SMM Weekly Review and Forecast (Jan. 30-Feb.3)-Shanghai Metals Market

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SMM Weekly Review and Forecast (Jan. 30-Feb.3)

SMM Insight 03:16:52PM Feb 06, 2012 Source:SMM

SHANGHAI, Feb. 6 (SMM) – Before the Chinese New Year holiday, international commodity prices surged given the falling US dollar index, but surrendered previous gains after the holiday as the US dollar index rebounded. SMMI fell by 0.38% last week. In particular, SMMI.Cu declined by 1.7%, but SMMI.Sn and SMMI.Zn rose by 7% and 2.62%, respectively. SMMI.Ni also gained 1.97% over the past week.

Copper  
Chinese stock markets failed to rally following the Chinese New Year holiday. Trading volumes for the most actively-traded copper contracts were also down by 700,000 lots compared with pre-holiday levels and market activity was low. SHFE copper prices remained weak despite rising LME copper prices during the holiday, causing the SHFE/LME copper price ratio to fall to 7.14. The most actively-traded copper contract prices retreated to RMB 59,500/mt, down from RMB 61,500/mt. SHFE copper prices were trapped below the 5 and 10-day moving averages and had little upward momentum.

In the spot market, losses for copper importers grew last week, forcing them to hold goods at current low prices. Domestic copper smelters also had no intention of selling goods at existing discounts of 400-300/mt. Despite the reluctance to sell, overall market supply was still stable. Early last week, traders entered the market when copper discounts were relatively large, but downstream producers were absent since they had not yet restarted production. As a result, market transactions were relatively quiet.

SHFE copper prices should move between RMB 58,500-60,500/mt in the coming week, and spot copper discounts will gradually narrow.

Aluminum
SHFE three-month aluminum contract prices fell continuously during the first week of trading following the Chinese New Year holiday, with prices slipping from RMB 16,460/mt to RMB 16,200/mt and testing support at the 20-day moving average. Growing spot aluminum inventories and a delay in production resumption at downstream processors depressed spot aluminum prices, with spot discounts remaining above RMB 100/mt and SMM aluminum prices moving below RMB 16,000/mt. High discounts gave some traders opportunities for  profits from the spread between futures and spot markets, resulting in quiet trading in spot markets.

SHFE three-month aluminum contract prices will fall to RMB 16,100/mt and some demand at lower prices will help limit declines in SHFE aluminum prices. Although trading activity will improve slightly in spot markets after February 6th, growing spot aluminum inventories will keep spot discounts around RMB 100/mt. Trading volumes expected to increase slightly as well.

Lead
SHFE lead prices, boosted by higher LME lead prices during the holiday, opened higher at RMB 16,440/mt on the first trading day following the Chinese New Year holiday, a new high since September 2011. However, later in last week, SHFE lead prices were dragged down by declining Chinese stock markets, falling to RMB 15,960/mt. SHFE lead prices are expected to move between RMB 15,800-16,200/mt in the coming week.

In China's domestic spot markets, lead prices fell to RMB 15,800/mt last week, down from RMB 16,100/mt, and with discounts over the SHFE lead prices growing from RMB 100/mt to as high as RMB 180/mt. Since large smelters have now resumed production and since inventories were relatively high during the holiday, cargo holders were actively moving goods. However, most downstream enterprises will not restart production until after the Lantern Festival on February 6 and those now open were consuming existing stocks, so buying interest was low and transactions quiet. Production at downstream enterprises will return to normal and demand should improve following the Lantern Festival. However, smelters may undertake regular maintenance and use remaining output for long-term contracts, limiting supply and help support prices between RMB 15,700-16,100/mt.

Zinc
SHFE zinc prices failed to keep pace with strong gains made by LME zinc prices after the Chinese New Year holiday. SHFE three-month zinc contract prices hit a high of RMB 16,360/mt after opening up on the first trading day after the holiday, but fell later in the week to below RMB 16,000/mt due to strong short selling pressures. Prices later struggled around the 5-day moving average and frequently tested RMB 15,800/mt. 

Spot zinc markets remained quiet after the holiday as most downstream producers were still closed from the holiday. As SHFE zinc prices surged early last week, spot discounts gradually grew to RMB 400/mt over SHFE three-month zinc contract prices. This arbitrage window improved trader demand for registered zinc brands. Most deals last week were made by traders and mainly between RMB 15,500-15,800/mt. Spot discounts gradually narrowed later in the week to RMB 260-300/mt due to declines in SHFE zinc prices.

