SHANGHAI, Apr. 9 (SMM)--
Weak LME copper prices during the Chinese Qingming holiday caused SHFE 1308 copper contract to open RMB 330/mt lower at RMB 53,990/mt on Monday. After its opening, the most active SHFE copper contract climbed on rising Shanghai Composite Index, but met resistance at the 5-day moving average. In the afternoon, SHFE copper for August delivery touched a high of RMB 54,620/mt due to position liquidation, and finally settled up RMB 270/m or 0.5% at RMB 54,590/mt. Trading volumes and positions of SHFE 1308 copper contracts decreased 30,552 lots and 430 lots, respectively. Total trading volumes and positions contracted 129,000 lots and 8,572 lots, respectively. It remains to be seen whether SHFE copper will extend gains.
Spot copper in Shanghai was quoted at a premium of RMB 160-260/mt over SHFE 1304 copper contract prices on Monday. Traded prices for standard-quality copper were between RMB 54,600-54,720/mt, and RMB 54,640-54,820/mt for high-quality copper. The most active SHFE copper contract was resilient, allowing cargo holders to hold back from selling at lows. Growing premium of imported copper, combined with dwindling spot copper supply, pushed spot copper premium all the way up. Some traders entered the market in the morning, while downstream producers purchased to need at low prices. High-quality copper remained the most popular. Premium should remain high, though few transactions were concluded after premiums rose to more than RMB 250/mt. Overall trading was brisk. Traded prices rose to RMB 54,750-54,900/mt in the afternoon.
SMM survey shows that 30% market players believe copper prices will rebound this week, with LME copper returning to USD 7,530/mt and SHFE copper standing above RMB 55,000/mt. Market players are paying less attention to the European debt crisis, leaving less pressure on copper prices. The US dollar index was dragged down by the negative US economic data, given support to copper prices. Furthermore, proportion for canceled warrant of LME copper rose above 25% despite increasing LME copper inventories, which will help improve spot copper market. In China's premiums for imported copper have been rising recently, driving up quotations for domestic spot copper. Besides, high prices for scrap copper caused some enterprises to purchase refined copper instead of scrap copper. Plus the eased financial pressure and improved orders for downstream enterprises in early April, premiums for spot copper are expected to remain high, which will lend some support to SHFE copper prices. Thus, copper prices may rise further.
15% industry insiders expect copper prices to fall further, with LME copper expected to drop below USD 7,400/mt and SHFE copper expected to test RMB 53,800/mt. The US nonfarm payrolls hit a 9-month low in March, lower than expected, negatively affecting base metal markets. In this context, crude oil prices slipped for several trading days, offering guides for commodity prices. CFTC reported that net positions continued to increase to 20,187 lots as of the week ended March 26, with bearishness towards copper price trends. China's domestic markets remained weak after the Qingming Festival with domestic stock markets starting lower, combined with the large amount of unlocked stocks in the first trading week after Qingming Festival which will influence futures market, SHFE copper prices will be weighed on. Thus, these investors expect copper prices to fall this week.
The remaining 55% industry insiders expect copper prices to keep vacillating this week, with LME copper hovering near USD 7,450/mt and SHFE copper around RMB 54,500/mt. The weak US economic data kept US equities at high level during Qingming Festival. The US retail sales and import price will be released this week, but market will be quiet in terms of economic news, leaving little impetus for US equities to rise further, and resistance at moving averages will leave downside risk for US equities. Technical indicators also showed copper prices are under downward pressure. Meanwhile, investors intend to sell at high prices through short-term runs, limiting the moving range for copper prices. In China, most copper smelters will complete their maintenance operations in April and recover full production, which will push up domestic copper output and make up the gap of imported copper supply. Thus, increase in premiums for spot copper will be limited. As such, copper prices are expected to remain stable this week.
