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SMM Weekly Review and Forecast (22-26 Jul. 2013)
Jul 22,2013 17:37CST
price review forecast
Source:SMM
China's latest GDP data was close to market expectations.

SHANGHAI, Jul. 22 (SMM) –

Copper:
China's latest GDP data was close to market expectations. China's leaders emphasized that the government would not introduce any new stimulus policies now that economic indicators are considered acceptable. The Asian Development Bank lowered its expectations for China's economic growth, which pulled down Chinese A-shares by over 2%. SHFE copper prices rose to RMB 50,800/mt, but fell back to RMB 49,300/mt as investors closed positions. Turnover was high, with the daily turnover rate for SHFE three-month copper contract prices over 300%. Daily trading volumes exceeded 1 million lots and total positions grew significantly early in the week, but fell sharply ahead of the weekend, with SHFE copper price performance for the week below that of LME copper.

Copper prices are expected to become more volatile in the coming week. US housing data will be released and is expected to push up US stock prices to another historic high. However, as the US dollar index finds solid support at the 30-day moving average, copper prices will be weighed down. The market expects manufacturing PMIs from many countries will continue to fall, which will put selling pressure on financial and commodity markets. 
 
Aluminum:
China's latest GDP data was close to market expectations. China's leaders emphasized that the government would not introduce any new stimulus policies now that economic indicators are considered acceptable. The Asian Development Bank lowered its expectations for China's economic growth, which pulled down Chinese A-shares by over 2%. SHFE copper prices rose to RMB 50,800/mt, but fell back to RMB 49,300/mt as investors closed positions. Turnover was high, with the daily turnover rate for SHFE three-month copper contract prices over 300%. Daily trading volumes exceeded 1 million lots and total positions grew significantly early in the week, but fell sharply ahead of the weekend, with SHFE copper price performance for the week below that of LME copper.
Copper prices are expected to become more volatile in the coming week. US housing data will be released and is expected to push up US stock prices to another historic high. However, as the US dollar index finds solid support at the 30-day moving average, copper prices will be weighed down. The market expects manufacturing PMIs from many countries will continue to fall, which will put selling pressure on financial and commodity markets. 
 
Zinc:
Dragged down by LME zinc prices, SHFE 1310 zinc contract prices lost early week gains, falling below RMB 14,600/mt. SHFE 1310 zinc contract prices found support and moved narrowly between RMB 14,650-14,730/mt during the first half of last week, but fell below RMB 14,600/mt later in the week as LME zinc prices moved lower. By midday last Friday, trading volumes had fallen by 166,000, to 365,000 lots, and total positions decreased by 5,860, to 312,000 lots. Spot premiums for #0 zinc were RMB 70-90/mt higher than SHFE 1310 zinc contract prices during the first half of the week, but later expanded to RMB 90-110/mt as SHFE zinc prices tumbled. SHFE 1310 contract prices remained above RMB 14,750/mt during the first three trading days, a monthly high, and was the second time since April prices exceeded  RMB 14,750/mt. Smelter willingness to sell goods increased slightly, but turned negative again as SHFE zinc prices fell sharply later in the week. Downstream enterprises were only purchasing as needed, with demand shrinking due to a lack of downstream orders. SMM sources report about 2,000 mt/day were shipped out of Shanghai, flat at last week's level. In Tianjin, stocks of Zijin, Hongye and Shuangyan brands were all up, and with the price spread with Shanghai narrowing to RMB 180/mt. The price spread between Guangdong and Shanghai remained between RMB 100-130/mt, with an average for the past two months of about RMB 100/mt, and deliveries in Shanghai falling short of 1%.

US housing data and July PMIs from China and many European countries will be released this coming week, but markets are pessimistic and expect zinc prices to fall since the low demand season for many manufacturing sectors is underway. LME zinc prices may find strong support at USD 1,850/mt, but if prices fall below this level, prices will likely stabilize at USD 1,820-1,830/mt. In the coming week, the shift will be made to SHFE 1311 zinc contracts, with prices falling to test support at RMB 14,400/mt. With soft demand and growing inventories, spot premiums against SHFE three-month zinc contract prices will unlikely rise above RMB 130/mt.

Lead:
SHFE lead prices were still not significantly affected by LME lead last week and moved between RMB 13,880-13,900/mt for the first three days last week before edging RMB 30/mt lower to RMB 13,850/mt on Thursday. This week, SHFE lead prices should still follow LME trends, but may be more resilient to declines at RMB 13,810-13,880/mt since prices are now close to this year's low.

Spot lead was traded between RMB 13,670-13,770/mt early last week, with spot discounts of RMB 120/mt against the most active SHFE lead contract price, but fell by RMB 20/mt as SHFE lead prices moved lower. Although electric vehicle battery producers have raised prices twice this month, the peak demand season has not yet arrived, so downstream purchasing was still soft. Limited supply from smelters caused by a lack of raw materials will offer some support to prices. Downstream buyers may increase purchases in preparation for the upcoming high-demand season, so spot lead prices this week are expected at RMB 13,600-13,750/mt, and with trading activity improving slightly.

Tin:
In Shanghai spot tin market, prices were mainly at RMB 136,800-138,500/mt. Quotes from Yunnan Tin Group remained firm, while other smelters were unwilling to move goods, so prices gained certain support from the limited supplies. Besides, the consolidation of LME tin prices also helped keep domestic spot prices stable. The low-demand season for downstream buyers undermined their interest in purchasing tin ingot, leaving tin demand sluggish. On the other hand, many tin smelters cut production recently due to weak demand, high input costs and stricter environmental protection in several regions. Given the stalemate between buyers and sellers, spot tin prices remained in a narrow range, waiting for guides from LME tin.

Nickel:
In China's domestic spot markets, trading was quiet. In Shanghai, the average price for #1 nickel was RMB 96,860/mt, up RMB 1,100/mt from a week earlier. The unfavorable Shanghai/LME price ratio dampened demand for Russian nickel, but SMM has learned that approximately 400 mt of nickel from South Africa entered the market. Jinchuan Group indicated it would hold prices firm and would make price quotes on a daily basis. Prices for refined nickel were adjusted for a fourth time on Thursday from RMB 102,000/mt to RMB 98,500/mt, for a weekly decline of RMB 3,500/mt. Last week, prices for Sumitomo nickel were RMB 200/mt below Jinchuan nickel, while prices for South African nickel were RMB 400/mt below Russian nickel.

In the coming week, market attention will shift to US housing data, as well as US and major nation PMI figures. After rebounding last week, LME nickel will unlikely maintain this upward momentum due to slowing growth in China. In the coming week, LME nickel will feel pressure at USD 14,100/mt, with prices expected between USD 13,600-14,100/mt.


 

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