SHANGHAI, Aug. 10 (SMM) --
SHFE copper market on Monday advanced further after a high open, but still moved cautiously compared with SHFE zinc market. SFHE copper for November delivery copper contract opened at RMB 57,860/mt, and met resistance at RMB 58,200/mt due to limited rising momentum. The most actively-traded copper contract came under pressure at the daily moving average due to falling China A-share market, dropping as low as RMB 57,850/mt. However, the November delivery copper contract reached RMB 58,310/mt along with rebounding China A-share market, and finally closed at RMB 58,280/mt, up RMB 840/mt, or a gain of 1.46%. Trading sentiment for SHFE November delivery copper contract was moderate, and positions were down 4,406 lots to 205,600 lots. The closing price remains above the 5-day moving average, and with an upward momentum available on technical analysis. After SHFE copper market finds solid support at the 5-day moving average, the next target will be RMB 58,500/mt. A series of major economic data will be released this week, and struggle at the important price level will be intense, and SMM believes SHFE copper market will continue to hover at high levels in view of strong long sentiment.
In the spot market, market participants reacted differently based on their conditions as prices tried to test RMB 58,000/mt. Rising prices in the SHFE copper market restricted supply of goods for hedging, and suppliers of imported goods were also unable to move goods after the SHFE/LME copper price ratio fell to 7.0. Domestic copper producers were cautious towards sales in view of spot discounts at negative RMB 150-200/mt when delivery data comes closer. Only speculators were active in the market, expanding spot discounts. Downstream producers generally agreed with the rising trend, but were still wary of purchases at prices of RMB 58,000/mt along with higher costs and low orders. Spot discounts were between negative RMB 80~200/mt in the morning, dealing in the RMB 57,850~58,000/mt range. With rising China's domestic stock markets, cargo-holders became more optimistic towards outlook, with low interest in moving goods, and spot discounts narrowed to negative RMB 50~150/mt in response. Transactions were done between 57,900~58,100/mt. This week is the last trading week before the delivery date, and spot discounts are not expected to increase further, and long positions are continuing to dominate the market. The ratio is constantly falling, and the condition of a strong LME and weak SHFE copper market further will further stimulate moves to buy "Shanghai" and sell "London", and SHFE copper market will gradually keep up the rising pace of LME copper market. China's A-share market will be supported by positive macro policies. Hence, SMM believes spot copper prices will continue to move upward.
SHFE aluminum prices opened slightly higher following other base metals in the morning session, and SHFE 1011 aluminum contract prices opened at the intraday low of RMB 15,685/mt, with the upward momentum significantly weaker than copper and zinc prices. SHFE 1011 aluminum contract prices later climbed to RMB 15,775/mt, and finally closed at RMB 15,755/mt, returning to above the 5-day moving average, up RMB 120/mt compared with the previous trading day, or up 0.77%. Trading sentiment remained sluggish, and short positions grew dramatically.
Traders were optimistic toward market outlook after aluminum prices moved higher, and spot discounts stabilized at RMB 50/mt, with limited room for bargaining. Downstream buying interest was low, and most downstream fabricators adopted a wait-and-see attitude, with overall transactions neutral.
SMM expects LME aluminum prices to fluctuate around USD 2,000/mt, with special attention paid to future trends of the US dollar. SHFE 1011 aluminum contract prices will remain above the 5-day moving average, and will continue to inch up following other base metals in the short term, but a lack of upward momentum will limit any aluminum price increases in the future.
Although LME lead prices moved around USD 2,200/mt, constant price daily gains boosted downstream buying interest. In the morning business, transactions in the Shanghai market were good, dealing in the RMB 16,200-16,400/mt. In the afternoon, the Ministry of Industry and Information Technology announced the list of companies required to eliminate inefficient capacity. Moreover, the news that lead-acid battery producers lifted battery prices further boosted market sentiment, helping lead prices gain around RMB 50/mt on average, with deals between RMB 16,250-16,500/mt. Traders were unwilling to move goods in view of limited goods in hands. Hence, trading volumes failed to improve significantly.