SHFE 1306 aluminum contract found its low at RMB 14,555/mt after starting the day slightly higher at RMB 14,570/mt on Monday. In the afternoon, the most active aluminum contract broke through resistance at RMB 14,600/mt on short-covering, and finally closed at an intraday high of RMB 14,650/mt, up RMB 95/mt or 0.65%. Positions shrank 1,514 lots to 88,878 lots. Longs are cautious about buying, so SHFE aluminum for June delivery is expected to test support at RMB 14,600/mt.
Spot aluminum was traded at RMB 14,420-14,440/mt in Shanghai on Monday, a discount of RMB 50-80/mt over SHFE 1304 aluminum contract prices. Low-iron aluminum was trade at RMB 14,580-14,600/mt. The low-end price of SHFE 1306 aluminum contract was resilient, promoting downstream producers to restock after the three-day public holiday. Similarly, traders were active moving goods, pushing transaction volumes up slightly. In the afternoon, prices of the most active SHFE aluminum contracts staged a strong rally, triggering wait-and-see sentiment in spot markets. Sparse quotations were reported at RMB 14,440-14,450/mt and overall trading was muted.
SMM aluminum price averaged RMB 14,430/mt on Monday, slightly higher than last week's RMB 14,423/mt. A majority of the 39 aluminum ingot traders and producers surveyed by SMM believe aluminum prices will stabilize or rebound slightly this week.
38% of market players are confident that aluminum prices will likely break through RMB 14,450/mt this week for three reasons. First, downbeat US employment data mean the US Federal Reserve will continue to keep its QE3 in place. Second, a softer US dollar will help commodity prices rebound. Third, LME aluminum tried to regain USD 1,900/mt on Monday, which will offer some upward momentum to aluminum prices in China. As such, SHFE 1306 aluminum contract will test resistance at RMB 14,700/mt. In spot aluminum market, growing hopes for consumption growth and slowing inventory growth will help push spot aluminum up to RMB 14,450/mt. Overall trading will gradually pick up.
The remaining 62% of market players expect aluminum prices to hover between RMB 14,400-14,450/mt this week for two reasons. First, although LME and SHFE aluminum has rebounded, the rally is due mainly to short-covering. Long buying is limited. Second, growing inflationary pressure and declining industrial profits in China will keep aluminum prices in check. In this context, LME aluminum will meet resistance at USD 1,900/mt, while prices for the most active SHFE aluminum contracts are expected to test support at RMB 14,600/mt. Market demand should be stable.
SHFE 1306 lead contract price started lower at RMB 14,340/mt on Monday influenced by the falling LME lead prices last Friday, and gained buying support at RB 14,400/mt. Although domestic stock markets gapped lower to fall below 2,200, the SHFE lead contract remained resilient with price finally closing up RMB 75/mt to RMB 14,425/mt. Trading volumes were down 72 lots to 134 lots, while positions were up 48 lots to 2,066 lots.
Quotations for spot lead in China were also flat with the level before Qingming Festival, but traded prices fell. Quotes for Jinsha were around RMB 14,220/mt, but traded price was RMB 14,180/mt, with spot discounts over the most active SHFE lead contract price at RMB 210/mt. Quotations for Nanfang, Yubei, and Tongguan were flat at the most active SHFE lead contract price, but transactions were rarely done. Prices for Hanjiang, Shuangyan, and Yunxi were offered at RMB 14,150-14,170/mt. Smelters were not willing to move goods, and downstream consumption remained weak.
According to SMM survey, 60% of industry insiders hold a cautious attitude to lead price trends this week. With fewer economic reports expected this week, market will focus on financial reports of US companies. Although the US nonfarm payrolls and unemployment rate were reported negative, the stabilizing US economic recovery is undeniable. In addition, the Cyprus bailout deal eased market concerns over euro zone economy. These may drive LME lead prices hover around USD 2,060/mt and test the 5-day moving average. In China's spot lead markets, some lead-acid battery producers started to cut prices due to limited orders and excess inventories, but consumption remained soft. Lead smelters remained unwilling to move goods after lead prices fell below RMB 14,500/mt. Thus, lead prices will unlikely show sharp movement and are expected to be between RMB 14,200-14,300/mt this week.
