SHANGHAI, Aug. 20 (SMM) –
The most traded copper contract on the Shanghai Futures Exchange (SHFE) opened RMB 260/mt higher at RMB 53,050/mt on Monday. The contract fell back after climbing to RMB 53,130/mt as some investors closed positions. In the afternoon session, December copper on the SHFE dropped further to RMB 52,700/mt, despite rising Shanghai Composite Index. Finally, SHFE 1312 copper contract ended the day RMB 50/mt or 0.09% lower at RMB 52,740/mt. Trading volumes and positions contracted by 291,000 lots and 8,402 lots, respectively.
Spot copper in Shanghai was quoted at a backwardation of RMB 120-250/mt over SHFE 1309 copper contract on Monday. Traded prices were RMB 53,280-53,360/mt for standard-quality copper, and RMB 53,350-53,500/mt for high-quality copper. Cargo holders largely held offers a backwardation of RMB 120-250/mt, but trading was thin. Downstream producers bought only to need against higher prices. Quotes for spot copper increased in the afternoon, with backwardation at RMB 150-250/mt, while traded prices were RMB 53,250-53,500/mt. Both sellers and buyers refused to budge on price. Most traders reported no transactions in the afternoon.
The most recent SMM survey reveals that 57% of industry insiders believe copper prices will increase this week, with LME copper hitting USD 7,400/mt and SHFE copper testing RMB 53,200-53,500/mt. The US economic data were mixed recently, and market concerns over the QE taper will ease if the housing data to be released this week turn out weak, and market will also be largely boosted if the data are positive. Economic figures for the eurozone were optimistic, presaging a strong euro in the short term and placing pressure on the US dollar index. Meanwhile, crude oil and gold further increased, when combined with geopolitical reasons, will give guides to copper prices. CFTC data showed that net short positions dropped sharply to 6,834 lots as of August 16, with bearishness weakening. Besides, LME copper inventories have been falling for one and a half month, and dropped 6,625 mt to 577,450 mt on August 19, while canceled warrant ratio remained high at 52%, helping bolster copper prices. In China’s spot copper markets, cargo holders kept quotes high after the shift of most traded SHFE copper contract, and speculative traders were still willing to purchase. In this context, optimistic industry insiders believe copper prices will rise further this week.
29% of industry insiders are cautious, expecting LME copper to move around USD 7,350/mt and SHFE copper to hover at RMB 53,000/mt. Market players are not positive to the HSBC China manufacturing PMI for August, but anticipate that PMI figures for the eurozone, Germany, France, and the US will improve. In China, the anomaly in Chinese stock markets last Friday caused by Everbright Securities led to a slump in Hong Kong shares, and may continue to influence the market. In addition, shares to be unlocked in Shenzhen and Shanghai stock markets will climb to RMB 77.6 billion this week. Although A-shares did not experience panic selling, stocks are still under great resistance, which may limit moving range for copper prices. As such, these industry insiders believe copper prices will unlikely show significant changes this week.
The remaining 14% of industry insiders believe LME copper prices will fall below USD 7,300/mt and SHFE copper may slip to test support at RMB 52,000/mt. In China’s spot copper markets, since smelters were not in a hurry to fulfill long-term contracts as in July, some are willing to sell goods in spot markets to generate cash. High-end prices for high-quality copper were offered at backwardation of RMB 230-240/mt on August 19, compared with the RMB 350-380/mt for the same period in July. This may undermine speculators’ interest in entering the market, while downstream buyers have been reluctant to purchase after copper prices rebounded. In this context, spot market may see growing oversupply pressure, weighing on copper prices.
The most active aluminum contract on the Shanghai Futures Exchange (SHFE), SHFE 1311 aluminum contract, opened higher at RMB 14,550/mt on Monday, helped by rising LME aluminum overnight. SHFE aluminum for November delivery, however, drifted lower in the afternoon session before finishing at RMB 14,510/mt, up RMB 35/mt or 0.24%. Trading volumes of HFE 1311 aluminum contracts surged by 7,674 lots to 20,840, while positions were down 716 lots to 48,910 lots. Positions of SHFE 1312 aluminum contracts increased by 1,382 lots to 47,470 lots. This indicates December aluminum on the SHFE may become the most active one soon.
Mainstream traded prices for spot aluminum in Shanghai were RMB 14,450-14,460/mt on Monday morning, a contango of RMB 0-20/mt and backwardation of RMB 0-10/mt over SHFE 1309 aluminum contract. Low-iron aluminum was traded around RMB 14,570/mt. Cargo holders were eager to sell, but middlemen showed low interest due to limited margins and downstream producers bought only to need against rising aluminum prices and tight liquidity.
SMM surveyed 26 major aluminum ingot producers and traders in China.
27% of the surveyed market players expect aluminum prices to rise above RMB 14,500/mt this week. First, lower spot aluminum stocks in China will allow cargo holders to hold prices firm, as reflected in the current small contango. Second, rising LME aluminum will provide upward momentum to aluminum prices in China. Third, upbeat manufacturing PMI in China, Europe and the US as well as strong foreign trade data in China will boost market sentiment.
