SHANGHAI, June 22 (SMM) – Copper
On Monday, the September delivery copper contract on the SHFE market, the most active one opened slightly higher at RMB 51,590/mt, and fluctuated in a narrow range of RMB 51,600-51,800/mt in the morning session, with mild performance reported. From 11:10 am, SHFE copper prices rallied with rising stocks markets, especially in the afternoon session, SHFE September delivery copper prices gained 5% to RMB 53,920/mt, hitting a daily rising limit. Finally, the most active copper prices closed at RMB 53,700/mt, with a daily gain of 4.56%, up RMB 2,340/mt. Trading volumes reached as high as 855,954 lots along with entrance of a large amount of long positions and withdrawal of short ones, and total positions dropped by 10,528 lots due to short covering. Supported by rising SHFE copper prices, LME copper prices advanced to USD 6,725/mt after 13:30 pm, touching above the 30-day moving average, and later edged down, fluctuating between USD 6,600-6,680/mt. SMM believes LME copper prices will continue to advance.
In the spot market, transactions were traded in the RMB 52,250~52,650/mt in the morning business, with spot premiums between positive RMB 150~250/mt. Traded prices in the afternoon trade rose to RMB 53,750-54,000/mt due to strengthening copper prices on the SHFE market, with spot premiums at RMB 0-50/mt. Sales of imported copper in the morning were hampered by the SHFE/LME copper price ratio, which was around 7.95. Meanwhile, bullish sentiment leaves low selling interest among holders of domestic goods, resulting in supply tightness. Downstream purchasing interest was brisk at prices of RMB 52,500/mt. When copper prices advanced to RMB 54,000/mt in the afternoon, downstream consumption was depressed due to rapid price gains. Suppliers of imported goods represented no interest in moving goods in view of no improvement in spot premiums, even if the ratio increased to above 8.0, a sign of bullish attitude towards copper prices on Tuesday.
Currently, supply of domestic scrap copper is limited, with firm prices, and some small smelters have reduced production as a result, leaving higher demand for imported copper concentrate, and premiums for imported copper remain strong. In this context, suppliers of imported goods are not eager to move goods, resulting in limited availability of high-quality imported copper, with firm prices. SMM believes spot premiums will remain, although a traditional low demand period in summer is coming, and this will support copper prices in response. G-20 Summit will begin soon, and market focus is now on the issue of yuan appreciation. China's move to pledge to make yuan more flexible at such a momentum no doubt favors financial markets, and expectations of yuan appreciation in the short term will continue to support copper prices. If there is no a stream of positive news available, SMM believes copper prices will rally at first, and then fall back, with a wider fluctuating range expected.
China's central bank decided to proceed further with the reform of the RMB exchange rate last Saturday, and the US dollar has fallen below RMB 6.80 to RMB 6.7975 on Monday in response, showing clear signs of RMB appreciation. China's Shanghai and Shenzhen stock markets surged by 2.9% and 3.44%, respectively, stimulating domestic commodity markets to soar. SHFE 1009 aluminum contract prices opened at RMB 14,645/mt in the morning, and later rebounded strongly driven up by rising domestic A-shares market before closing at noon. SHFE 1009 aluminum contract prices jumped by 400/mt after opening in the afternoon, soaring to RMB 15,210/mt, and trading sentiment became bullish as well. Positions of SHFE 1009 aluminum contract increased by 17,970 lots, while trading volumes reached 197,572 lots, with the turnover rate of 198%. SHFE 1009 aluminum contract prices mainly moved narrowly around RMB 15,000/mt in the afternoon, and finally closed at RMB 15,005/mt, up RMB 455/mt, or up 3.13%. SHFE 1009 aluminum contract prices closed with gains, with prices hitting the 30-day moving average and pointing to RMB 15,250/mt in the near term. SMM predicts SHFE aluminum prices will climb to fluctuate between 20-day and 30-day moving averages after erasing losses recorded since June.
In the spot market, spot aluminum prices mainly moved between RMB 14,370-14,380/mt from 10:30 am to 11:00 am, and trading sentiment was neutral. CHALCO quoted RMB 14,400/mt in the morning, but no market response was reported. Spot aluminum offers have risen from RMB 14,400/mt to RMB 14,450/mt at noon following soaring SHFE aluminum prices after 11:00 am, boosting market sentiment. The growing optimism stimulated downstream producers and speculators, and transactions were brisk as a result. However, spot aluminum prices failed to keep pace with SHFE aluminum prices in the afternoon after SHFE aluminum prices jumped by nearly RMB 500/mt. In this context, almost no deals were made when cargo-holders kept offers firm at RMB 14,700-14,750/mt. Smelters held high interest in moving goods when spot aluminum prices approached RMB 15,000/mt, but the higher price levels triggered downstream concerns over the upward room for aluminum prices and the sustainability of aluminum price increases, so transactions were limited. Whether or not aluminum prices can stand steady at current levels and then try to move higher on June 22nd will depend on the trends of the US stocks, LME aluminum prices, and China's A-shares market.