The remaining 40% investors are more pessimistic, noting the depressed nonfarm employment data indicate the US economic recovery is far from optimistic. Some market players expect the Fed will continue the easing measures. In the euro zone, manufacturing PMI, new order index and output index all slipped in March, signifying further contraction in manufacturing sector and leaving unemployment rate high. China's H7N9 also exerted influence on market, hurting tourism and agriculture and dragging down the Shanghai Composite Index. Transactions for spot lead are rare at present, with some goods traded for arbitrage, but supply in China's spot lead market remain ample. Downstream buyers are selling down finished goods inventories while cutting raw material purchases at the same time. As a result, these investors believe spot lead prices will be RMB 14,100-14,200/mt.
SHFE 1307 zinc contracts prices opened at RMB 14,650/mt today since LME zinc prices gained back some losses during the Qingming holiday in China. But LME zinc prices overnight plunged after opening, and investors were concerned the avian influenza will trigger market fears, dragging down commodity prices. As a result, large numbers of shorts rushed to the market, and SHFE zinc prices dipped to RMB 14,575/mt. But as the Shanghai Composite Index pulled up, and since LME zinc prices inched up to USD 1,900/mt, SHFE zinc prices broke through the 5-day moving average, and finally closed at RMB 14,735/mt, up RMB 125/mt or 0.86%. Trading volumes decreased by 25,030 lots, to 64,458 lots, and total positions decreased by 2,894 lots to 130,496 lots.
SHFE 1307 zinc contract prices opened high, but dipped, and then rallied. Discounts of #0 zinc against SHFE 1306 zinc contract prices were RMB 50-70/mt, with traded prices between RMB 14,490-14,530/mt. #1 zinc prices were between RMB 14,460-14,480/mt, with tight supply. Smelters continued to hold back goods, and traders stood on the sidelines after the holiday. Downstream buyers purchased to replenish stocks, so overall transactions improved.
Major economic data from Europe and US last week was generally disappointing, weighing down zinc prices. Will zinc prices stop falling this week?
According to a recent SMM survey, 40% of market players surveyed believe LME zinc prices should lose USD 1,850/mt, testing USD 1,812.5/mt. SHFE 1307 zinc contract prices should fall to test RMB 14,300/mt, with spot discounts narrowing to RMB 30-60/mt. Market attention will be focused on US. US non-farm employment data released last Friday fell far short of expectations, causing market concerns towards US economic recovery, and will continue to plague commodity market this week. The automatic spending cuts under the sequester have exerted a considerably negative influence on the market, one that looks set to grow until budget negotiations resume. Earning reports in the US will also be released, which is pessimistic, and expected to weigh down zinc prices.
China's March CPI and PPI will be released this Tuesday. As food supply increased after the Chinese New Year holiday, the CPI growth is expected to fall. China was recently attacked by the bird flu, causing market fears. With negative news in domestic stocks markets, zinc prices are pessimistic.
27% market players believe zinc prices will rally. LME zinc prices are expected to rise to USD 1,900/mt, and SHFE 1307 zinc contract prices should gained back losses in the previous week, moving between RMB 14,700-14,800/mt, with spot discounts around RMB 100/mt. US non-farm employment data released last Friday was poor, helping ease concerns that US will quit quantitatively easing polices in advance. Japan began to implement QE without announcing a deadline, while European central bank President Draghi expressed his pessimism towards economic outlook, and stated the bank will maintain easing policies in a long term. Increasing currency supply will push up zinc prices, and investor appetite for risk grew, driving up the euro against the US dollar to the 20-day moving average. This will boost investor confidence in the euro zone, and boost zinc prices. LME zinc inventories had fallen for 12 consecutive days by last Friday, down in excess of 50,000 mt, to 1.15 million mt.
