SHANGHAI, Dec. 7 (SMM) –
SHFE copper market advanced further after a high open on Monday. SHFE 1103 copper contract prices, the most actively-traded one, reached briefly RMB 66,050/mt after opening at RMB 65,700/mt. Later, the copper for delivery in three months in the SHFE market fell back due to falling prices in domestic stocks markets, down as low as RMB 65,380/mt before the end of trading at the midday. SHFE three-month copper contract prices rallied with support from rebounding LME copper prices in the afternoon session, but met resistance at RMB 66,000/mt. Finally, SHFE 1103 copper contract prices closed at RMB 65,530/mt, up RMB 250/mt, or a gain of 0.38%. Positions were down by 2,578 lots to around 177,000 lots, and trading volumes dropped greatly to 170,000 lots. Although the closing price for the SHFE three-month copper contracts was lower than the opening price, prices ended above the moving averages, and the upward momentum still existed. The commodity market remains attractive for speculative funds, and it is a matter of time to see copper prices to climb higher, given crude oil prices have made breakthroughs.
As the price difference between SHFE three-month and current-month copper contracts expanded to RMB 1,000/mt, arbitraging trades were depressed. Hence, market supply in the spot market tightened on Tuesday, especially for high-quality copper, with spot discounts between negative RMB 150-180/mt. Supply of imported copper continued to reduce, as the SHFE/LME copper price ratio remains sluggish recently. The price difference between high-quality and standard-quality copper was RMB 50/mt, with discounts between negative RMB 200-250/mt. Transactions were made in the RMB 64,600-64,750/mt range. With rapid declines in the SHFE copper market after 11:00 am, spot discounts narrowed to negative RMB 100-150/mt, and even at negative RMB 0/mt, and traded prices fell to RMB 64,500-64,650/mt. In the afternoon business, spot discounts were between negative RMB 100-150/mt as SHFE copper prices rallied, with traded prices up to RMB 64,650-64,800/mt.
Market attention is on the strength of long sentiment this week. The optimists believe that spot discounts will narrow along with the delivery date on December 15th both for SHFE 1012 copper contracts and LME copper contracts. In addition, particular attentions should also be paid to the premiums for cash metal over LME 3-month contracts. Coupled with rising crude oil prices and a weaker US dollar, the optimists believe copper prices will rise to the record high level soon. However, transactions were limited on Tuesday, and the LME copper market made moderate gains despite of lower US dollar, both depressing the sentiment. Hence, LME copper prices are expected to move between USD 8,650-8,800/mt.
SHFE aluminum prices continued to fluctuate in a narrow band, and trading sentiment remained sluggish. SHFE 1103 aluminum contract prices briefly climbed to RMB 16,540/mt after opening slightly higher at RMB 16,510/mt, and later followed the Shanghai Stock Exchange composite index trends, with the lowest prices reported at RMB 16,470/mt. SHFE 1103 aluminum contract prices finally closed at RMB 16,510/mt. Positions of SHFE 1103 aluminum contract increased slightly by 1,256 lots, and SHFE 1103 aluminum contract prices faced heavy resistance at the 60-day moving average, and SMM predicts SFHE aluminum prices will continue to fluctuate weakly.
Spot aluminum prices only made small gains in east China due to weak SHFE aluminum prices and sluggish trading sentiment. In addition, traders reduced offers gradually following SHFE aluminum price movements in morning trading, and deals were mainly made at discounts between zero and positive RMB 10/mt, with traded prices between RMB 16,030-16,070/mt. Although spot transactions were weak, the SMM survey shows only limited market players were pessimistic toward future prices, and most players believe aluminum prices will unlikely experience wide fluctuations in view of limited inflows of speculative funds, high production costs, tight cash flows, and the approaching seasonal low demand period at the end of year.
On Monday, prices in China’s domestic lead markets rose to RMB 17,150-17,300/mt tracking rising LME lead prices. Amid recent volatile LME lead prices, domestic downstream producers were even slower to purchase at the current higher domestic prices, causing transactions muted. Supply of “Gejiu” lead is limited currently, given optimistic smelters’ unwillingness to sell at the current price levels; while supply of other unknown brand lead is relatively high, since traders are still moving their stocks now.
Most market players believe domestic lead prices to keep stable this week. Last week, the US dollar index slumped to around 79, after release of US macro economic data, and from Bernanke’s statement about further quantitative easing monetary policies. The US dollar index is expected to stabilize at this level in the short term, helping support base metals markets. What’s more, market players won’t rush to dump goods in the near future, which happened a lot during the past two weeks when single-day declines in LME lead prices reaching above USD 100/mt. In this context, domestic lead prices will find support at the RMB 17,000/mt mark, with limited room of falling. However, traders are now still holding stocks on hand, and will depress higher domestic prices if they dump these goods for profit-taking. To sum up, SMM believes prices in domestic lead markets to mainly stabilize at the current level.
