SMM Weekly Review and Forecast (Mar.18-Mar.22)

SHANGHAI, Mar. 18 (SMM) –

Copper:
The low-end LME copper price still rose due to buying support and short-covering. LME copper prices briefly touched a high of USD 7,883/mt and regained the 5 and 10-day moving average, with prices for the week up 0.6% and with technical indicators pointing up. LME copper stocks have now risen for nearly three months and now exceed 520,000 mt.

After China released only modest industrial added value and retail sales data, the Shanghai Composite Index tumbled more than 2%. In this context, SHFE copper prices lost any upward momentum and caused the SHFE/LME copper price ratio to fall, with prices fluctuating between RMB 56,300-57,200/mt. Trading volumes increased sharply by nearly 500,000 lots, and as the delivery date for SHFE 1303 copper contracts neared, selling pressure for forward SHFE copper contracts dominated the market

In spot markets last week, since copper futures prices lacked upward momentum, some hedged copper remained locked out of spot markets. Some cargo-holders also remain optimistic toward future copper prices and held back goods, which caused copper supply to fall sharply. Over the past week, traders mostly conducted intraday operations, while downstream producers largely stood on the sidelines and resisted high premiums ahead of the delivery date for SHFE 1303 copper contracts.

SMM believes LME copper prices will hover between USD 7,730-7,880/mt, and SHFE copper prices will fluctuate between RMB 56,300-57,200/mt this coming week.  
  
Aluminum:
Two weeks ago, prices of the most active SHFE aluminum contracts rose and met resistance at RMB 15,000/mt on news that the State Reserve Bureau (SRB) would buy aluminum ingots. SHFE 1306 aluminum contract prices, however, fell last Friday to move between the 10-day and 20-day moving average, with low-end price at RMB 14,800/mt and meeting resistance at RMB 14,900/mt.

Markets widely believed that the SRB would buy aluminum ingot at high prices on March 15, helping aluminum prices resist declines. Last week, mainstream traded prices for spot aluminum in Shanghai were stagnant at RMB 14,520-14,550/mt, with spot discounts narrowing from RMB 130/mt to RMB 50/mt due to approaching delivery date of SHFE current-month aluminum contracts. Downstream producers were purchasing as needed, and middlemen were cautious, with both concerned aluminum prices may fall following SRB's bid invitation.  
 
In the coming week, LME aluminum prices should test resistance at USD 2,000/mt, and prices for the most active SHFE aluminum contracts should fall further, with only weak support at RMB 14,800/mt. Spot discounts should grow to over RMB 150/mt early next week as surpluses will remain, and with traded prices stagnant at RMB 14,500/mt. Bearish sentiment is expected to dominated the market in the coming week.  
 
Zinc:
In China, SHFE 1306 zinc contract prices also bottomed out, but fluctuated at low levels and with strong support from RMB 15,150/mt following the trend set by LME zinc prices. However, since the Shanghai Composite continued to weaken, SHFE 1306 zinc contract prices moved lower to between RMB 15,150-15,300/mt. Short momentum also waned slightly.

In China's domestic spot markets, spot zinc prices were generally flat or slightly below SHFE spot-month zinc contract prices from two weeks ago, which means spot discounts barely changed last week despite the approach of the delivery date. Discounts for #0 zinc against SHFE 1305 zinc contract prices remained between RMB 170-200/mt, and traded prices for Shuangyan brand #0 zinc fluctuated narrowly between RMB 14,950-15,000/mt. Smelters continued to hold goods following the holiday, with most spot goods released by arbitrage traders and with some brands in short supply. Last week, the State Reserves Bureau (SRB) purchased zinc reserves for a fourth time since 2008, and even though purchase volumes only totaled 50,000 mt, it did help zinc prices stabilize. Some downstream buyers bought goods at lower prices, but overall downstream demand remained sluggish.