Smelters continued to hold back goods after the Chinese New Year holiday, while spot supply was mainly available from arbitrage traders. But since they reduced supply, some brands fell short. Demand for zinc is expected to improve in April, and will support zinc prices to rise.
33% believe zinc price decreases will slow. LME zinc prices will continue to test USD 1,850/mt, moving between USD 1,840-1,900/mt, and SHFE 1307 zinc contract prices will move between RMB 14,550-14,700/mt, with spot discounts between RMB 60-90/mt.
SHFE zinc prices have fallen to a near-two-year low, while LME zinc prices are only USD 50/mt higher than a two-year low. Some smelters have cut output due to losses since domestic spot prices were close to the lowest last year. Zinc prices should fluctuate this week due to support from costs.
In Shanghai tin market, spot prices were mainly between RMB 148,500-150,500/mt on Monday. Yunxi was traded between RMB 150,000-150,500/mt, and Yunheng was traded at RMB 149,500/mt. Traded prices for Yunxiang and Kaiyuan were between RMB 148,500-149,000/mt, with mainstream traded prices down from the previous trading day on the whole. Transactions improve slightly, as downstream buyers and traders were more willing to purchase. Output at Jiangxi's smelters will be negatively affected recently due to environmental protection inspection, but investors believe this will give little support to tin prices.
SMM survey shows that 60% market players believe domestic spot tin prices will hold steady this week, noting LME tin prices may keep fluctuating. In this context, they expect spot tin prices to stabilize between RMB 148,000-150,000/mt. The environmental protection inspection in Jiangxi province will limit output of local smelters, curtailing low-priced goods in the market, while unabated raw material prices will place cost pressure on smelters, benefitting spot tin prices. However, the depressed demand will constrain upward trend in prices.
The remaining 40% market players expect spot tin prices may fall this week, with LME tin prices meeting strong resistance at USD 23,100/mt. Spot tin prices may continued to fall if LME tin prices fail to break through the resistance against the numerous risk events. Besides, the oversupply and anemic demand in spot tin market may also weigh down prices.
In Shanghai, Jinchuan nickel prices were between RMB 112,900-113,100/mt on Monday, while Russian nickel prices were between RMB 112,000-112,200/mt.As LME nickel prices rose, Jinchuan quotes were raised to RMB 113,200/mt, and Russian nickel prices also inched up to RMB 112,300/mt. Some traders believing nickel prices had fallen to a low level and will rise in the foreseeable future replenished stocks modestly, with transactions brisk.
According to a recent SMM survey, 60% of market players believe nickel prices should continue to fall and test USD 15,900/mt. They are pessimistic due to the sluggish downstream market. Over the past month, prices for #300 stainless steel continued to plummet by RMB 100-500/mt, with prices for #304 hot rolled coil (3mm) and cold rolled coil (2mm) dropped from RMB 16,600-17,000/mt and RMB 17,800-18,000/mt a month ago, to RMB 16,500-16,700/mt and RMB 17,300-17,500/mt, respectively. Transactions for #300 stainless steel were extremely quiet in March, and prices will fall further due to oversupply. According to downstream enterprises, local detailed regulations to the property market will continue to push down stainless steel market. Besides, despite negative news from Cyprus eased recently, the pessimistic statement by European central bank President weighed down investor appetite for risk. The disappointing US non-farm employment data dragged down the US dollar index, but the index should continue to strengthen, and will pull down LME nickel prices.
The remaining 40% market players believe nickel prices should fluctuate between USD 15,950-16,250/mt this week. Despite the fact that current news is negative, they believe nickel prices have fallen to low levels, and will fluctuate in the foreseeable future. The US Federal Reserve will announce its minute for the monetary policy and March retail sales data, which will likely change market sentiment. Many market players chose to remain cautious before the news is released. LME nickel prices should remain fluctuating in a narrow band.