SMM Base Metals Market Daily Review (2015-1-20)

SHANGHAI, Jan. 21 (SMM) –

Copper
Copper for March delivery on the Shanghai Futures Exchange, the most active contract, started at RMB 41,200/mt and then rallied to RMB 41,590/mt in Monday’s night session. The price of the SHFE 1503 copper contract later fell to test support at RMB 41,000/mt and finished down RMB 200/mt, or 0.48% at RMB 41,200/mt. Positions for the most active contract shed 908 to 286,382, while trading volumes totaled some 220,000 lots.

On Tuesday, SHFE copper initially rose to RMB 41,500/mt and then edged up to RMB 41,560/mt. The price of the red metal surrendered all gains to dip to RMB 41,170/mt in the afternoon trading session and ended down RMB 150/mt, or 0.36% at RMB 41,250/mt. Positions for the SHFE 1503 copper contract tumbled 11,092 to 276,198, while trading volumes slumped by some 100,000 lots. The SHFE 1504 copper contract finished down RMB 110/mt at RMB 41,080/mt on Tuesday, with positions up 13,020 to 231,348.

Spot copper was quoted at a RMB 50-130/mt premium to the SHFE 1502 copper contract in Shanghai on Tuesday. Standard- and high-quality copper sold for RMB 41,680-41,740/mt and RMB 41,720-41,800/mt, respectively.

As SHFE copper stagnated, deliverable copper warehouse warrants flowed into the market, aggravating oversupply pressure and leaving a variety of copper brands available. Cargo holders were unwilling to cut premiums much as the price gap between the SHFE 1502 and 1503 copper contract narrowed. The price differential between standard- and high-quality copper held steady. Spot copper trading was light on Tuesday. Spot copper was quoted at a RMB 60-130/mt premium and traded at RMB 41,550-41,650/mt in the afternoon trading.

Aluminum
On Monday night, SHFE 1503 aluminum contract slipped to RMB 12,785/mt after starting at RMB 12,835/mt, and finished the night session at RMB 12,810/mt. Trading volumes totaled 12,106 lots, with positions up 242 to 135,674.

China’s GDP grew 7.3% in Q4, and 7.4% in 2014. Both figures indicate heavy downward pressures facing the economy. Hence, the most active contract fell to RMB 12,765/mt before ending Tuesday at RMB 12,775/mt. Trading volumes totaled 33,438 lots, with positions down 2,328 to 133,104. Technically, further price decline is expected.

Spot aluminum largely traded between RMB 12,740-12,750/mt in Shanghai and Wuxi on Tuesday, discounts of RMB 20-40/mt over SHFE 1502 aluminum contract, versus RMB 12,760-12,770/mt in Hangzhou. The inflow of aluminum ingot from SHFE warehouses added to oversupply pressures. Traders stayed out of the market, waiting for SHFE aluminum to fall further. Downstream demand remained slack. This forced suppliers to lower offers. In the afternoon, trading came to a virtual standstill.

Lead
Lead for March delivery on the Shanghai Futures Exchange, the most active contract, opened at RMB 12,400/mt in Monday’s night session and then advanced to RMB 12,480/mt. The price of the SHFE 1503 lead contract later retreated to RMB 12,400/mt amid growing profit-taking by longs and ended up RMB 20/mt at RMB 12,400/mt. During the night session, trading volumes for the most active contract amounted to 5,326 lots, while positions shrank 666 to 19,958.

On Tuesday, SHFE lead initially sank to RMB 12,345/mt and later edged up to RMB 12,400-12,430/mt before ending up RMB 45/mt at RMB 12,425/mt. China’s GDP was reported Tuesday to have grown 7.3% YoY in Q4, level with expectations. Large industrial value added increased at the highest rate in three months, while home sales hit the highest of 2014 despite falling investment in the property market. The better-than-expected economic figures have eased concerns over a slowdown in the Chinese economy.