Inventories fell modestly last week as downstream processors built stocks. Inventories in east China fell slightly by 1,600 mt, to 379,600 mt, and this is a strong sign that arrivals and consumption in the region has returned to normal. Inventories in north China remained at 10,000 mt, but inventories in south China grew further by 2,800 mt, to 140,900 mt. SMM sources report total inventories in the three regions reached 530,700 mt, up 1,200 mt from a week ago and with growth generally coming from south China.

Lead:
In China, SHFE 1306 zinc contract prices also bottomed out, but fluctuated at low levels and with strong support from RMB 15,150/mt following the trend set by LME zinc prices. However, since the Shanghai Composite continued to weaken, SHFE 1306 zinc contract prices moved lower to between RMB 15,150-15,300/mt. Short momentum also waned slightly.

In China's domestic spot markets, spot zinc prices were generally flat or slightly below SHFE spot-month zinc contract prices from two weeks ago, which means spot discounts barely changed last week despite the approach of the delivery date. Discounts for #0 zinc against SHFE 1305 zinc contract prices remained between RMB 170-200/mt, and traded prices for Shuangyan brand #0 zinc fluctuated narrowly between RMB 14,950-15,000/mt. Smelters continued to hold goods following the holiday, with most spot goods released by arbitrage traders and with some brands in short supply. Last week, the State Reserves Bureau (SRB) purchased zinc reserves for a fourth time since 2008, and even though purchase volumes only totaled 50,000 mt, it did help zinc prices stabilize. Some downstream buyers bought goods at lower prices, but overall downstream demand remained sluggish.

Inventories fell modestly last week as downstream processors built stocks. Inventories in east China fell slightly by 1,600 mt, to 379,600 mt, and this is a strong sign that arrivals and consumption in the region has returned to normal. Inventories in north China remained at 10,000 mt, but inventories in south China grew further by 2,800 mt, to 140,900 mt. SMM sources report total inventories in the three regions reached 530,700 mt, up 1,200 mt from a week ago and with growth generally coming from south China.

Tin:
SHANGHAI, Mar. 18 (SMM) – In China's spot tin market, prices went against the track of LME tin and fell to RMB 153,000-155,000/mt last Friday due to the large amount of low-priced goods. Nanshan, Yinsheng, and Kaiyuan were mainly traded at RMB 153,000/mt, while deals for Yunheng were made at RMB 154,000/mt. Traded prices for Yunxi were between RMB 155,000-155,500/mt. Trading remained quiet despite falling prices.

Nickel:
LME nickel prices rebounded last week and rose above USD 17,000/mt. After LME nickel prices successfully broke through the 10-day and 15-day moving average lines, positions also surged to 117,720 lots, up 4,793 lots. Trading volumes were also at high levels. Technical indicators all indicate an upward trend for base metal prices. Italy's credit rating cut weighed on markets and a rising US dollar index put downward pressure on nickel prices. However, the surge in positions and trading volumes shows the rebound momentum in nickel prices is strong. As of last Thursday, LME nickel prices rose to a high of USD 17,191/mt, almost on par with levels seen in January.

Jinchuan Group raised ex-works nickel prices last week by a total of RMB 2,000/mt, which hit  RMB 118,000/mt after two increases of 1,000/mt on Wednesday and Friday. In the Shanghai nickel spot market, #1 nickel averaged RMB 117,830/mt, up RMB 470/mt from a week earlier. Since supply of nickel from Russia was limited, transactions for Russian nickel were not brisk, but steadily rising LME nickel prices offered arbitrage opportunity for domestic Jinchuan Group nickel. As a result, transactions for Jinchuan Group nickel among traders were brisk.

In general, news was mixed and markets did not show any clear upward momentum over the short term. However, economic data released on Friday, especially PMI from major economies and nonfarm employment payrolls from the US, will increase market activity. Technically, LME nickel prices are considered to have hit bottom and may rebound if Friday's economic reports are positive.
In the Shanghai nickel spot market, stainless steel mills were under increasing cash flow pressure, so purchasing demand for nickel was weak.