SMM Base Metals Market Daily Review (2014-10-21)

SHANGHAI, Oct. 24 (SMM) –

Copper
The most active SHFE 1412 copper contract continued to test support at RMB 46,450/mt during Monday’s night session, and closed down RMB 40/mt at RMB 46,720/mt. During the night session, trading volumes for the most active contract hovered steadily around 110,000 lots, and positions gained by 418 lots.

SHFE copper fluctuated largely around RMB 46,800/mt during the morning trading session, meeting resistance at RMB 46,950/mt, despite better-than-expected Chinese economic indicators. The price of the red metal sank to RMB 46,600/mt subsequently, and ended down RMB 230/mt, or 0.49%, at RMB 46,530/mt. Trading volumes for the SHFE 1412 copper contract added by 14,816 lots, and positions expanded by 19,274 lots.

Physical copper in Shanghai was quoted Tuesday at a RMB 60-140/mt premium to the SHFE 1411 copper contract. Traded prices were RMB 47,630-47,700/mt for standard-quality copper and RMB 47,660-47,750/mt for high-quality copper. As SHFE copper hovered in narrow ranges, cargo holders moved goods steadily, while some middlemen entered the market to buy at low prices. The price gap between standard- and high-quality copper narrowed to less than RMB 50/mt. Downstream producers went bargain-hunting on Tuesday, leaving trading activity better than Monday.

As SHFE copper fell during the afternoon trading session, physical copper was largely quoted at a RMB 80-150/mt premium and traded lower at RMB 47,480-47,600/mt. Cargo holders refrained from selling at low prices, causing supply to fall, while a small number of downstream producers went bargain-hunting.

Aluminum
On Monday night, SHFE 1412 aluminum contract crept higher to RMB 13,840/mt after starting at RMB 13,785/mt, and finished the night session at RMB 13,825/mt. Trading volumes totaled 31,402 lots, with positions down 1,068 lots to 122,594 lots.

China’s GDP growth slowed to 7.3% in Q3, slightly better than expected. China’s industrial value-added, retail sales and fixed asset investment data were mixed. The most active contract hovered at highs in the morning on Tuesday, but fell in the afternoon on risk aversion, closing RMB 25/mt lower at RMB 13,750/mt Trading volumes totaled 5,054 lots, with positions down 7,686 lots to 114,908 lots.

Spot aluminum largely traded at RMB 13,680-13,690/mt in Shanghai and Wuxi on Tuesday, discounts of RMB 60-70/mt over SHFE 1411 aluminum contract, versus RMB 13,690-13,700/mt in Hangzhou. Sellers were anxious to sell out of pessimism, but traders watched from the sidelines. Downstream producers bought only as needed and pushed for lower prices. In the afternoon, some cut offers to RMB 13,640-13,650/mt after SHFE aluminum went down. Trading came to a virtual standstill as buyers were waiting for prices to fall further.

Lead
Lead for December delivery on the Shanghai Futures Exchange, the most active contract, opened Monday’s night session at RMB 13,670/mt, and then followed LME lead down to end at RMB 13,590/mt, RMB 60/mt off.

Boosted by better-than-expected Chinese GDP growth and industrial output, SHFE lead advanced to RMB 13,695/mt, but tracked LME lead down during the afternoon trading session to end down RMB 45/mt at RMB 13,605/mt. Trading volumes for the SHFE 1412 lead contract totaled 2,838 lots, and positions shed 466 lots to 10,344 lots.

Chihong Zn & Ge brand in Shanghai traded Tuesday at RMB 13,670/mt, close to the most active SHFE 1412 lead contract. Traded prices were RMB 13,660/mt for Nanfang brand, and RMB 13,650/mt for Humon and Hanjiang brands. Lead smelters ramped up sales to increase cash flows, helping ease tight supply on the Shanghai market. Market participants, however, were reluctant to buy since concerns over a slowdown in the global economy casted a shadow on lead price outlook. At the same time, higher operating rates at motive lead-acid battery producers in Hunan and Jiangxi contributed to brisk trading activity in these two regions on Tuesday.

Zinc
SHFE 1412 zinc contract prices opened lower at RMB 16,170/mt Monday evening, then fluctuated between RMB 16,160-16,265/mt, and closed at RMB 16,215/mt, down RMB 95/mt or 0.58%. Trading volumes decreased 59,088 to 220,340 lots, and total positions increased 8,622 to 157,268 lots. SHFE 1412 zinc contract prices opened at RMB 16,210/mt October 21, then clawed back some losses due to rebounding LME zinc prices and better-than-expected Q3 growth in China. As LME base metals weakened in the afternoon, SHFE 1412 zinc contract prices fell to as low as RMB 16,140/mt, and closed at RMB 16,150/mt, down RMB 160/mt or 0.98%. Trading volumes decreased 29,530, to 382,186 lots, and total positions were down 6,716 lots to 141,930 lots. SHFE 1412 zinc contract prices are expected to test support from RMB 16,000/mt now that LME zinc prices hit a three-month low.

#0 zinc prices were between RMB 16,570-16,610/mt, with spot premiums of RMB 320-360/mt against SHFE 1412 zinc contract prices. #1 zinc prices were between RMB 16,500-16,530/mt, and prices for Kazakhstan #1 zinc were RMB 16,450-16,470/mt. SHFE 1412 zinc contract prices fell RMB 50/mt from the previous trading day, causing spot premiums to expand RMB 20/mt. Smelters held back from selling on falling prices, leading to tight supply. Arbitrage traders moved goods but modestly due to limited inventories whilst purchasing at lower prices. Downstream buyers purchased as needed. Shuangyan branded #0 zinc prices were RMB 16,590-16,610/mt, and prices for Yuguang and Hongda zinc were RMB 16,580-16,600/mt. Baiyin, Qilin, and Jiulong zinc prices were RMB 16,570-16,580/mt. SHFE 1412 zinc contract prices plummeted to RMB 16,150/mt in the afternoon, allowing spot premiums to expand to RMB 330-370/mt, with trading muted.

Tin
In Shanghai spot tin market, most deals closed between RMB 135,000-138,000/mt on Tuesday. The low-end price was down RMB 500/mt from a day earlier duet to the inflow of imported tin. Nanshan and Jinlong brand tin traded between RMB 134,500-135,000/mt, while goods from Yunnan traded between RMB 134,500-135,500/mt.

Nickel
SMM #1 nickel prices were between RMB 103,600-103,900/mt. Spot prices dropped after opening, with quotes RMB 0-100/mt below 1411 nickel contract prices on the Wuxi electronics trading. Russian nickel prices were RMB 200/mt below Jinchuan nickel prices, between RMB 103,500-104,700/mt. Spot prices stabilized between RMB 103,400-103,500/mt at one point in the afternoon, but fell with LME nickel prices after 3:00 pm, with Jinchuan nickel prices traded as low as RMB 102,600/mt. Trading between traders was active. Jinchuan lowered nickel prices RMB 3,300/mt to RMB 103,700/mt, but trading was barely made at this price level in the afternoon. Downstream purchase increased.