SHANGHAI, Mar. 13 (SMM) –
As LME copper prices closed with strong gains last Friday, SHFE 1206 copper contract prices, the most active one, opened RMB 560/mt higher at RMB 60,700/mt Monday. SHFE copper prices fluctuated briefly following the opening, but met large-scale selling pressures after touching a high of RMB 60,850/mt. Chinese stock markets closed slightly down, dragging down SHFE copper prices, which came under pressure at the daily moving average but won support near the 20-day moving average of RMB 60,350/mt. Finally, SHFE 1206 copper contract prices closed at RMB 60,620/mt, up RMB 480/mt or 0.8%. Positions for SHFE 1206 copper contract were up 3,818 lots, while trading volumes were down 54,208 lots. SHFE copper prices failed to break resistance at RMB 61,000/mt during the first trading day of this week, but gained more support at low-end prices.
In spot markets, since SHFE copper prices lacked momentum to rebound, cargo-holders tried to maintain premiums as the delivery date for SHFE current-month copper contract nears. Mainstream copper offers were quoted between discounts of negative RMB 50/mt and premiums of positive RMB 20/mt in the morning business. Traded prices for standard-quality copper were between RMB 59,650-59,750/mt, and RMB 59,700-59,850/mt for high-quality copper. Spot copper supply decreased during the whole trading day. Traders continued to favor high-quality copper with low premiums, while downstream producers opted to stand on the sidelines, keeping market activity light. In the afternoon business, spot copper offers were virtually unchanged from the morning session levels, but traded prices edged down to between RMB 59,600-59,770/mt. Some traders made purchases when copper prices rallied at the tail of trading, but overall market activity remained quiet.
SMM conducted a survey with regard to copper price movements this week.
Based on the survey, 42% of market insiders believe copper prices will fluctuate at current values this week, with LME copper prices expected between USD 8,400-8,500/mt and SHFE copper prices around RMB 60,000/mt. Despite successful Greek debt swap deal and strong US economic data, both LME and SHFE copper prices are still struggling among their moving averages, with technical indicators pointing downside. In China, Premier Wen Jiabao lowered China's 2012 economic growth target to 7.5% when delivering a government report, the first time below 8% in recent 8 years. Monetary policy, though, will be maintained stable, and the projected growth of China's broad money supply (M2), which is closely related to liquidity in stock markets, is only estimated at around 14% this year. This means there will be limited room for significantly loosening measures. However, the National Bureau of Statistics (NBS) announced last Friday China's latest CPI growth continued to fall, boosting market expectations that the central bank will introduce some appropriately loosening monetary measures, and providing good support for low-end copper prices. Nevertheless, Chinese stock markets face great pressures at 2,450 points, which will drag commodity markets down. These factors mentioned above will lead copper prices to fluctuate this week.
29% of the market insiders SMM surveyed are optimistic about the outlook, believing LME copper prices will challenge resistance at USD 8,500/mt and that SHFE copper prices will stand above RMB 60,500/mt. As private creditors approved the debt swap deal, the European debt crisis will have a weakening impact on copper markets over the near term. The US nonfarm payrolls are positive, and markets are positive towards this week's import and export price index, initial jobless claims, and the latest CPI data. In this context, the US and European stock markets are likely to rise further this week, which can drive up copper prices. Meanwhile, cargo-holders in spot markets will quote prices firm as the delivery date for SHFE current-month copper contract nears. Slight copper premiums will bolster SHFE copper prices. Therefore, copper prices will trend higher this week.
The remaining 29% are pessimistic, expecting LME copper prices will retreat to USD 8,300/mt and SHFE copper prices will confirm support at RMB 59,000/mt. The US dollar broke resistance at 80 Monday after closing with strong gains last Friday, and will keep increasing momentum this week, both from impossibility of US loosening monetary policy over the near term and technical indicators. Furthermore, spot copper consumption in China fails to improve, and especially given the fact that downstream buying will be unlikely as spot copper will maintain slight premiums due to the approach of delivery date. As such, both a strong US dollar and sluggish Chinese consumption will push copper prices down this week.
