SMM Weekly Review and Forecast (Dec. 6-Dec. 10)-Shanghai Metals Market

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SMM Weekly Review and Forecast (Dec. 6-Dec. 10)

SMM Insight 03:28:43PM Dec 13, 2010 Source:SMM

SHANGHAI, Dec. 10 (SMM)--The Political Bureau of the Central Committee of the CPC decided to implement positive fiscal and steady monetary policies at a meeting on December 3. Meanwhile, National Bureau of Statistics (NBS) announced to unveil major economic data for November on December 11 in advance. In this context, markets were cautious last week. As LME copper prices hit a new-high last week, SMMI was up 1.46% in response. The other base metal prices were up less than 0.5% while SMMI.Cu was up 2.53%.

Copper:
SHFE copper prices rose in tandem with the LME copper over the past week, but SHFE prices were slower to advance, leaving no improvement in the SHFE/LME copper price ratio. SHFE 1103 copper contract prices, the most active, rose steadily from RMB 65,500/mt, to reach RMB 67,950/mt on Thursday. Total positions for SHFE copper contracts generally remained below 330,000 lots due to market expectations of interest rate increases in China prior to the release of major economic results on Saturday. Spot trading sentiment improved slightly over this past week, but trading volumes failed to expand due to tight supply.

China’s Central Economic Work Conference originally scheduled for December 5th has been pushed back to December 10th. China brought forward to December 11th (Saturday) the release of major economic reports, originally scheduled for release on December 13th.  Markets expect China’s CPI for November will likely set a new high, so China’s Central Government may take more measures to cope with rising inflationary pressure before the data is announced on Saturday. In this context, any room for copper prices to rise is limited as markets await reports and responses by the government. If China raises interest rates as markets expect, copper prices will rise, especially for SHFE copper prices. However, copper price gains will be moderate if China continues to take only moderate controlling measures. SMM believes LME copper prices will fluctuate between USD 8,800-9,200/mt in the coming week. 

Aluminum:
SHFE base metals prices were weaker than LME base metals prices. SHFE aluminum prices fluctuated in a narrow band and trading sentiment remained sluggish, with SHFE aluminum prices near the 5-day moving average. Struggles between long and short positions in SHFE aluminum market remain intense, and market players are focusing on China’s economic data for November and whether or not China’s Central Government will introduce any new monetary policies in the near future.

Spot aluminum prices also fluctuated narrowly around RMB 16,000/mt, and although trader sentiment was depressed, they were still unwilling to move goods at lower prices. Spot premiums appeared against SHFE current-month aluminum contract prices, and market transactions remained weak.

Lead:
In general, China’s domestic lead markets were lackluster last week. At first, traders lifted offers to RMB 17,200-17,300/mt with rising LME lead prices early last week, but met resistance from downstream producers, keeping transactions muted. Domestic lead prices lacked strength to rise later, hovering between RMB 17,100-17,200/mt. Despite LME lead prices rallied above USD 2,400/mt over the weekend, prices and transactions in domestic lead markets failed to improve. For one thing, lead consumption was down due to weaker demand for e-bike batteries. For another, smelters and traders replenished stocks previously due to expectations of China’s launch of lead futures market in 2010, which caused lead stocks in Shanghai to constantly rise since September. However, the launch of China’s lead futures market is still uncertain so far, coupled with growing pressure of cash generation at the end of the year, traders and smelters were less insistent on firm offers. In general, domestic lead prices failed to rise in response to higher LME lead prices, due to weaker demand and relatively high stocks. 

Zinc:
US non-farm employment data for November was released the previous Friday and was less than forecast.  The US dollar index rebounded above 80, pushing down LME zinc prices to USD 2,219/mt.  Although the US dollar index moved higher last week, LME zinc prices still rallied to close to USD 2,300/mt on positive news that the US Federal Reserve may continue quantitative easing policies and the US government announced to prolong tax-cut policy.

Markets generally took a wait-and-see attitude before the release the past Saturday of China’s consumer prices index (CPI).  SHFE 1103 zinc contract prices mainly fluctuated between RMB 18,000-18,500/mt last week, but both trading volumes and total positions were lower.  In spot markets, spot zinc was traded between RMB 17,600-18,000/mt, with discounts of RMB 550-600/mt against SHFE 1103 zinc contract prices, but with trading at higher prices limited.  Transactions were made mainly between traders last week, while downstream buyers were only purchasing at lower prices.

Last week, total inventories increased to 550 kt, up 8,000 mt from the previous week.  Inventories in east China increased by 7,000 mt, to 423 kt, and in south China increased by 2,000 mt, to 119 kt.  In north China, inventories fell by 1,000 mt, to 8 kt.  Changes in inventories were a result of the following two reasons.

1. Zinc prices rose to RMB 17,700-18,000/mt, up from the previous week.  As a result, downstream purchasing was down and inventories were higher.  Inventories in east China grew mainly because some smelters shipped goods to east China for delivery.

2. Inventories fell in Tianjin since some smelters in Inner Mongolia were unwilling to sell goods given fluctuating zinc prices, resulting in declining supply.
 