Supported by rallying LME lead prices, domestic lead prices climbed higher on Monday. After increasing to RMB 14,000/mt, domestic lead producers remain reluctant in moving goods, while downstream producers held mixed views in purchases. In general, overall consumption was lackluster. Transactions in the Shanghai market were traded in the RMB 14,500-14,600/mt range. After LME lead prices gained to USD 1,800/mt in the afternoon, traders made no offers, or quoted prices as high as RMB 14,750/mt.
SHFE zinc prices posted bullish movements on June 21st driven up by LME zinc prices. SHFE 1009 zinc contract prices opened slightly high at RMB 14,245/mt, and later edged higher after 11:00 am, and finally closed at RMB 14,750/mt in the morning session, with large amounts of short positions withdrawing from the market. Long position momentum remained strong in the afternoon, helping push up SHFE zinc prices to the daily price limits. Although a number of long investors left the market, SHFE 1009 zinc contract prices finally closed at the daily price limits, with the closing prices at RMB 14,845/mt. Positions declined by 45,426 lots, with the largest declines reported over nearly one month, an indication of intensifying market divergence.
In the spot market, spot zinc prices experienced significant changes amid wild fluctuation in SHFE zinc prices. #0 zinc was mainly traded between RMB 14,400-14,450/mt in the Shanghai market before 11:00 am, with spot discounts ranging between RMB 70-90/mt against SHFE 1009 zinc contract prices. #0 zinc was traded in the RMB 14,450-14,500/mt range after 11:00 am when SHFE zinc prices jumped. Spot discounts of #0 zinc have expanded to a range of RMB 200-250/mt against SHFE 1009 zinc contract prices in the afternoon, and traded prices moved higher at a slower pace to around RMB 14,600/mt, but almost no deals were made. Although spot market sentiment improved in the afternoon, spot zinc prices still face heavy pressure in the RMB 14,900-15,000/mt range based on the facts that spot zinc prices failed to keep pace with SHFE zinc prices, and positions declined on the SHFE zinc market.
LME tin prices opened at USD 17,651/mt and closed at USD 17,625/mt last Friday, down USD 26/mt from a day earlier, with the highest price at USD 17,700/mt and the lowest price at USD 17,500/mt. Daily trading volumes were 140 lots and positions were 17,533 lots. LME metal prices were closed with losses by concerns over China's weak equity market and diminished demand of metals. On June 21st, LME tin prices opened at USD 17,690/mt and were boosted to exceed USD 18,000/mt due to RMB exchange rate reform, with highest price testing USD 18,250/mt. Weak price fluctuation trend is expected to change to certain extent, and close attention should be paid to LME tin price movement during the European trading period.
Tin prices remain stable in the Shanghai tin spot market on June 21st. Some smelters lifted their offers and were reluctant to move goods as LME tin prices exceeded USD 18,000/mt. Transactions were slightly brisker, but most downstream companies still adopted a wait-and-see attitude, with market expecting a more clear trend to direct price movement. Traded prices of major brand tin were in the RMB 138,500 - 140,000/mt range and traded prices of unknown brand tin were between around RMB 138,500/mt. If LME tin prices can continue to be supported by RMB exchange rate reform this week, spot prices are expected to advance slightly at a stable pace.
LME nickel prices opened at USD 19,636/mt and closed at USD 19,600/mt last Friday, down USD 36/mt from a day earlier, with the highest price at USD 19,800/mt and the lowest price at USD 19,250/mt. Daily trading volumes were 1,545 lots and positions were 88,877 lots. On June 21st, LME nickel prices opened at USD 19,800/mt, and reached the highest level at USD 20,418/mt. Commodity prices were all stimulated to rebound significantly due to China's RMB exchange rate reform.
In the Shanghai nickel spot market, transactions were moderate due to price increases of LME nickel prices. Traded prices of nickel from Jinchuan Group were between RMB 155,000-156,000/mt, and traded prices of imported nickel were between RMB 154,000-155,000/mt, with supply of imported nickel still tight. Supply of spot nickel was ample, but is dominated by untradable inventories. Market transactions were still dominated by traders, and downstream purchasers still remained cautious and only made purchases in a small amount for short-term use, despite that pries rose significantly in the afternoon.
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