SHFE 1103 zinc contract prices opened slightly higher, with prices mainly moving between RMB 18,450-18,550/mt in the mornign session, and with prices once hitting an intraday high of RMB 18,620/mt. The US dollar index rebounded from 79.2 to 79.55 in the midday, weighing down LME zinc prices to between USD 2,235-2,245/mt. Meanwhile, the Shanghai Stock Exchange composite index dipped to between 2,830-2,840 points. The weakening LME zinc prices and dipping Shanghai Stock Exchange composite index dragged down SHFE 1103 zinc contract prices to a low of RMB 18,335/mt. However, a large number of speculators entered the market, helping SHFE 1103 zinc contract prices climb gradaully in the afternoon session, and SHFE 1103 zinc contract prices finally closed at RMB 18,465/mt, up RMB 0.82%, with prices hitting the 20-day moving average. Trading volumes fell by nearly 200,000 lots to more than 810,000 lots, while positions increased slightly by 2,812 lots to 284,146 lots, with struggles between long and short positions remaining intense.
In spot markets, #0 zinc was traded between RMB 17,850-17,900/mt, with discounts of RMB 600-620/mt against SHFE 1103 zinc contract prices. Traded prices for #0 zinc fell to around RMB 17,800/mt when SHFE 1103 zinc contract prices fell to RMB 18,350/mt in the midday. #1 zinc was traded between RMB 17,750-17,800/mt, with deals mainly made between traders, and downstream producers only made limited purchases at lower prices.
With regard to zinc price trends, 43% of market players believe the US dollar index will likely weaken further to between 78-79 in the near term, and LME zinc prices will climb to between USD 2,250-2,300/mt in response, and as a result, SHFE zinc prices will extend gains, with SHFE 1103 zinc contract prices expected to move between RMB 18,500-19,000/mt and spot zinc prices expected to climb to above RMB 18,000/mt. Among the remaining 57% of market players, some believe SHFE 1103 zinc contract prices will fluctuate around RMB 18,500/mt this week due to tight cash flow at the end of year and spot zinc prices will fluctuate above the RMB 18,000/mt mark, while others are uncertain about zinc price trends and are taking a wait-and-see attitude.
On Monday, low-end prices in Shanghai tin markets rose slightly, with stable high-end prices. Overall trading sentiment was still sluggish, with the lowest traded price at RMB 158,000/mt. Unknown brand tin was traded between RMB 158,000-158,300/mt, and deals for tin from Yunnan Tin Group and Gejiu Non-ferrous Metals Processing Company were closed between RMB 158,200-159,000/mt. Market supply was limited, and downstream producers were cautious to enter the market, purchasing on an as-needed basis.
The US dollar index fell below 80 last Friday due to the weak US nonfarm employment data and aggressive QE from the US Fed, but may rebound in the short term, given the ongoing European debt problem. Currently, metals markets are waiting for guide from China’s primary trade data in November, which will be released on Friday. LME tin prices are expected to fluctuate at around USD 25,500/m in the near future; downstream producers will mainly stay on the sidelines amid volatile LME tin prices, with limited transactions for high-priced tin ingot. SMM expects prices in Shanghai tin markets will mainly keep stable in the short term.
In the Shanghai nickel spot market, transactions were sluggish as buying interest was not strong amid unclear market trend. Mainstream traded prices of nickel from Jinchuan Group were between RMB 179,300-179,700/mt, with average price at RMB 179,500/mt, unchanged from last Friday’s level. Mainstream traded prices of nickel from Russia were between RMB 178,000-178,500/mt, with average price at RMB 178,250/mt, uncharged last Friday’s level.
According to results of SMM survey, 45% market players were bearish towards LME nickel price outlook in this week. They believe that European debt crisis still hunted market and euro may weaken versus the US dollar, weighing on base metal markets. It is reported that following Ireland, yields of treasury bond of Belgium and Italian are growing. From fundamental point of view, domestic stainless steel’s demand for refined nickel is shrinking and most stainless steel mills prefer to sign long term contract with (10-115%) NPI producers. In addition, recent demand from Europe is also not brisk, and inventories of domestic stainless steel in late November were up by 12.8% from mid-November’s level.
32% market players believe that LME nickel prices will be on upward track this week, holding that economic data released last week was optimistic and Bernake announced that the US may further buy dollar bond, which will support base metal prices.
The remaining 32% market players expect that LME nickel prices will remain volatile this week since struggles between long powder and short power continues.
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