Tin:
Last week, prices in China’s tin markets rose to RMB 159,500-161,000/mt, with the average price up RMB 1,000/mt from a week earlier. Domestic tin prices rose amid unchanged LME tin prices, due mainly to limited supply in domestic markets. Supply of Jinhai, Yunheng, Yunshan tin was quite low in markets; Yunnan Tin Group kept offers firm between RMB 160,000-161,000/mt, failing to attract buyers; supply of unknown brand tin was also limited, given smelters’ limited selling interest at low prices due to high costs and low stocks. In general, higher costs of traders and low market supply were mainly behind the rapid tin price increases last week. Some cargo-holders raised offers, and other sellers followed suit as well, helping lift mainstream prices in domestic tin markets. Besides Jinxin, Nanshan, Kaiyuan tin, supply is mainly from Yunnan Tin Group and Gejiu Non-ferrous Metals Processing Company. 

Nickel:
The average price in the Shanghai nickel spot market from 2-9 December was RMB 178,800/mt, up RMB 3,200/mt from a week earlier.  According to results of an SMM survey, market players are split evenly between bullish, neutral, and bearish outlooks.  In this context, traders were purchasing cautiously given the struggle between long and short positions.  Following four consecutive days of gains and given the possibility of an interest rate hike in China, most market players chose to stay out of the market.  Downstream purchases were mainly from the electroplating sector.

Last week, ex-works contract prices from Taigang Stainless Steel were up by RMB 400/mt to RMB 25,620/mt for #304 cold-rolled stainless coil, up by RMB 200/mt to RMB 24,620 for #304 hot-rolled stainless steel coil, and up by RMB 200 to RMB 12,220/mt for #430 cold-rolled stainless steel coil.  Stainless steel prices were generally stable last week and overall trading sentiment was quiet.

Taigang Stainless Steel announced it would resume the monthly quote system beginning in early 2011.  Taigang Stainless Steel adopted a weekly quote system in March 2009 when domestic stainless steel mills lowered prices in order to complete with imported stainless steel. 

Market rumors report the 2010 chromium industry meeting will be held in Shanghai.  China will attempt to shut down 50% of inefficient stainless steel capacity, or approximately 2.5-3 million mt.  The government crackdown on pollution and energy consumption will be more strictly implemented again in 2011, which is the start of another five year plan.  However, objections from local governments may cause difficulties in achieving Central Government goals.

 

Copyright © SMM. All Rights Reserved

None of this material may be used for any commercial or public use in any forms or means, without the prior written consent of SMM. For reproduction issue, please contact us by email: service.en@smm.cn

 

SMM Weekly Review and Forecast (Dec. 6-Dec. 10)

SMM Insight 03:28:43PM Dec 13, 2010 Source:SMM

SHANGHAI, Dec. 10 (SMM)--The Political Bureau of the Central Committee of the CPC decided to implement positive fiscal and steady monetary policies at a meeting on December 3. Meanwhile, National Bureau of Statistics (NBS) announced to unveil major economic data for November on December 11 in advance. In this context, markets were cautious last week. As LME copper prices hit a new-high last week, SMMI was up 1.46% in response. The other base metal prices were up less than 0.5% while SMMI.Cu was up 2.53%.

Copper:
SHFE copper prices rose in tandem with the LME copper over the past week, but SHFE prices were slower to advance, leaving no improvement in the SHFE/LME copper price ratio. SHFE 1103 copper contract prices, the most active, rose steadily from RMB 65,500/mt, to reach RMB 67,950/mt on Thursday. Total positions for SHFE copper contracts generally remained below 330,000 lots due to market expectations of interest rate increases in China prior to the release of major economic results on Saturday. Spot trading sentiment improved slightly over this past week, but trading volumes failed to expand due to tight supply.

China’s Central Economic Work Conference originally scheduled for December 5th has been pushed back to December 10th. China brought forward to December 11th (Saturday) the release of major economic reports, originally scheduled for release on December 13th.  Markets expect China’s CPI for November will likely set a new high, so China’s Central Government may take more measures to cope with rising inflationary pressure before the data is announced on Saturday. In this context, any room for copper prices to rise is limited as markets await reports and responses by the government. If China raises interest rates as markets expect, copper prices will rise, especially for SHFE copper prices. However, copper price gains will be moderate if China continues to take only moderate controlling measures. SMM believes LME copper prices will fluctuate between USD 8,800-9,200/mt in the coming week. 

Aluminum:
SHFE base metals prices were weaker than LME base metals prices. SHFE aluminum prices fluctuated in a narrow band and trading sentiment remained sluggish, with SHFE aluminum prices near the 5-day moving average. Struggles between long and short positions in SHFE aluminum market remain intense, and market players are focusing on China’s economic data for November and whether or not China’s Central Government will introduce any new monetary policies in the near future.

Spot aluminum prices also fluctuated narrowly around RMB 16,000/mt, and although trader sentiment was depressed, they were still unwilling to move goods at lower prices. Spot premiums appeared against SHFE current-month aluminum contract prices, and market transactions remained weak.

