SMM Base Metals Market Daily Review (2014-10-16)

SHANGHAI, Oct. 17 (SMM) – 

 

Dampened by a tumble in LME copper, the most active SHFE 1412 copper contract slid to RMB 47,570/mt during Wednesday’s night session after starting at RMB 47,920/mt. The price of the contract closed the night session down RMB 680/mt at RMB 47,620/mt. Trading volumes for the most active contract rose to some 280,000 lots, and positions added by 3,144 lots. Trading volumes for the SHFE 1501 copper contract totaled around 100,000 lots, and positions gained by nearly 20,000 lots.

 

On Thursday, SHFE copper advanced to only RMB 47,820/mt against a broad sell-off for back-month contracts, and fell subsequently to a low of RMB 47,370/mt before ending down RMB 870/mt, or 1.8%, at RMB 47,430/mt. Trading volumes for the SHFE 1412 copper contract expanded by 133,000 lots, and positions decreased by 13,154 lots. Trading volumes for the SHFE 1510 copper contract rose by 138,000 lots, and positions rose by 60,574 lots. Trading volumes and positions for the SHFE 1502 copper contract increased by 23,760 and 14,564 lots, respectively.

 

Physical copper in Shanghai was quoted Thursday at a RMB 50-170/mt premium to the SHFE 1411 copper contract. Traded prices were RMB 48,150-48,280/mt for standard-quality copper and RMB 48,200-48,370/mt for high-quality copper.

 

Large quantities of hedged goods flocked to the market on the back of a tumble in SHFE copper, while a sharp rise in the SHFE/LME copper price ratio resulted in sizeable inflows of imported copper. In response, physical copper premiums narrowed from above RMB 200/mt to some RMB 150/mt. Middlemen replenished stocks in light volumes, and downstream producers bought only to need. Trading activity remained lackluster on Thursday, with supply exceeding demand by a large margin. Physical copper was largely quoted at a RMB 50-130/mt premium and traded lower at RMB 47,950-48,320/mt during the afternoon trading session. Trading activity improved slightly on Thursday. 

 

Aluminum      

On Wednesday night, SHFE 1412 aluminum contract moved sideways after starting at RMB 13,740/mt, and finished the night session at RMB 13,715/mt. 

 

On Thursday, the most active contract dropped to RMB 13,640/mt before closing at RMB 13,660/mt. Trading volumes totaled 82,324 lots, with positions down 2,282 lots to 130,840 lots. Prices are likely to continue falling as bearish sentiment is running rampant. 

  

Spot aluminum largely traded at RMB 13,590-13,600/mt in Shanghai and Wuxi on Thursday, discounts of RMB 50-60/mt over SHFE 1411 aluminum contract, versus RMB 13,600-13,610/mt in Hangzhou. Falling SHFE aluminum prices soured sentiment in physical market. Most buyers took a wait-and-see stance, pulling prices down. In the afternoon, offers changed little, with trading subdued. 

 

Lead for November delivery on the Shanghai Futures Exchange, the most active contract, opened Wednesday’s night session at RMB 13,650/mt, and then surged to RMB 13,710/mt. The price of the SHFE 1411 lead contract finished the night session down RMB 80/mt at RMB 13,655/mt.

On Thursday, SHFE lead initially slipped to RMB 13,340/mt, but later rebounded to RMB 13,500/mt before ending down RMB 255/mt at RMB 13,480/mt. Trading volumes for the SHFE 1411 lead contract surged to 5,790 lots, and positions shrank 2,094 lots to 11,202 lots.

 

In the Shanghai physical lead market, Chengyuan brand was quoted Thursday at RMB 13,550/mt, a RMB 100/mt premium to the most active SHFE 1411 lead contract. Traded prices were RMB 13,620-13,650/mt for Jinsha brand, an around RMB 170/mt premium to the most active contract. Only Chihong Zn & Ge, among lead smelters, moved goods in light volumes, while traders were reluctant to sell with low inventories. Some downstream producers went bargain-hunting. Prices were quoted at RMB 13,600-13,650/mt in Henan on Thursday. 

 

SHFE 1412 zinc contract prices opened low at RMB 16,535/mt overnight, and fell to RMB 16,365/mt with the entrance of shorts, and closed at RMB 16,370/mt, down RMB 365/mt or 2.18%. Trading volumes decreased 12,724 to 408,086 lots, and total positions increased 4,280 to 169,010 lots.

 

SHFE 1412 zinc contract prices opened at RMB 16,370/mt October 16, then extended declines in the morning, dipping to as low as RMB 16,225/mt. In the afternoon, SHFE 1412 zinc contract prices rallied to RMB 16,400/mt before falling, and closed at RMB 16,290/mt, down RMB 445/mt or 2.66%. Trading volumes increased 91,124, to 712,802 lots, and total positions were down 4,148 lots to 160,582 lots. Any further declines of SHFE 1412 zinc contract prices are expected to be limited.

 

#0 zinc prices were between RMB 16,580-16,650/mt, with spot premiums of RMB 280-350/mt against SHFE 1412 zinc contract prices. #1 zinc prices were between RMB 16,480-16,540/mt, with the price spread between #1 and #0 zinc expanding slightly to RMB 70-80/mt. SHFE 1412 zinc contract prices dipped to RMB 16,250-16,270/mt before rising, hovering around RMB 16,300/mt, with spot premiums narrowing from RMB 300-350/mt to RMB 280-330/mt. Smelters held back goods as zinc prices fall, but falling SHFE zinc prices also allowed traders to move goods actively, leaving supply sufficient and transactions brisk. Downstream buyers also entered the market, causing trading to improve. Shuangyan branded #0 zinc prices were RMB 16,610-16,650/mt, and prices for Yuguang were RMB 16,600-16,640/mt. Qilin, Qinxin, Feilong and Baiyin zinc prices were RMB 16,580-16,630/mt. SHFE 1412 zinc contract prices consolidated in the afternoon, with transactions largely unchanged. 

 

Tin prices in Shanghai extended losses on Thursday, with mainstream traded prices down RMB 500/mt to RMB 136,000-138,000/mt. Nanshan and Jinlong brand tin traded between RMB 135,800-136,500/mt, while goods from Yunnan traded between RMB 136,400-138,000/mt. Many smelters have halted shipments against continuous price declines.

SMM #1 nickel prices were between RMB 106,100-106,500/mt, with the average price down RMB 6,050/mt from the previous day to its lowest since April. 1411 nickel contract prices on the Wuxi electronics trading opened 3% lower, but LME nickel price drop was more sharp, with spot discounts narrowing to RMB 0-100/mt. Transactions between traders were brisk, with traded prices between RMB 116,500-117,300 /mt, RMB 100-200/mt below the most actively traded contract on the Wuxi electronics trading. Jinchuan nickel prices were as low as RMB 116,400/mt, and Russian nickel prices were RMB 200/mt below Jinchuan nickel. Russian nickel prices were RMB 500/mt below Jinchuan nickel prices. Jinchuan left nickel prices unchanged at RMB 112,500/mt, with downstream buying interest weak.