SMM Base Metals Market Daily Review (2014-10-17)

SHANGHAI, Oct. 21 (SMM) –

Copper
The most active SHFE 1412 copper contract hovered between RMB 46,830-47,210/mt during Thursday’s night session after starting at RMB 47,000/mt, and closed down RMB 540/mt at RMB 47,170/mt. Trading volumes for the most active contract surged to more than 300,000 lots, and positions shrank by 7,886 lots. Trading volumes for the SHFE 1501 copper contract spiked to some 200,000 lots, and positions gained by 30,896 lots.

On Friday, the SHFE 1412 copper contract initially advanced to RMB 47,360/mt, but dipped to 46,700/mt during the afternoon trading session before finishing down RMB 960/mt, or 2.01%, at RMB 46,300/mt. Trading volumes for the SHFE 1412 copper contract added by 38,348 lots, but positions contracted by 15,858 lots. Trading volumes for the SHFE 1501 copper contract expanded by 123,000 lots, and positions increased by 60,256 lots.

Physical copper in Shanghai was quoted Friday at a RMB 60-150/mt premium to the SHFE 1411 copper contract. Traded prices were RMB 47,550-47,750/mt for standard-quality copper and RMB 47,580-47,800/mt for high-quality copper.

As SHFE copper stretched losses, hedged goods flooded to the market. Speculative traders entered the market to buy low-priced goods, while downstream producers ramped up purchases after prices fell below RMB 48,000/mt. Cargo holders, however, withheld goods from sale at low prices. The price gap between inferior and high-quality copper brands narrowed further, with trading activity improving markedly on Friday.

As SHFE copper stretched losses during the afternoon trading session, physical copper was quoted mostly at a RMB 100-150/mt premium and traded slightly lower at RMB 47,450-47,730/mt. SHFE copper inventories for the week ending October 17 expanded 14,465 mt to 97,235 mt.

Aluminum
Last Thursday night, SHFE 1412 aluminum contract dipped to RMB 13,555/mt after starting at RMB 13,605/mt, and finished the night session at RMB 13,645/mt.

Last Friday, the most active contract dropped to RMB 13,540/mt as pessimism dominated the market. But prices rebounded later to close at RMB 13,600/mt as short sellers withdrew to avoid risks before the weekend. Trading volumes totaled 69,884 lots, with positions down 624 lots to 130,216 lots. Prices will be vulnerable at RMB 13,500/mt.

Spot aluminum largely traded at RMB 13,470-13,490/mt in Shanghai and Wuxi last Friday, discounts of RMB 60-70/mt over SHFE 1411 aluminum contract, versus RMB 13,490-13,520/mt in Hangzhou. SHFE front-month contract fell to near 13,500/mt, leaving pessimism running rampant in physical market and sending spot aluminum prices down. But sentiment in spot market improved after SHFE aluminum rallied near lunchtime, allowing sellers to raise offers slightly. In the afternoon, sellers held offers firm, with a few transactions reported.

Lead
Lead for December delivery on the Shanghai Futures Exchange became the most active contract on Friday. The price of the SHFE 1412 lead contract hovered largely around RMB 13,470/mt in the morning trading session, and then advanced as high as RMB 13,660/mt before ending down RMB 65/mt at RMB 13,530/mt. Trading volumes for the most active contract totaled 4,234 lots, and positions gained 648 lots to 11,020 lots.

On the Shanghai physical lead market, Chihong Zn & Ge, Nanfang, Tongguan, and Chengyuan brands traded last Friday at RMB 13,610-13,620/mt, a RMB 150-160/mt premium to the SHFE 1411 lead contract. Hanjiang brand was sold at RMB 13,600/mt. Chihong Zn & Ge, Nanfang, and Hanjiang moved goods in light quantities. Downstream producers bought only to need out of fears that lead prices will fall against growing concerns over a global economic slowdown. Trading activity was moderate on last Friday.

Zinc
SHFE 1412 zinc contract prices opened low at RMB 16,140/mt overnight, and touched RMB 16,265/mt with the entrance of longs, and closed at RMB 16,250/mt, down RMB 175/mt or 1.07%. Trading volumes increased 15,918 to 424,004 lots, and total positions decreased 856 to 159,726 lots. SHFE 1412 zinc contract prices opened at RMB 16,250/mt October 17, then stabilized between RMB 16,170-16,285/mt, and closed at RMB 16,170/mt, down RMB 255/mt or 1.55%. Trading volumes decreased 126,000, to 587,000 lots, and total positions were down 3,064 lots to 158,000 lots. SHFE 1412 zinc contract prices are expected to test RMB 16,000/mt.

#0 zinc prices were between RMB 16,520-16,570/mt, with spot premiums of RMB 300-350/mt against SHFE 1412 zinc contract prices. #1 zinc prices were between RMB 16,420-16,450/mt, with the price spread between #1 and #0 zinc expanding to RMB 100/mt. SHFE 1412 zinc contract prices fluctuated around RMB 16,220/mt, down RMB 80/mt from the previous trading day. Smelters held back goods as zinc prices fell, high spot premiums allowed traders to move goods actively. When combined with some goods releases after delivery, supply was sufficient. But high premiums deterred traders from purchasing. This, combined with small SHFE zinc price volatility, left transactions muted. Downstream buyers purchased modestly as they had replenished stocks. Shuangyan branded #0 zinc prices were RMB 16,560-16,570/mt, and prices for Yuguang were RMB 16,550-16,560/mt. Qilin, Jiulong, Feilong and Hongda zinc prices were RMB 16,540-16,550/mt. Baiyin zinc prices were RMB 16,520-16,530/mt. prices of imported zinc were SHFE 280/mt above SHFE 1412 zinc contract prices, with imported zinc availability extremely limited in Shanghai. SHFE 1412 zinc contract prices consolidated in the afternoon, with trading muted.

Tin
In Shanghai spot tin market, sentiment was poor last Friday, with buyers showing little interest. Most deals closed between RMB 135,500-138,000/mt, with the low-end price down RMB 500/mt from a day earlier. Nanshan and Jinlong brand tin traded between RMB 135,200-135,500/mt, while goods from Yunnan traded between RMB 135,800-137,000/mt.

Nickel
SMM #1 nickel prices were between RMB 106,300-106,700/mt. Spot nickel prices in Shanghai rose with LME nickel prices in the morning, with prices RMB 100-200/mt below 1411 nickel contract prices on the Wuxi electronics trading, between RMB 106,300-106,800/mt. Spot prices fell in the afternoon, with Jinchuan nickel prices as low as RMB 106,200/mt. Russian nickel prices were RMB 200/mt below Jinchuan nickel prices, but transactions were quiet. Trading between traders was brisk due to significant price volatility. Jinchuan lowered nickel prices RMB 6,000/mt to RMB 106,500/mt. Most downstream buyers suspended purchase due to weak LME nickel prices.