Lead:
In general, China’s domestic lead markets were lackluster last week. At first, traders lifted offers to RMB 17,200-17,300/mt with rising LME lead prices early last week, but met resistance from downstream producers, keeping transactions muted. Domestic lead prices lacked strength to rise later, hovering between RMB 17,100-17,200/mt. Despite LME lead prices rallied above USD 2,400/mt over the weekend, prices and transactions in domestic lead markets failed to improve. For one thing, lead consumption was down due to weaker demand for e-bike batteries. For another, smelters and traders replenished stocks previously due to expectations of China’s launch of lead futures market in 2010, which caused lead stocks in Shanghai to constantly rise since September. However, the launch of China’s lead futures market is still uncertain so far, coupled with growing pressure of cash generation at the end of the year, traders and smelters were less insistent on firm offers. In general, domestic lead prices failed to rise in response to higher LME lead prices, due to weaker demand and relatively high stocks. 

Zinc:
US non-farm employment data for November was released the previous Friday and was less than forecast.  The US dollar index rebounded above 80, pushing down LME zinc prices to USD 2,219/mt.  Although the US dollar index moved higher last week, LME zinc prices still rallied to close to USD 2,300/mt on positive news that the US Federal Reserve may continue quantitative easing policies and the US government announced to prolong tax-cut policy.

Markets generally took a wait-and-see attitude before the release the past Saturday of China’s consumer prices index (CPI).  SHFE 1103 zinc contract prices mainly fluctuated between RMB 18,000-18,500/mt last week, but both trading volumes and total positions were lower.  In spot markets, spot zinc was traded between RMB 17,600-18,000/mt, with discounts of RMB 550-600/mt against SHFE 1103 zinc contract prices, but with trading at higher prices limited.  Transactions were made mainly between traders last week, while downstream buyers were only purchasing at lower prices.

Last week, total inventories increased to 550 kt, up 8,000 mt from the previous week.  Inventories in east China increased by 7,000 mt, to 423 kt, and in south China increased by 2,000 mt, to 119 kt.  In north China, inventories fell by 1,000 mt, to 8 kt.  Changes in inventories were a result of the following two reasons.

1. Zinc prices rose to RMB 17,700-18,000/mt, up from the previous week.  As a result, downstream purchasing was down and inventories were higher.  Inventories in east China grew mainly because some smelters shipped goods to east China for delivery.

2. Inventories fell in Tianjin since some smelters in Inner Mongolia were unwilling to sell goods given fluctuating zinc prices, resulting in declining supply.
 
Tin:
Last week, prices in China’s tin markets rose to RMB 159,500-161,000/mt, with the average price up RMB 1,000/mt from a week earlier. Domestic tin prices rose amid unchanged LME tin prices, due mainly to limited supply in domestic markets. Supply of Jinhai, Yunheng, Yunshan tin was quite low in markets; Yunnan Tin Group kept offers firm between RMB 160,000-161,000/mt, failing to attract buyers; supply of unknown brand tin was also limited, given smelters’ limited selling interest at low prices due to high costs and low stocks. In general, higher costs of traders and low market supply were mainly behind the rapid tin price increases last week. Some cargo-holders raised offers, and other sellers followed suit as well, helping lift mainstream prices in domestic tin markets. Besides Jinxin, Nanshan, Kaiyuan tin, supply is mainly from Yunnan Tin Group and Gejiu Non-ferrous Metals Processing Company. 

Nickel:
The average price in the Shanghai nickel spot market from 2-9 December was RMB 178,800/mt, up RMB 3,200/mt from a week earlier.  According to results of an SMM survey, market players are split evenly between bullish, neutral, and bearish outlooks.  In this context, traders were purchasing cautiously given the struggle between long and short positions.  Following four consecutive days of gains and given the possibility of an interest rate hike in China, most market players chose to stay out of the market.  Downstream purchases were mainly from the electroplating sector.

Last week, ex-works contract prices from Taigang Stainless Steel were up by RMB 400/mt to RMB 25,620/mt for #304 cold-rolled stainless coil, up by RMB 200/mt to RMB 24,620 for #304 hot-rolled stainless steel coil, and up by RMB 200 to RMB 12,220/mt for #430 cold-rolled stainless steel coil.  Stainless steel prices were generally stable last week and overall trading sentiment was quiet.

Taigang Stainless Steel announced it would resume the monthly quote system beginning in early 2011.  Taigang Stainless Steel adopted a weekly quote system in March 2009 when domestic stainless steel mills lowered prices in order to complete with imported stainless steel. 

Market rumors report the 2010 chromium industry meeting will be held in Shanghai.  China will attempt to shut down 50% of inefficient stainless steel capacity, or approximately 2.5-3 million mt.  The government crackdown on pollution and energy consumption will be more strictly implemented again in 2011, which is the start of another five year plan.  However, objections from local governments may cause difficulties in achieving Central Government goals.

 

Copyright © SMM. All Rights Reserved

None of this material may be used for any commercial or public use in any forms or means, without the prior written consent of SMM. For reproduction issue, please contact us by email: service.en@smm.cn