SHANGHAI, Jan. 4 (SMM)--
LME copper prices slipped last Friday, so SHFE 1304 copper contract, the most active one, opened slightly RMB 180/mt down at RMB 57,590/mt Monday. HSBC China manufacturing PMI was reported to hit a recent high and helped the Shanghai Composite Index rebound strongly by 1.6%. In this context, the contract marched higher all the way after temporarily testing a low of RMB 57,430/mt, and reached an intraday high of RMB 58,080/mt near the midday. SHFE copper prices edged down in the afternoon, however, as investors closed positions. SHFE 1304 copper contract settled RMB 210/mt or 0.36% higher at RMB 57,860/mt, with trading volumes up 24,208 lots but positions down 6,642 lots. Total trading volumes on the SHFE added by 44,644 lots, but total positions decreased by 17,480 lots. With prices standing above all recent moving averages and technical indicators pointing up, SMM believes SHFE copper prices will rebound following the New Year holiday.
SHFE copper prices moved higher after starting down on favorable HSBC China manufacturing PMI, but most companies chose to withdraw from markets during the last trading day of 2012, causing copper supply to decrease. In this context, copper discounts narrowed sharply to negative RMB 100-250/mt in Shanghai in the morning business. Traded prices for standard-quality copper were between RMB 56,950-57,150/mt, and RMB 57,000-57,250/mt for high-quality copper. Hedged copper was locked out of spot copper markets following copper price rebounds and helped copper discounts shrink further. Traders stood on the sidelines, while downstream producers made purchases in small quantities. Overall market transactions rose first but then decreased. In the afternoon, spot copper resources were rarely seen in the spot markets, but as copper prices fell, cargo-holders became less willing to hold firm prices, leading discounts to expand to negative RMB 170-300/mt. Traded prices were RMB 56,900-57,200/mt in the afternoon.
SMM conducted a survey with regard to copper price trend this week.
Based on the survey, 33% of market insiders believe that copper prices may challenge highs, with LME copper expected to touch USD 8,000/mt and SHFE copper to stand above RMB 58,000/mt. HSBC announced that the HSBC China manufacturing PMI hit a new 18-month top, and markets are also upbeat about PMI indexes in Europe and the US to be released this week. The financial markets will be boosted significantly, driving copper prices higher. Besides, technical indicators for both LME and SHFE copper are pointing up. Meanwhile, selling pressures should ease as market activity will remain muted during the two trading days. As such, these market insiders foresee that copper prices will continue rebounding this week.
The remaining 67% of market insiders, though, are still cautious about copper price trend this week, anticipating that LME and SHFE copper will fluctuate narrowly around USD 7,900/mt and RMB 57,500/mt, respectively, this week. The US may avoid the fiscal cliff and will not give a heavy blow to market confidence, but uncertain factors prevail. In the euro zone, German Chancellor Angela Merkel linked future German prosperity to a prosperous European Union in her new year message and urged Germans to be more patient since the European debt crisis is far from over. This indicates that market focus will again shift to the European debt crisis, which will restrict copper price trend. Moreover, the US dollar is trying to shake off resistance at recent moving averages and will impose great pressure to copper prices once breaking the 20-day moving average effectively. Gold and crude oil prices have recently struggled around their recent moving averages, providing some guidance for copper price movement. Furthermore, Shanghai spot market activity is expected to remain lackluster this week, and copper discounts will continue. In this context, these insiders anticipate that copper prices will likely stay within their previous trading range this week.
SHFE 1303 aluminum contract prices opened at RMB 15,305/mt on December 31. China's manufacturing PMI for December was positive, sending prices of the most active SHFE aluminum contract up, but gains were limited as longs were cautious towards buying at higher prices. The March aluminum on the SHFE only touched a high of RMB 15,365/mt and finally closed at an intraday high of RMB 15,365/mt, up RMB 40/mt or 0.26%. Positions were up 134 lots to 65,124 lots. Investors turned away from the market on the last trading day of 2012 as positive Chinese economic data was offset by worries over the fiscal cliff talks in the US. SHFE market will resume trading today and whether the most active SHFE aluminum contract will meet resistance or find support at RMB 15,300/mt depends on how LME aluminum moves.
Spot aluminum was mainly traded at RMB 15,070-15,080/mt in Shanghai on December 31, with discounts between RMB 50-60/mt. Low-iron aluminum was traded at RMB 15,110-15,130/mt. HSBC's China manufacturing PMI for December was upbeat, helping SHFE 1303 aluminum contract prices rebound mildly. Cargo holders refrained from selling, while downstream producers seldom entered the market, with only middlemen purchasing limited amounts. Sparse quotations were seen firm at RMB 15,070/mt and overall trading was quiet.