Many downstream producers are not expected to resume production until February 6th. Since downstream consumers resisted building inventories before the holiday and existing inventories have now been used up, spot market trading is expected to improve in the coming week. In general, SMM expects LME zinc prices to move between USD 2,100-2,150/mt in the coming week, but as domestic spot zinc inventories grow, spot zinc prices are expected to hover between RMB 15,400-15,800/mt.

Tin
Spot tin prices surged to RMB 185,500-186,000/mt early last week supported by jumping LME prices and tight supply. However, after LME tin ended its gaining run and other metals prices dropped, and as many downstream businesses already stocked up ahead of the Chinese New Year, tin prices fell to RMB 182,000-184,000/mt on Friday. Supply of the metal has held tight as smelters in Yunnan and Jiangxi etc. still have not fully resumed production with a wait-and-see stance. Production has not turned normal either at downstream, leading to light trading.

Nickel
On the first trading day following Chinese New Year, LME nickel prices fell slightly due to declines in the euro following profit-taking after opening at USD 21,653/mt. On Tuesday, LME nickel prices were again weighed down by a combination of negative factors including the 17% yield rate for Portugal's 10-year government bonds, a lack of progress in Greek debt talks, and weak economic indicators from the US. However, LME nickel prices rebounded slightly on Wednesday once upbeat PMI from the US and the euro zone eased market pessimism. During Thursday's Asian trading hours, China's domestic stock market also rebounded strongly and pushed up LME nickel prices, but concerns over euro zone debts caused LME nickel prices to close with slight losses during European and New York trading hours. 

Some traders and downstream producers are expected to replenish stocks following the Chinese Lantern Festival on February 6th, so SMM expects trading volumes will grow and spot nickel prices will move in the RMB 140,000-149,000/mt range in the coming week. 




 

Price

more
SMM #1 Nickel
Jul.16
107000.0
850.0
(0.80%)
#1 JinChuan Nickel
Jul.16
107750.0
750.0
(0.70%)
SHFE nickel contract premium/discount
Jul.01
1050.0
0.0
(0.00%)
#1 Import Nickel
Jul.16
106250.0
800.0
(0.76%)
SHFE nickel contract premium/discount
Jul.01
-550.0
0.0
(0.00%)

SMM Weekly Review and Forecast (Jan. 30-Feb.3)

SMM Insight 03:16:52PM Feb 06, 2012 Source:SMM

SHANGHAI, Feb. 6 (SMM) – Before the Chinese New Year holiday, international commodity prices surged given the falling US dollar index, but surrendered previous gains after the holiday as the US dollar index rebounded. SMMI fell by 0.38% last week. In particular, SMMI.Cu declined by 1.7%, but SMMI.Sn and SMMI.Zn rose by 7% and 2.62%, respectively. SMMI.Ni also gained 1.97% over the past week.

Copper  
Chinese stock markets failed to rally following the Chinese New Year holiday. Trading volumes for the most actively-traded copper contracts were also down by 700,000 lots compared with pre-holiday levels and market activity was low. SHFE copper prices remained weak despite rising LME copper prices during the holiday, causing the SHFE/LME copper price ratio to fall to 7.14. The most actively-traded copper contract prices retreated to RMB 59,500/mt, down from RMB 61,500/mt. SHFE copper prices were trapped below the 5 and 10-day moving averages and had little upward momentum.

In the spot market, losses for copper importers grew last week, forcing them to hold goods at current low prices. Domestic copper smelters also had no intention of selling goods at existing discounts of 400-300/mt. Despite the reluctance to sell, overall market supply was still stable. Early last week, traders entered the market when copper discounts were relatively large, but downstream producers were absent since they had not yet restarted production. As a result, market transactions were relatively quiet.

SHFE copper prices should move between RMB 58,500-60,500/mt in the coming week, and spot copper discounts will gradually narrow.