Following gains of LME aluminum last Friday, the most active SHFE aluminum contract for May delivery hit RMB 16,235/mt in Monday morning, but failed to consolidate thereby closing down RMB 20/mt or 0.12% at RMB 16,175/mt. Positions stayed at 51,502 lots while only 5,148 lots of contracts were transactions. Weak fundamentals means the metal will not likely present one-sided movement in the near term.
Spot aluminum traded between RMB 15,920-15,940/mt in Shanghai, at smaller discounts of RMB 20-40/mt over the SHFE current-month aluminum price as delivery date nears. Low-iron aluminum traded between RMB 16,000-16,020/mt. Scarce inquires and deals were reported, however, from bearish middlemen and downstream buyers.
In an SMM survey on this week's aluminum prices, 3 or 8% of the 38 aluminum traders covered say aluminum price will gain as demand recovers in March and with the rebound of LME aluminum prices after the European debt crisis slightly eased. Narrowing discounts over the SHFE current-month aluminum price with the nearing delivery date also means higher aluminum prices.
The majority 30 or 79% respondents expect stability though, while high production costs limit downward space and warrant hedging of aluminum plants prevents large gains. In addition, high aluminum stocks have added to upward resistance. Remaining 5 or 13% traders expect losses based on recent stagnation and light trading of SHFE aluminum while aluminum stocks keep going up in the face of weak demand outlook.
On Monday, SHFE 1205 lead contract became the most active one. Although LME lead prices rose last Friday, SHFE lead prices did not increase significantly, and moved between RMB 15,930-15,970/mt after opening at RMB 15,970/mt. In the afternoon, SHFE lead prices moved down to hit a low of RMB 15,880/mt due to the falling domestic stocks and finally closed at RMB 15,940/mt, down RMB 80/mt. Traded volumes increased by 156 lots to 396 lots and positions were up 162 lots to 1,386 lots.
Spot lead price in China's domestic markets remained unchanged from last week. Quotations were fewer as SHFE lead prices were not steady on Monday and market players were cautious. Brands including Yubei and Shuangyan were quoted between RMB 15,800-15,850/mt, and quotations for Shenqian were at RMB 15,750/mt. Transactions remained modest. In the afternoon, futures prices fell slightly and quotations were sparse in spot markets.
With regard to the lead price trends this week, 73% of industry insiders believe spot lead prices will not show significant change and should remain between RMB 15,600-15,900/mt. Despite the completion of Greek debt exchange, Greece will still be at high risk of defaulting according to credit rating agency Moody's as private creditors may suffer great losses in the debt exchange. In addition, investors will remain cautious before the much concerned US Federal Reserve meeting on interest rates scheduled for this Wednesday. In domestic spot markets, cargo holders will be more willing to move goods, but downstream buyers will purchase on an as-needed basis with the approach of offseason.
The rest 27% are relatively optimistic as the completion of the Greek debt exchange secured the EU's second bailout loan to Greece, combined with the positive US nonfarm payrolls released last Friday, risk aversion in the market was eased. Meanwhile, LME lead inventories have been falling since early March. In China's domestic spot markets, lead concentrate supply was in shortage since the unfavorable Shanghai/LME lead price ratio left few lead concentrate imports and crude lead was hard to find in domestic markets. Therefore, operating rates at lead smelters remained low, and refined lead supply will continue to decline as a result. Besides, since some smelters had to limit sales due to lower output caused by repairs and environmental protection inspections, lead supply will likely fall significantly in the near term, helping support lead prices to hold at the RMB 16,000/mt mark.
SHFE three-month zinc contract prices fell continuously to test the 5-day moving average after opening higher at RMB 15,950/mt on Monday. Prices began to move higher in the midday, but the lack of upward momentum caused prices to lose previous gains after hitting RMB 15,890/mt. Later, prices climbed in response to strengthening Shanghai Composite Index, with prices finally closing at RMB 15,900/mt, up RMB 60/mt. Trading volumes fell by 3,880 lots to 144,162 lots, while positions increased by 4,936 lots to 158,274 lots.
In the spot market, as SHFE three-month zinc contract prices fell gradually after opening higher, discounts of #0 zinc held between RMB 300-350/mt against SHFE 1206 zinc contract prices, with traded prices between RMB 15,500-15,550/mt. #1 zinc was traded between RMB 15,450-15,500/mt. Spot traded prices climbed slowly, but downstream buying interest was low. Traders were firm with low discounts, keeping overall trading activity quiet.
