SMM Weekly Review and Forecast (Jan. 16-20)-Shanghai Metals Market

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SMM Weekly Review and Forecast (Jan. 16-20)

SMM Insight 10:47:52AM Jan 21, 2012 Source:SMM

SHANGHAI, Jan. 21 (SMM) – With serial positive news from major economies including China, US and Europe, base metals prices showed strong trends last week. SMMI increased by 3.45%, with SMMI. Cu up 5%, leading the increase. SMMI.Pb, SMMI.Ni and SMMI.Zn were up 3.09%, 2.2% and 2.01%, respectively. SMMI.Sn and SMMI.Al only rose 0.5% and 0.44% due to restrictions from market fundamentals.

Copper
Last week, rising Chinese stocks prices helped SHFE copper prices rise from RMB 57,500/mt to RMB 60,000/mt, with a weekly high-end price of RMB 61,150/mt. With the approach of the Chinese New Year holiday, trading activity in domestic markets was low. Gains by SHFE copper were less than LME copper, causing the SHFE/LME copper price ratio to fall to 7.25. Trading volumes fell sharply by nearly 1 million lots and positions also experienced marked declines.

In China’s domestic copper market, transactions were quiet as traders closed for the Chinese New Year holiday. Downstream buyers were staying out of markets, leaving only a few arbitrage operations early in the week. Spot discounts declined with the surging copper prices. Deals were sparse late during the week.

Aluminum
Last week, SHFE three-month aluminum contract prices rose to RMB 16,455/mt after gaining momentum at RMB 16,200/mt. However, resistance at RMB 16,400/mt was strong due to slow trading activity ahead of the Chinese New Year holiday.

In East China, downstream buying activity was quiet, with limited transactions made mainly by traders and for stock replenishment before the holiday. Quotations by cargo-holders were also mixed, with some eager to generate cash expanding spot discounts to RMB 150/mt, while most other traders held offers firm at RMB 16,100/mt. Despite the limited increase in spot aluminum prices, market players were cautious, leaving spot markets quieter late during the week.

Lead
Last week, SHFE lead prices surged to RMB 16,000/mt, up from RMB 15,265/mt early in the week and with a weekly gain of 4.8%. SHFE lead prices after the holiday will likely be influenced by LME lead prices and market news during the holiday.

In China’s domestic spot markets, lead prices rose to RMB 15,800/mt along with higher LME lead prices. Since most producers, traders and downstream buyers have already closed for the holiday, transactions last week were scarce and with only a few deals made early in the week between RMB 15,350-15,450/mt. After the holiday, increase in spot lead prices will be limited. Since many downstream enterprises will not restart operation immediately following the holiday, refined lead demand will not improve quickly. Supply will begin to build soon after the holiday since smelters will sell stocks to improve cash flows. As a result, lead prices will not likely increase, but remain between RMB 15,600-15,900/mt.

Zinc
The most actively traded contract shifted to SHFE 1204 zinc last week. Apart from drawing support from the recent LME zinc price rally, SHFE 1204 zinc contract prices were also boosted by rising Chinese stock markets. Last week, SHFE 1204 zinc contract prices broke through the RMB 15,000/mt mark and stood above all moving averages. Although longs and shorts gradually exited the market ahead of the Chinese New Year holiday, SHFE 1204 zinc contract prices still advanced with strong upward momentum.

In spot markets, spot discounts against SHFE 1204 zinc contract grew from RMB 250 to RMB 400-450/mt due to steady increases in SHFE zinc futures prices. Since most downstream consumers and traders have now closed for the Chinese New Year holiday, overall trading sentiment was quiet.

Spot zinc inventories increased further over muted transactions. Inventories in East China were unchanged at 416,400 mt, inventories in South China grew by 37,000 mt, to 133,000 mt, and inventories in North China remained unchanged at 14,000 mt. Notably, discounts for LME zinc narrowed to USD 7/mt last week, and LME zinc inventories surged by over 20,000 mt, to hit 840,000 mt.

Tin
Last week, tin prices in Shanghai remained stable between RMB 170,000-173,000/mt. Later in the week, with fewer goods at lower prices available in the market, mainstream spot prices rose to RMB 172,000-173,000/mt. Some traders intended to sell futures tin to be delivered following the holiday with prices mainly below RMB 170,000/mt but with few inquiries. Transactions were quiet ahead of the holiday as both sellers and buyers were almost closed for the holiday.

Nickel
LME nickel prices fell slightly last Monday following the ratings downgrade by Standard & Poor’s of nine European countries. LME nickel prices advanced on Tuesday and Wednesday, however, as China’s stock markets rebounded on news of positive results from Portugal’s government bond auction. The euro zone will undergo a critical long-term debt demand test on Thursday, but market players were already optimistic towards the issue by Spain and France of EUR 14 billion in government bonds. On Friday, officials from the IMF, European Central Bank, and European Union will arrive in Athens, Greece to discuss additional rescue plans for Greek debt. In general, market sentiment was relatively optimistic as European leaders were taking positive action to resolve the debt crisis, helping LME nickel prices surge on Thursday and break through the USD 20,000/mt mark.

Jinchuan Group ex-works nickel prices were unchanged last week at RMB 137,000/mt.  Pre-holiday stock replenishment has ended as downstream producers gradually closed for holiday, leaving trading sentiment quiet. Since most traders also closed for holiday, final stock replenishments last Wednesday drove trading volumes slightly higher, but overall trading sentiment was still relatively quiet. Few offers were quoted by traders, but were still relatively high on Thursday between RMB 137,500-139,000/mt.
 