Aluminum
SHFE three-month aluminum contract prices fell continuously during the first week of trading following the Chinese New Year holiday, with prices slipping from RMB 16,460/mt to RMB 16,200/mt and testing support at the 20-day moving average. Growing spot aluminum inventories and a delay in production resumption at downstream processors depressed spot aluminum prices, with spot discounts remaining above RMB 100/mt and SMM aluminum prices moving below RMB 16,000/mt. High discounts gave some traders opportunities for  profits from the spread between futures and spot markets, resulting in quiet trading in spot markets.

SHFE three-month aluminum contract prices will fall to RMB 16,100/mt and some demand at lower prices will help limit declines in SHFE aluminum prices. Although trading activity will improve slightly in spot markets after February 6th, growing spot aluminum inventories will keep spot discounts around RMB 100/mt. Trading volumes expected to increase slightly as well.

Lead
SHFE lead prices, boosted by higher LME lead prices during the holiday, opened higher at RMB 16,440/mt on the first trading day following the Chinese New Year holiday, a new high since September 2011. However, later in last week, SHFE lead prices were dragged down by declining Chinese stock markets, falling to RMB 15,960/mt. SHFE lead prices are expected to move between RMB 15,800-16,200/mt in the coming week.

In China's domestic spot markets, lead prices fell to RMB 15,800/mt last week, down from RMB 16,100/mt, and with discounts over the SHFE lead prices growing from RMB 100/mt to as high as RMB 180/mt. Since large smelters have now resumed production and since inventories were relatively high during the holiday, cargo holders were actively moving goods. However, most downstream enterprises will not restart production until after the Lantern Festival on February 6 and those now open were consuming existing stocks, so buying interest was low and transactions quiet. Production at downstream enterprises will return to normal and demand should improve following the Lantern Festival. However, smelters may undertake regular maintenance and use remaining output for long-term contracts, limiting supply and help support prices between RMB 15,700-16,100/mt.

Zinc
SHFE zinc prices failed to keep pace with strong gains made by LME zinc prices after the Chinese New Year holiday. SHFE three-month zinc contract prices hit a high of RMB 16,360/mt after opening up on the first trading day after the holiday, but fell later in the week to below RMB 16,000/mt due to strong short selling pressures. Prices later struggled around the 5-day moving average and frequently tested RMB 15,800/mt. 

Spot zinc markets remained quiet after the holiday as most downstream producers were still closed from the holiday. As SHFE zinc prices surged early last week, spot discounts gradually grew to RMB 400/mt over SHFE three-month zinc contract prices. This arbitrage window improved trader demand for registered zinc brands. Most deals last week were made by traders and mainly between RMB 15,500-15,800/mt. Spot discounts gradually narrowed later in the week to RMB 260-300/mt due to declines in SHFE zinc prices.

Many downstream producers are not expected to resume production until February 6th. Since downstream consumers resisted building inventories before the holiday and existing inventories have now been used up, spot market trading is expected to improve in the coming week. In general, SMM expects LME zinc prices to move between USD 2,100-2,150/mt in the coming week, but as domestic spot zinc inventories grow, spot zinc prices are expected to hover between RMB 15,400-15,800/mt.

Tin
Spot tin prices surged to RMB 185,500-186,000/mt early last week supported by jumping LME prices and tight supply. However, after LME tin ended its gaining run and other metals prices dropped, and as many downstream businesses already stocked up ahead of the Chinese New Year, tin prices fell to RMB 182,000-184,000/mt on Friday. Supply of the metal has held tight as smelters in Yunnan and Jiangxi etc. still have not fully resumed production with a wait-and-see stance. Production has not turned normal either at downstream, leading to light trading.

Nickel
On the first trading day following Chinese New Year, LME nickel prices fell slightly due to declines in the euro following profit-taking after opening at USD 21,653/mt. On Tuesday, LME nickel prices were again weighed down by a combination of negative factors including the 17% yield rate for Portugal's 10-year government bonds, a lack of progress in Greek debt talks, and weak economic indicators from the US. However, LME nickel prices rebounded slightly on Wednesday once upbeat PMI from the US and the euro zone eased market pessimism. During Thursday's Asian trading hours, China's domestic stock market also rebounded strongly and pushed up LME nickel prices, but concerns over euro zone debts caused LME nickel prices to close with slight losses during European and New York trading hours. 

Some traders and downstream producers are expected to replenish stocks following the Chinese Lantern Festival on February 6th, so SMM expects trading volumes will grow and spot nickel prices will move in the RMB 140,000-149,000/mt range in the coming week.