SMM Base Metals Weekly Price Review and Forecast (Apr. 20-24, 2015)

SHANGHAI, Apr. 21 (SMM) –A series of Chinese economic data, including foreign trade, GDP and industrial value-added, were all depressed. Most US economic figures were negative, sending the US dollar index down. Crude oil gained for six straight days. Base metals rallied as a result. Lead led gains among base metals, with SMMI.Pb up 2.68%. Domestic lead smelters held back goods at lows, while traders were active in stockpiling goods out of bullishness. SMMI.Zn rose 2.08%. SHFE zinc broke though RMB 16,500/mt, and zinc prices in domestic spot market followed suit. SMMI.Cu inched up 0.61%. Suppliers in domestic spot copper market raised premiums. Buying by processors and traders picked up, pushing traded prices up. SHFE tin followed LME tin down, which created a ripple effect in spot market. SMMI.Sn lost 3.46%. SMMI.Ni was stable. LME nickel stopped falling, while SHFE nickel rallied. A flood of imported nickel in domestic market prevented prices from rising. SMMI.Al shed 0.22%. Bearishness grew after spot aluminum prices fell below RMB 13,000/mt. In conclusion, SMMI edged up 0.68% last week.   

 

Copper 

SHFE copper outperformed LME copper and moved widely between RMB 42,600-43,600/mt. Trading volumes soared more than 1.8 million lots, and positions tumbled 35,000 before the weekend.

 

Downstream buyers began purchasing when copper prices fell to RMB 43,000/mt last week, helping improve spot trades.

 

China’s stock markets will extend gains, and SHFE copper may follow LME copper up to challenge RMB 44,000/mt. 

 

Aluminum

The decline in China’s exports of unwrought aluminum and aluminum semis dampened sentiment, sending SHFE 1506 aluminum contract down. Some bears withdrew after prices fell to RMB 13,000/mt. This, together with technical correction and rising LME aluminum, helped the most active SHFE aluminum contract bounce back to RMB 13,200/mt later in the week. In China’s spot market, spot prices followed SHFE aluminum down below RMB 13,000/mt. Processors and traders, in anticipation of no price rally, showed little interest.    

 

The KDJ indicator is positive for SHFE 1506 aluminum contract, but poor market fundamentals and worries over selloffs by Chalco will deter some bulls from entering. The most active SHFE aluminum contract is expected to move between RMB 13,150-13,300/mt. In China’s spot market, cargo holders will remain eager to sell, but most will not lower quotes. Downstream producers will show little interest even at low prices. Spot aluminum should trade at discounts of RMB 70-110/mt over SHFE front-month contract.  

 

Lead

SHFE most active lead contract dipped below RMB 13,000/mt last Tuesday, but regained the losses later to end at RMB 13,500/mt, posting a weekly gain of 2%.

 

Spot lead prices in China surged RMB 700/mt due to strong bullish mood and tight supply. In Shanghai, spot premiums rose from RMB 0/mt to RMB 100/mt, and some smelters were still unwilling to sell even after premiums climbed. Henan’s smelters raised quotations to above RMB 50-100/mt higher than SMM lead prices. Some suppliers refused to sell spot goods last Friday. Downstream producers shied away from high prices, only buying on production needs. Large producers just accepted goods under long-term contracts.

 

SHFE most active lead contract may test a high of RMB 13,900/mt this week. 

 

 Zinc

Spot discounts on #0 zinc in Shanghai against SHFE 1506 zinc contract prices widened from RMB 100/mt to RMB 140-90/mt. Smelters sold normally, while cargo holders increased sales, creating healthy supply. Traders expecting spot discounts to narrow purchased at lower prices, widening the spread between regular #0 zinc brands and Shuangyan zinc from RMB 10/mt to RMB 40-50/mt. Downstream interest, however, weakened, resulting in a decline in overall transactions.

 

In China’s spot markets, smelters will move goods normally this week, and cargo holders will also sell proactively, leading to ample supply. Some traders will purchase at lows, lending support to zinc prices. Zinc prices rose above RMB 16,000/mt, but processing fees at downstream producers lacked ability to rise. Downstream buyers should purchase on an as-needed basis this week, with spot discounts against SHFE 1506 zinc contract prices expanding to RMB 150/mt.

 

Tin

SHFE 1507 tin contract ended last Thursday at RMB 112,880/mt, down 3.3% from a week ago. Despite falling supply, tin prices in China’s spot market fell rapidly, due to falling LME and SHFE tin prices. Mainstream traded prices dropped to RMB 110,500-112,000/mt last Friday. 

 

Nickel

SHFE nickel prices also rebounded from RMB 92,640/mt to stand above the 10-day moving average, but met strong resistance. Trading volumes surged 371,000 lots to 929,000 lots, while positions grew 25,270 to 131,000.

 

In China’s spot nickel market, SMM #1 refined nickel traded at an average price of RMB 94,190/mt last week, down RMB 2,110/mt on a weekly basis. Imported nickel still claimed a large share in China’s spot nickel supply, dragging down imported nickel prices. Some downstream producers bought on dips. Jinchuan Group did not adjust ex-works prices last week, as the rebound in LME nickel was limited and as a majority of goods in the market were imported nickel.

 

Lackluster nickel demand is expected to leave spot prices at RMB 93,000-96,500/mt this week.