Supplies from Chihong Zn & Ge traded at RMB 12,540-12,550/mt in Shanghai on Tuesday, a RMB 130/mt premium to the most active SHFE 1503 lead contract, down from a RMB 200/mt premium on Monday. Traded prices were RMB 12,500/mt for Humon. The decline in spot premiums pointed to sluggish lead demand as lead ingot remained in short supply in Shanghai. SMM attributes dispiriting lead demand to two factors. First, downstream producers have slowed production against soft end-consumer demand and mounting finished-goods inventories. Second, slow payment collection has compounded cash shortfalls at these producers in the last month before Chinese New Year.

Zinc
SHFE 1503 zinc contract prices opened at RMB 15,980/mt Monday evening, then hovered around RMB 15,960/mt, and closing at RMB 15,935/mt, down RMB 10/mt or 0.06%. Trading volumes were down 37,000 to 71,656 lots, and total positions increased 2,922 to 161,778. SHFE 1503 zinc contract prices opened at RMB 15,935/mt on Tuesday, rising and breaking through USD 16,000/mt in the morning, reaching as high as USD 16,100/mt. Nonetheless, SHFE 1503 zinc contract price gains slowed in the afternoon, and closing at RMB 16,035/mt, up RMB 90/mt or 0.56%. Trading volumes decreased 89,886 to 166,498 lots. Total positions were up 3,208 to 162,064. SHFE 1503 zinc contract prices are expected to hover around RMB 16,000/mt this evening.

#0 zinc prices were between RMB 16,210-16,280/mt, with spot premiums of RMB 200-250/mt against SHFE 1503 zinc contract prices. #1 zinc prices were RMB 16,130-16,180/mt. SHFE 1503 zinc contract prices fluctuated around RMB 16,000/mt after opening, with spot premiums between RMB 210-250/mt. SHFE 1503 zinc contract prices soared to RMB 16,050-16,060/mt during 10:30-11:30 am, causing spot premiums to narrow to RMB 200-230/mt. Smelters increased supply, and imported zinc was also sufficient. Trading was brisk due to significant SHFE zinc price volatility. Some traders put pressure on high-grade zinc prices and purchased the latter to fulfill term contracts. But downstream buyers were reticent, with trading mainly between traders. Shuangyan and Hongda #0 zinc prices were RMB 16,230-16,280/mt, RMB 230-250/mt above SHFE 1503 zinc contract prices. Yuguang #0 zinc prices were RMB 16,220-16,260/mt, RMB 210-230/mt above SHFE 1503 zinc contract prices. Mengzi, Qilin, Feilong and Qinxin zinc prices were between RMB 16,210-16,250/mt, RMB 200-220/mt above SHFE 1503 zinc contract prices. Tiefeng #0 zinc prices were between RMB 16,200-16,220/mt, RMB 170-190/mt above SHFE 1503 zinc contract prices. Indian and Peruvian #0 zinc prices were RMB 16,090-16,140/mt, RMB 90-100/mt above SHFE 1503 zinc contract prices. SHFE 1503 zinc contract price gains slowed in the afternoon, with spot premiums between RMB 200-230/mt, and trading quiet.

Tin
In Shanghai spot tin market, falling LME tin prices dampened trading activity on Tuesday. Mainstream traded prices were RMB 125,500-127,500/mt. Yunxiang, Yunheng and Yunxi brand tin traded between RMB 126,000-127,500/mt.

Nickel
SMM #1 nickel prices were between RMB 107,100-107,500/mt. Spot nickel prices in Shanghai rose in the morning as LME nickel prices inched up. Jinchuan increased supply as downstream buyers purchased modestly, causing transactions to improve and with traded prices between RMB 107,300-107,700/mt. LME nickel prices dived in the afternoon, pushing down spot nickel prices and muting trading, with traded prices between RMB 107,200-107,500/mt. Jinchuan lowered nickel prices by RMB 1,000/mt to RMB 107,500/mt.