SMM Weekly Review and Forecast (Jan. 16-20)

SMM Insight 10:47:52AM Jan 21, 2012 Source:SMM

SHANGHAI, Jan. 21 (SMM) – With serial positive news from major economies including China, US and Europe, base metals prices showed strong trends last week. SMMI increased by 3.45%, with SMMI. Cu up 5%, leading the increase. SMMI.Pb, SMMI.Ni and SMMI.Zn were up 3.09%, 2.2% and 2.01%, respectively. SMMI.Sn and SMMI.Al only rose 0.5% and 0.44% due to restrictions from market fundamentals.

Copper
Last week, rising Chinese stocks prices helped SHFE copper prices rise from RMB 57,500/mt to RMB 60,000/mt, with a weekly high-end price of RMB 61,150/mt. With the approach of the Chinese New Year holiday, trading activity in domestic markets was low. Gains by SHFE copper were less than LME copper, causing the SHFE/LME copper price ratio to fall to 7.25. Trading volumes fell sharply by nearly 1 million lots and positions also experienced marked declines.

In China’s domestic copper market, transactions were quiet as traders closed for the Chinese New Year holiday. Downstream buyers were staying out of markets, leaving only a few arbitrage operations early in the week. Spot discounts declined with the surging copper prices. Deals were sparse late during the week.

Aluminum
Last week, SHFE three-month aluminum contract prices rose to RMB 16,455/mt after gaining momentum at RMB 16,200/mt. However, resistance at RMB 16,400/mt was strong due to slow trading activity ahead of the Chinese New Year holiday.

In East China, downstream buying activity was quiet, with limited transactions made mainly by traders and for stock replenishment before the holiday. Quotations by cargo-holders were also mixed, with some eager to generate cash expanding spot discounts to RMB 150/mt, while most other traders held offers firm at RMB 16,100/mt. Despite the limited increase in spot aluminum prices, market players were cautious, leaving spot markets quieter late during the week.

Lead
Last week, SHFE lead prices surged to RMB 16,000/mt, up from RMB 15,265/mt early in the week and with a weekly gain of 4.8%. SHFE lead prices after the holiday will likely be influenced by LME lead prices and market news during the holiday.

In China’s domestic spot markets, lead prices rose to RMB 15,800/mt along with higher LME lead prices. Since most producers, traders and downstream buyers have already closed for the holiday, transactions last week were scarce and with only a few deals made early in the week between RMB 15,350-15,450/mt. After the holiday, increase in spot lead prices will be limited. Since many downstream enterprises will not restart operation immediately following the holiday, refined lead demand will not improve quickly. Supply will begin to build soon after the holiday since smelters will sell stocks to improve cash flows. As a result, lead prices will not likely increase, but remain between RMB 15,600-15,900/mt.

Zinc
The most actively traded contract shifted to SHFE 1204 zinc last week. Apart from drawing support from the recent LME zinc price rally, SHFE 1204 zinc contract prices were also boosted by rising Chinese stock markets. Last week, SHFE 1204 zinc contract prices broke through the RMB 15,000/mt mark and stood above all moving averages. Although longs and shorts gradually exited the market ahead of the Chinese New Year holiday, SHFE 1204 zinc contract prices still advanced with strong upward momentum.

In spot markets, spot discounts against SHFE 1204 zinc contract grew from RMB 250 to RMB 400-450/mt due to steady increases in SHFE zinc futures prices. Since most downstream consumers and traders have now closed for the Chinese New Year holiday, overall trading sentiment was quiet.

Spot zinc inventories increased further over muted transactions. Inventories in East China were unchanged at 416,400 mt, inventories in South China grew by 37,000 mt, to 133,000 mt, and inventories in North China remained unchanged at 14,000 mt. Notably, discounts for LME zinc narrowed to USD 7/mt last week, and LME zinc inventories surged by over 20,000 mt, to hit 840,000 mt.

Tin
Last week, tin prices in Shanghai remained stable between RMB 170,000-173,000/mt. Later in the week, with fewer goods at lower prices available in the market, mainstream spot prices rose to RMB 172,000-173,000/mt. Some traders intended to sell futures tin to be delivered following the holiday with prices mainly below RMB 170,000/mt but with few inquiries. Transactions were quiet ahead of the holiday as both sellers and buyers were almost closed for the holiday.

Nickel
LME nickel prices fell slightly last Monday following the ratings downgrade by Standard & Poor’s of nine European countries. LME nickel prices advanced on Tuesday and Wednesday, however, as China’s stock markets rebounded on news of positive results from Portugal’s government bond auction. The euro zone will undergo a critical long-term debt demand test on Thursday, but market players were already optimistic towards the issue by Spain and France of EUR 14 billion in government bonds. On Friday, officials from the IMF, European Central Bank, and European Union will arrive in Athens, Greece to discuss additional rescue plans for Greek debt. In general, market sentiment was relatively optimistic as European leaders were taking positive action to resolve the debt crisis, helping LME nickel prices surge on Thursday and break through the USD 20,000/mt mark.

Jinchuan Group ex-works nickel prices were unchanged last week at RMB 137,000/mt.  Pre-holiday stock replenishment has ended as downstream producers gradually closed for holiday, leaving trading sentiment quiet. Since most traders also closed for holiday, final stock replenishments last Wednesday drove trading volumes slightly higher, but overall trading sentiment was still relatively quiet. Few offers were quoted by traders, but were still relatively high on Thursday between RMB 137,500-139,000/mt.