SHANGHAI, April 1 (SMM) --
Benchmark copper for three-month delivery on the SHFE market on Wednesday opened higher at RMB 62,500/mt, but fell back later, with prices moving downward for the trading day. The July delivery copper contract on the SHFE market dropped as low as RMB 61,600/mt, and finalized at RMB 61,630/mt, down RMB 420/mt. Total positions were down 27,878 lots, a sign of withdrawal of long positions after profit-taking.
Despite of falling copper prices on the SHFE market, spot discounts continued to expand, with levels in the morning between negative RMB 550-650/mt. Expanding spot discounts increased unwillingness to move domestic goods, with imported copper dominating market supply. During the major trading hour, discounts for high-quality copper were in the negative RMB 550-600/mt, and discounts for standard-quality copper were between negative RMB 600-680/mt, dealing in a range of RMB 60,250-60,400/mt. Buying interest was improved by higher discounts, with smooth sales reported in the morning trade, but trading volume failed to improve significantly due to limited availability of goods. Spot discounts in the afternoon business narrowed following further copper price declines on the SHFE market. Discounts for high-quality copper were between negative RMB 450-500/mt, and discounts for standard-quality copper were between negative RMB 500-550/mt, with transactions mainly done around RMB 60,300/mt. However, trading sentiment in the afternoon was not as brisk as that in the morning, as cautious attitude resulted in a wait-and-see attitude.
After review on spot copper prices in March, deals were traded at premiums only during two trading days after the delivery date, and transactions were done at discounts for the rest of trading days for the month, with expanding discounts, reaching as high as negative RMB 650/mt, which was not seen in the past years. Moreover, trading sentiment for the whole month was lackluster. SMM takes an optimistic attitude towards copper prices in April, given a traditional high demand period in April and expectations of ample cash flow in earlier 2Q compared with late January. In addition, if China’s Central Bank lifts interest rates in April as expected, market fund operations will become more resolute following coming out of negative news, which will be favorable for copper prices in the future.
SHFE aluminum prices opened slightly high positively affected by rising LME aluminum prices, and SHFE 1006 aluminum contract prices fluctuated lower after opening at RMB 16,690/mt, and later remained on a downward track in the afternoon, falling to as low as RMB 16,505/mt. SHFE 1006 aluminum contract prices regained some lost grounds before closing, with prices finally ending at RMB 16,575/mt, down RMB 75/mt, or down 0.45%. Total positions increased by 2,020 lots, and SHFE aluminum prices rebounded to above the 5-day moving average line after experiencing dramatic declines, indicating any downward room for aluminum prices was limited. Technically, SHFE 1006 aluminum contract prices moved around the 5-day moving average line, showing trends of fluctuating in a narrow band in the short term.
Yesterday was the last day of March, and the relatively tight cash flow and notes negatively affected the spot transactions to some extent, but the soft aluminum prices and weak market fundamentals remained major reasons behind sluggish transactions. Yesterday, spot discounts also rose to RMB 300/mt.
Trading sentiment in domestic lead market on Wednesday remained low. Besides previous stock replenishment, passive price movements of domestic lead market following LME lead market also depressed downstream producer confidence towards outlook, preferring to wait for prices to drop below RMB 15,500/mt and then make purchases. Few transactions were made between RMB 15,450-15,600/mt in the Shanghai market. In March, traded prices in domestic lead market were generally in the RMB 15,200-15,900/mt range, with fluctuating range becoming narrower gradually. It is a seasonally low demand season for lead consumption in April and May, leaving a lack of upward momentum for lead prices. In this context, domestic lead prices will likely fluctuate in a narrower range for the foreseeable future.
SHFE zinc prices opened high but went lower, and SHFE 1007 zinc contract prices opened as high as RMB 19,200/mt, but later slipped all the way, and fell to as low as RMB 18,940/mt in the afternoon, with prices finally ending at RMB 18,970/mt, down RMB 115/mt, or down 0.6%. Positions of SHFE 1007 zinc contract declined by 9,874 lots, and total positions dropped by nearly 26,000 lots, with zinc prices moving under selling pressure. SHFE zinc prices have closed down for two consecutive days, but still stood above the 5-day moving average line. Adherence of all moving average lines except for 60-day moving average line was an indication of unclear short-term direction.
The US dollar index fell to 81.3 in the afternoon, and LME zinc prices advanced to USD 2,385/mt in response, with a third round of upward movements expected for zinc prices. Technical indicators also show LME zinc prices will move on an upward track.
In the spot zinc market, the fluctuating SHFE zinc prices depressed market confidence and sentiment. Traded prices for #0 zinc was around RMB 18,100/mt in the morning, but struggled at RMB 18,000/mt in the afternoon. Yesterday was the last day of March, and most companies were busy in month-end closing, resulting in limited cash flow, which in turn restricted the market transactions.
Tomorrow will be the first day of April, and market players held mixed views on whether or not seasonal peak demand period can be as bullish as past years, and SHFE zinc prices will also show more complicated performance. SMM believes any downward room for spot zinc prices to fall below RMB 18,000/mt will be limited in view of long momentum and positive expectations, but the RMB 19,000/mt mark will become a resistance level for #0 zinc in the short term given inventory pressure and excess supply.
The positive CCI figure from the US on March 30th resumed market confidence, and base metal prices advanced with gains. On March 30th, LME tin prices closed at USD 18,395/mt, up USD 395/mt from a day earlier, with the highest price at USD 18,449/mt and lowest price at USD 17,950/mt. On March 31st, LME tin prices remained positive, and reached the highest level of USD 18,400/mt.
In the spot market, domestic smelters lifted offers again along with soaring LME tin prices, wit tin from Yunnan Tin Group offered at RMB 145,000/mt, tin from Liuzhou China Tin Group Co., Ltd. offered RMB 145,000/mt and tin from Yunnan Chengfeng Non-ferrous Metals Co., Ltd offered at RMB 143,000/mt. Trading sentiment was relatively brisk among traders, and traded prices was lifted higher from a day earlier, with traded prices of major brand tin between RMB 141,000-142,000/mt range and traded prices of unknown band tin between RMB 140,500-141,000/mt range. As tin prices rose rapidly, some downstream companies began to adopt a wait-and-see attitude. Some market players told that any momentum for tin prices to rise further was weak, considering the fact that current downstream demand was not good.
On March 30th, LME nickel prices opened at USD 23,900/mt and closed at USD 24,300/mt, with highest price at USD 24,376/mt and lowest price at USD 23,600/mt. Daily trading volumes were 1,423 lots and positions were 101,722 lots. On March 31st, LME prices opened at USD 24,200/mt, and reached the highest level of USD 24,675/mt, with prices fluctuating to test USD 24,670/mt.
In the spot market, Jinchuan Group re-raised ex-works nickel prices by RMB 4,000/mt to RMB 171,000/mt. Traded prices in the spot market lowered due to sluggish transactions, although offers in the market were lifted to certain extend, with traded prices of nickel from Jinchuan Group in the RMB 168,500-170,000/mt range and traded prices of imported nickel in the RMB 168,500-169,000/mt range. As wide price spread between LME nickel prices and domestic nickel prices attracted many arbitrage traders, overall trading sentiment was moderate. Market players concerns that traders and downstream consumers may not want to add their inventories to high levels if prices continue to rise further.
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