SMM statistics show that SMM aluminum prices averaged RMB 15,060/mt on Monday against last week's RMB 15,042/mt.
According to SMM's survey of 32 domestic aluminum ingot traders and producers, almost half of the surveyed market players expect aluminum prices to hover around RMB 15,050/mt after the New Year holiday, without market direction in the near term.
31% of market players believe aluminum prices will likely break through RMB 15,100/mt post-holidays and LME aluminum prices will challenge resistance at USD 2,100/mt since they are expecting the State Reserve Bureau to conduct the next round of aluminum ingot purchase in January.
47% of market players hold the view that aluminum prices will stall at RMB 15,050/mt and show some resilience and that SHFE 1303 aluminum contract prices will consolidate support at RMB 15,300/mt. China's economic indicators have been positive recently and market is optimistic towards outlook for 2013. Besides, demand is likely to pick up in the new year. However, uncertainty still exists surrounding whether the US economy will recover or shrink in 2013. Aluminum ingot inventories were on the rise during the New Year's and it remains to be seen whether consumption will rebound post-holidays.
The remaining 22% understand that high inventories post-holiday will send aluminum prices down to RMB 15,000/mt again, LME aluminum should lose support at USD 1,950/mt and that SHFE 1303 aluminum contract prices are expected to meet resistance at RMB 15,300/mt.
The most active SHFE lead contract price opened RMB 100/mt lower at RMB 15,095/mt on the last trading day of 2012 due to falling LME lead prices overnight. As the final reading of HSBC manufacturing PMI for December was above expectations and previous figure, lifting the Shanghai Composite Index to rise as much as 1.6%, SHFE lead prices rose and moved between RMB 15,200-15,260/mt to finally end at RMB 15,265/mt. Trading volumes were down 258 lots to 202 lots, and positions increased 52 lots to 2,442 lots.
On the last trading day of 2012, cargo holders mainly focus on settlements, leaving quotations rarely reported in the China's spot lead market. Quotations for Chihong Zn & Ge were at RMB 14,780/mt, with spot discounts of RMB 450/mt over the most active SHFE lead contract price, and Chengyuan was quoted at RMB 14,700/mt. Trading was quiet with many market players already off for holiday.
The SHFE will only be open for two days and the LME will be open for four days this week, causing most investors to book profits and stay on the sidelines. However, SMM still conducts a survey to 30 industry insiders on the lead price trends this week, and opinions are divided due mainly to different views on the US fiscal cliff issue.
87% of market players surveyed by SMM believe trading should be quiet this week given the New Year holiday, and the uncertainty about the US fiscal cliff talks should persuade investors to seek US dollar for haven, with the US dollar index expected to hover around 79.6. In China's spot lead market, most cargo holders will be off for holiday, while downstream buyers will not be active in purchasing following the replenishments ahead of the holiday. Thus, a majority of investors expect spot lead prices will be RMB 14,650-14,800/mt this week.
The remaining 13% market players are more optimistic given the positive economic figures in China including the above-expected HSBC manufacturing PMI for December. Meanwhile, although market is still concerned that the US budget talk will fail to make progress with the approach of the deadline for fiscal cliff, expectations are strong that the US government will introduce interim measures to deal with the issue. Besides, LME lead inventories still present a downtrend, which will give some support to low-end lead prices. In China's domestic spot markets, several enterprises stocking goods in small amounts before the holiday may increase procurement this week. In this context, these investors believe spot lead prices will edge up to RMB 14,700-14,850/mt.
LME zinc prices plummeted last Friday. SHFE three-month zinc contract prices started the day lower at RMB 15,420/mt. HSBC's December PMI for China was 51.5, much better than the 50.9 expected. China's manufacturing continued to improve, so the Shanghai Composite opened high and moved higher, reaching a near-half-year high. As a result, SHFE three-month zinc contract prices soared and broke through three moving averages, touching RMB 15,570/mt in the afternoon, but then falling back to RMB 15,530/mt. Finally, SHFE and finally closed at RMB 15,520/mt, down RMB 30/mt. Total position decreased by 9,964 lots to 91,694 lots.
SHFE zinc prices opened lower but then inched up. Discounts of #0 zinc against SHFE three-month zinc contract prices were between RMB 300-320/mt, with traded prices between RMB 15,180-15,200/mt. #1 zinc prices were RMB 15,140-15,150/mt. Smelters lacked interest to move goods, leading to supply tightness. Some arbitrage traders released goods modestly due to narrowing spot discounts, but downstream buying interest was low, keeping overall transactions muted.