With regard to zinc prices this week, a majority of 64% market players believe SHFE three-month zinc contract prices should fluctuate, with pressure at RMB 16,300/mt and support at RMB 15,800/mt. Greek debt exchange plan has stalled, and US non-farm employment figure was positive, so investors will gain confidence to buy risk assets. LME zinc prices should move between USD 2,050-2,150/mt. China's CPI released last week shows domestic inflation is still under control, while positive speculations of the NPC and CPPCC will also support SHFE zinc prices. Downstream buying interest was strong when spot zinc prices were at low levels, which means strong support. SHFE three-month zinc contract prices should move between RMB 15,800-16,300/mt, with spot discounts between RMB 300-400/mt.
23% investors believe SHFE three-month zinc contract prices should fall further. Despite Greek debt exchange plan stalled, many problems exist in euro zone countries, and economies recover slowly. In this context, LME zinc prices should fall to USD 2,000-2,050/mt. Any possibility that China will further loosen monetary policies is limited according to the NPC and CPPCC progress, and SHFE zinc will unlikely gain sufficient cash flow, combined with high inventories at smelters, zinc prices will be weighed down. As a result, SHFE three-month zinc contract prices should move between RMB 15,500-15,800/mt, with discounts narrowing between RMB 200-300/mt.
The remaining 13% believe zinc prices should rise. SHFE zinc prices will gain support as spot demand improved as 2Q nears. SHFE three-month zinc contract prices should break through RMB 16,300/mt level and move between RMB 16,300-16,600/mt, with discounts expanding to RMB 400-500/mt.
Spot tin prices failed to continue the late rally in Shanghai on Monday, as light LME tin trading following a much lower opening and weak demand caused the wait-and-see sentiment to reshape. Supply stayed limited with smelters little interested in such prices. Nanshan, Feidie and Yunxiang struck deals between RMB 170,500-171,000/mt while Yunxi and Yunheng concluded transactions between RMB 171,500-172,000/mt.
In an SMM survey on this week's tin prices, 60% of market players covered expect stability as Greek debt swap results and US non-farm payroll data were already released while no risk-generating events will appear this week. In addition, they said LME tin seems has exhausted its momentum from late good news based on its rather flat performance on Monday. As such LME tin will provide limited support for domestic tin prices. That, together with a still weak demand, means domestic tin prices won't change much this week. Another 20% respondents said domestic tin prices will climb expecting LME tin to rally further. Remaining 20% are pessimistic respondents who say losses may show if LME tin fails to present large gains as last Friday's stock replenishments are a flash in the pan” and demand remains weak.
During Monday's Asian trading hours, LME nickel prices fell after a high open at USD 19,340/mt, and then fluctuated between 5-day moving average and 10-day moving average after failing to break through 10-day moving average.
During the morning trading hours in Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were in the RMB 136,000-136,200/mt range, and mainstream traded prices of nickel from Russia were in the RMB 135,600-135,800/mt range, slightly higher than last Friday's level, but with lackluster trading sentiment reported. During the afternoon trading hours, Jinchuan nickel was largely traded around RMB 136,000/mt, and Russian nickel largely around RMB 135,700/mt.
Based on result of an SMM survey on market sentiment, 21% market players believe that LME nickel prices will advance in this coming week. The US non-farm employment data boosted market sentiment. In addition, China's eased inflationary pressure may fuel expectation of looser monetary policy. LME nickel prices, therefore, are expected to find support at USD 18,800/mt and will climb to test 10-day moving average.
43% market players hold that LME nickel prices will continue to remain fluctuation trend in this coming week. The positive result of Greek debt swap deal curbed further deterioration in the European debt crisis. The US non-farm employment data also boosted market sentiment. However, considering the sluggish downstream demand, they believe that any room for LME nickel prices to advance further will be limited.
The remaining 36% market players expect that LME nickel prices will continue to slip in this coming week. The US economic data was better than market expectation, denting expectation of stimulus policy. In addition, the US dollar index was above 60-day moving average, weighing on base metal prices in the short term. Coupled with sluggish downstream consumption, LME nickel prices still face downward pressure.