SHANGHAI, Apr. 22 (SMM) – Commodities saw sharp declines last week. IMF slashed China and global growth forecasts, and China’s 1Q GDP growth was slower than expected. Germany’s credit rating and outlook for China’s rating were both lowered. In response, stock market in Asia, US and Europe, as well as prices for precious metals, crude oil and base metals, all plunged, with gold down as much as 17% and silver falling 15%. Oil prices also slumped 6%. In domestic markets, the A-shares fell 1%, SMMI tumbled 5.91%, with copper prices taking the lead. SHFE copper fell by the daily limit, and spot copper prices fell 8.12% last week, SMMI.Ni was down 5.9％, and SMMI.Sn was down 5.18%. SMMI.Al, being relatively resilient, fell 1.1%.
The Shanghai Composite Index also fell last week by over 1%, but SHFE three-month copper contract prices fell from RMB 55,300/mt two Fridays ago, to RMB 50,530/mt last Thursday, falling by the daily limit and down in total by as much as 10%. Trading volumes reached 35,200 lots, with total positions increasing by over 90,000 lots to 820,000 lots.
Inspiring news on production cuts at aluminum smelters has faded. Growing oversupply pressure against stable consumption weakened upward momentum of aluminum prices in China. SHFE 1306 aluminum contract prices basically moved within a RMB 14,500-14,600/mt range, but still tumbled to RMB 14,220/mt last Thursday as SHFE copper prices plummeted, but then rose to RMB 14,500/mt as shorts closed positions.
Spot aluminum hovered around RMB 14,400/mt early last week. Although LME aluminum rebounded and SHFE aluminum was resilient, spot aluminum hit a ceiling after climbing to RMB 14,450/mt as downstream producers resisted high prices. Later in the week, traders rushed to sell after copper prices plummeted, but middlemen were cautious. Spot aluminum tumbled to RMB 14,370/mt last Thursday, but even the low price failed to stoke much interest. Mainstream traded prices were at a discount of RMB 100/mt over SHFE 1305 aluminum contract.
SHFE 1306 lead contract prices also fell from RMB 14,200/mt to a record low of RMB 13,425/mt last week, a decline of 5.5%. This SHFE 1306 lead contract price is expected to move between RMB 13,600-14,000/mt and with support at RMB 13,600/mt this week.
Last week’s spot lead prices in China were mainly around RMB 14,000/mt, with spot discounts of RMB 150/mt against the most active SHFE lead contract price. Later, spot prices fell to RMB 13,550/mt as SHFE lead prices moved lower, causing the spot discount to narrow to RMB 50-70/mt. Smelters became even more reluctant to move goods, while downstream buyers turned bearish and stayed out of the market. This week, downstream buyers may remain unwilling to purchase despite the approach of the May Day holiday, with many buyers believing there is still room for prices to decline further. Smelters will also hold back from selling due to low prices, with spot lead prices expected at RMB 13,600-13,850/mt.
In China, SHFE 1307 zinc contract prices fell below all moving averages and with a weekly decline of 2.4%. Selling pressure grew after release of disappointing economic reports in China, initially pushing down SHFE 1307 zinc contract prices by 2.36%. However, SHFE 1307 zinc contract prices then rallied and touched a weekly high of RMB 14,680/mt due to rising LME zinc prices. On Thursday, SHFE copper prices were dominated by shorts and fell by daily limits after opening. SHFE zinc prices were also pushed down by shorts after opening, falling to near-two-year low of RMB 14,025/mt, but after shorts left the market after profit-taking, SHFE zinc prices rallied.
In domestic spot markets, spot discounts for #0 zinc against SHFE 1307 zinc contract prices fluctuated widely, narrowing from the RMB 100/mt early in the week to RMB 20-40/mt. As SHFE zinc price plunged, #0 zinc prices were even level with or RMB 20/mt higher than SHFE 1307 zinc contract prices. However, since SHFE zinc prices later rose, spot discounts expanded again to RMB 60-80/mt. Smelters were still unwilling to sell goods, causing shortages of some brands. Zinc prices plummeted to new lows, but still failed to raise downstream buying interest, with most buyers only purchasing based on downstream orders. Traders also stood on the sidelines, keeping overall transactions muted.
Spot tin prices, influenced by the plunging LME tin, fell some RMB 10,000/mt last week, with mainstream traded prices ending at RMB 140,500-142,000/mt last Friday after hitting a low of RMB 140,000/mt Thursday. Trading was rather quiet given strong bearishness. Most tin smelters were unwilling to move goods, but this gave no support to prices, as supply was still sufficient given the anemic demand. Downstream buyers only waited on the sidelines and rarely purchased against the falling prices.
On Friday, Jinchuan Group cut ex-works prices for refined nickel to RMB 106,000/mt (large panel), and to RMB 107,200/mt (small in barrel), a cut of RMB 6,500/mt. In the Shanghai nickel spot market, #1 nickel averaged RMB 117,740/mt, down RMB 4,300/mt. Last week, domestic spot nickel prices were extremely volatile, with price changing by RMB 1,000-2,000/mt within a single day. Market sentiment last week was mixed. Some market players, who were cautiously optimistic chose to purchase goods after prices appeared to bottom out. However, as LME nickel continued to fall below major support levels, those producers which began to purchase suffered losses. Other more pessimistic market players, halted purchases given continuous price declines.