SHFE zinc prices opened high and moved higher, and the rebounding China's A-share markets in the afternoon helped push up SHFE zinc prices further. SHFE 1011 zinc contract prices opened at RMB 17,490/mt, with prices mainly fluctuating narrowly around RMB 17,500/mt in the morning session. SHFE 1011 zinc contract prices edged higher later during spot trading hours, and even jumped to above RMB 17,500/mt in the afternoon stimulated by domestic stock markets, with prices climbing to RMB 17,745/mt and finally ending at RMB 17,740/mt, up RMB 570/mt, or up 3.3%. SHFE 1011 zinc contract prices soared, with prices far away from the 5-day moving average of RMB 17,200/mt, and long position momentum was building as a result, and positions of SHFE 1012 zinc contract increased by more than 50,000 lots. SHFE 1011 zinc contract prices will move toward RMB 18,000/mt in the near term.
Spot zinc prices have already stood above RMB 17,000/mt. #0 zinc was traded between RMB 17,050-17,080/mt in the morning, with spot discounts of RMB 500/mt against SHFE 1011 zinc contract prices. Market supply of #1 zinc was scarce, and although trading volumes were limited, the price gap between # 0 zinc and #1 zinc narrowed to RMB 20-30/mt. Stronger expectations of higher prices boosted supplier confidence, and downstream producers' buying interest was higher as well after they stayed out of the market for one week. Some downstream producers believe their orders will improve gradually in September, and they will replenish their raw material stocks amid China's loose monetary policy, which also helps support spot zinc prices to move toward RMB 17,500/mt.
LME tin prices opened at USD 20,250/mt and closed at USD 20,680/mt, up USD 314/mt from a day earlier, with the highest price at USD 20,900/mt and the lowest price at USD 20,250/mt. Daily trading volumes were 146 lots and positions were 17,905 lots. LME tin inventories rose by 325mt to 15,040mt. LME tin prices set a new high, and continued to advance on Monday, testing the highest at USD 21,400/mt.
In the Shanghai tin spot market, smelters lifted offers above RMB 150,000/mt and showed increased unwillingness to move goods under the context that LME tin prices surged. Mainstream traded prices were raised significantly. Traded prices of major brand tin were between RMB 150,000-152,000/mt and traded prices of unknown brand tin were between RMB 147,000-148,000/mt. Overall trading sentiment was stable, but transactions at high prices from few suppliers didn't go smoothly. Downstream consumers made purchases on an as-needed basis, but trading volumes at prices above RMB 150,000/mt were not high. Market sentiment became bullish along with the surge of LME tin prices. It is expected that domestic tin spot prices may advance slightly this week from the strong support of LME tin prices.
LME nickel prices opened at USD 21,860/mt and closed at USD 22,020/mt last Friday, up USD 160/mt from a day earlier, with the highest price at USD 22,280/mt and the lowest price at USD 21,750/mt. Metal prices shaved previous gains, and rose limitedly from worse-than-expected employment data from the US. On Monday, LME nickel prices opened at USD 22,225mt, reaching the highest at USD 22,495/mt and touching the lowest at USD 22,100/mt, with the latest at USD 22,475/mt, up USD 455/mt from a day earlier. LME nickel inventories were down by 1,062mt, helping boost market.
In the Shanghai nickel spot market, Jinchuan Group lifted nickel ex-works prices by RMB 3,000/mt to RMB 167,000/mt along with the advance of LME nickel prices. Bullish sentiment was prevailing in the market, and transactions between traders were brisk. Traded prices of nickel from Jinchuan Group were around RMB 168,000/mt and traded prices of nickel from Russia were around RMB 167,000/mt. Demand for (10-15%) NPI was strong and downstream purchasing volumes for (10-15%) NPI were high, pushing up prices to RMB 1,500/mtu.
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