream buyers were also cautious on sluggish orders, with overall transactions quiet. #0 zinc prices were between RMB 16,920-17,100/mt.

Tin
In Shanghai physical market, most deals closed between RMB 138,500-140,500/mt on Wednesday. Some imported and domestically produced tin traded at RMB 138,000/mt. Consumption was sluggish, but limited supply prevented prices from falling sharply.

Nickel
SMM #1 nickel prices were between RMB 129,600-129,900/mt, with Jinchuan nickel prices around RMB 129,800/mt. Spot nickel prices in Shanghai did not fall as sharply as LME nickel prices. Russian nickel availability was low due to import losses and China’s probe into finance-driven imports at the Port of Qingdao. Russian nickel prices were RMB 200/mt below Jinchuan nickel prices. Prices of 1409 nickel contracts on the Wuxi electronic trading dipped in the afternoon, with Jinchuan nickel prices RMB 500-600/mt higher. Spot traded prices were between RMB 129,500-129,800/mt in the afternoon. End-users purchased goods modestly, and stainless steel plants bought medium and high-grade NPI aggressively.