The market was quiet due to Christmas holiday. Concerns over US fiscal cliff problems improved, and LME zinc prices soared initially but then reversed increases, falling below the 5-day and 10-day moving averages.
With regard to zinc prices this week, 70% market players believe LME zinc prices should fluctuate around the 20-day moving average, attempting to touch the 5-day moving average. US fiscal cliff negotiations will continue to depressed market sentiment. Market concerns spread due to the gridlock of negotiations between the two parties. Investors are now cautious as to whether US can successfully sidestep the fiscal cliff problems, and this weighed on LME zinc prices. As final December PMI for Germany, Italy and eurozone to be released this week is expected close to the previous data, zinc prices will not gain guidance. Besides, LME zinc inventories remained at a high 1.223 million mt, and will weigh on zinc prices. As such, LME zinc prices should vacillate between USD 2,040-2,080/mt this week.
In China, the SHFE market will close for three days due to the New Year's holiday. Investors are unwilling to enter the market, so SHFE zinc prices will lack upward momentum. SHFE there-month zinc contract prices should move between RMB 15,400-15,550/mt, struggling around the 10-day moving average.
Demand for spot zinc is extremely sluggish as the low demand season sets in. Besides, spot goods supply will increase following the holiday. Spot discounts are expected to expand to RMB 350/mt.
The remaining 30% believe zinc prices will stop falling and rebound. US will announce December manufacturing index of Dallas Federal Reserve and ISM, which is optimistic. Besides, US non-farm data for December is expected to continue improving. Investor confidence will thus improve and give support to zinc prices. LME zinc prices are expected to stand at the 10-day moving average, moving between RMB 2,080-2,110/mt.
Both HSBC's December PMI for China and official PMI improved, pulling up the Shanghai Composite to break through 2,250. As a result, SHFE three-month zinc contract prices should edge up to RMB 15,550-15,650/mt, with spot discounts widening to RMB 350-400/mt.
In Shanghai tin market, mainstream traded prices were between RMB 152,000-153,500/mt on December 31 with trading light ahead of the New Year holiday. Yunxiang was traded at RMB 152,000/mt, and a few brands from Jiangxi were mainly traded at RMB 151,500/mt. Traded prices for leading brands in Yunnan were RMB 153,000-153,500/mt.
According to an SMM survey, 50% market players expected spot tin prices to remain stable this week. Many traders are closed for holiday with only two trading days this week, and some buyers had already replenished stocks before the holiday. Thus, transactions should not be brisk on Friday. Besides, spot tin prices will unlikely gain strong support from LME tin prices given a lack of buying support.
25% market players believed spot tin prices should continue to rise, expecting the progress for the US fiscal cliff talks to give a boost to LME tin prices, driving up spot tin prices.
The remaining 25% investors expected spot tin prices to fall, pointing out that LME tin prices may be dragged down if no result is reported for the US fiscal cliff talks. Besides, purchases in domestic spot markets should be sparse with most buyers already completing replenishment last week. As such, these market players believed tin prices will drop this week.
In the Shanghai nickel spot market, mainstream traded prices of nickel from Jinchuan Group were between RMB 119,400-119,500/mt and mainstream traded prices of nickel from Russia were between RMB 118,200-118,400/mt. There were virtually no transactions in spot market on Monday as most traders were on holiday on the even of new year.
Based on result of SMM survey on market sentiment, 50% market players predict that LME nickel prices will fall below USD 17,000/mt this week. According to report from Wall Street, the two parties in the US still fail to report progress on the fiscal cliff one day ahead of deadline. The Senate will have a vote on new proposal on 12:00 on Monday night. It is believed that fiscal cliff is possible, which may weigh on LME nickel prices.
30% market players believe that LME nickel prices will regain upward momentum and may advance above USD 17,700/mt in this coming week. There reasons are as follows. First, they believe that a proposal will be accepted by two parities, which will prevent market confidence from weakening. Second, stainless steel mils purchases for raw materials were low due to tight cash flow pressure by the end of the year. However, cash flow pressure will be eased with the coming of new year, which may improve downstream demand. They believe these two factors will boost LME nickel prices to rise in the following week.
20% market players hold that LME nickel prices will move between USD 17,000-17,600/mt in the coming week. The US fiscal cliff negotiation has many uncertainties. Meanwhile, the ISM manufacture index and non-farm report for December which will be released this week will also bring many uncertainties. Therefore, SMM believes that LME nickel prices will remain fluctuation trend is this coming week.