Half of market players in SMM’s sample expect aluminum prices to remain little changed at RMB 14,450/mt this week. First, longs and shorts are staying cautious, as reflected in the thin trading volumes. Second, the relatively quiet period from macro front will keep the light metal moving in tight ranges. Third, some longs will pull out of the market for fear that aluminum prices will face downward correction following earlier rise, which will contain the gains of aluminum prices. Fourth, spot aluminum stocks are dropping at a slower pace, but at the same time downstream consumption did not falter sharply. This will keep aluminum prices stable.
The remaining 23% hold the view that aluminum prices will retreat to RMB 14,400/mt this week. First, SHFE aluminum is facing risks of downward correction. Second, downstream producers are holding to the sidelines, which will cause spot discount to expand. Third, the US dollar index will probably rebound amid concerns that the US Fed will exit QE3. Fourth, there is little chance that the central government will introduce massive stimulus in the latter half of the year, depressing aluminum demand from housing and transportation sectors.
The most active SHFE lead contract price opened at RMB 14,800/mt on Monday and climbed to RMB 14,960/mt. But prices fell RMB 80/mt to RMB 14,880/mt later due to weakening buying support. In the afternoon, SHFE lead went down RMB 50/mt along with falling SHFE copper, and eventually closed at RMB 14,865/mt, up RMB 15/mt. Trading volumes edged up 6 lots, while positions dropped 78 lots. SHFE lead may extend increase but the resistance at RMB 15,000/mt is not negligible.
Spot lead prices in China continued to rise on Monday driven by the increasing SHFE lead prices. Quotes for lead of Nanshan was initially at RMB 14,900/mt, but was lowered by RMB 20/mt later, flat with the most active SHFE lead contract price. Hanjiang and Mengzi were offered at RMB 14,860/mt. Lead of Qinyuan was quoted at RMB 14,850/mt. Warrants for Yubei and Shuikoushan were offered at RMB 14,890/mt, with a backwardation of RMB 10/mt over SHFE 1309 lead contract price. Tongguan was quoted at RMB 14,900/mt, a backwardation of RMB 20/mt over SHFE 1309 lead contract price. Cargo holders continued to hold prices firm, but downstream buyers purchased as needed. Spot lead prices were RMB 20/mt lower in the afternoon, but transactions remained limited.
According to the most recent SMM survey on lead price trends this week, 53% of industry insiders hold an optimistic attitude and believe LME lead may touch a high of USD 2,300/mt. The positive GDP data for Europe shored up market confidence in Eurozone economy, sending the euro up and weighing down the US dollar. In addition, LME lead inventories fell further below 190,000 mt, which will enable LME lead to extend gains. In China’s spot lead markets, warehouse warrants for lead dropped by nearly 2,100 mt last week, while trading inventories for lead ingot declined by 4,000 mt. Some lead smelters remain suspended due to maintenance and tight raw material supplies, while those in operations still refrain from selling given bullish outlook, intensifying lead supply shortages. As such, over half of industry participants anticipate that lead prices may probably rise above RMB 15,000/mt.
47% of industry insiders are more conservative, noting that investors will be more cautious with market focus shifting to whether the Fed will taper the QE in September. Besides, the Fed will release its minutes and the HSBC China manufacturing PMI for August will also be announced this week. Given lower-than-50 PMI for the past two months and limited improvements in metal consumption recently, market is not optimistic to the figure for August. In addition, LME lead prices may meet strong resistance at the USD 2,260/mt, leading market players to believe that LME lead will move between USD 2,210-2,260/mt this week. In spot lead markets, given declining purchases made by battery distributors and increasing finished battery inventories, Chaowei Power cut prices for 48V 12AH motive batteries by RMB 30/set to RMB 380/set, and 48V 20AH batteries by RMB 50/set to RMB 550/set last week, a decline of 7-8%. This may indicate a premature end of high demand season for lead. In this context, many expect spot lead prices to be RMB 14,700-14,900/mt this week.
SHFE 1312 zinc contracts became the most actively traded contracts, with prices opening RMB 120/mt higher at RMB 15,280/mt, boosted by LME zinc prices overnight, but moving lower to RMB 15,200/mt after opening. The Shanghai Composite Index rebounded, inspiring the market. SHFE zinc prices generally moving between RMB 15,200-15,240/mt in the afternoon, and were pulled up to RMB 15,300/mt, hitting a new high in four months, and closing at RMB 15,225/mt, up RMB 65/mt or 0.43%. Trading volumes decreased by 39,844 lots, to 68,818 lots, and total positions decreased by 2,000 lots, to 104,000 lots.
#0 zinc prices were between RMB 15,140-15,190/mt, with spot discounts of RMB 0-30/mt against SHFE 1311 zinc contract prices, and #1 zinc prices between RMB 15,100-15,110/mt. SHFE zinc prices opened high but moved lower, however, spot prices edged up from last week, with smelters moving goods actively. Traders were also aggressively moving goods, with purchasing weakening due to market pessimism. Downstream buyers purchased on an as-needed basis, with transactions quiet and mainly made among traders.
Zinc prices continued to rise last week. Will zinc prices extend gains this week?
The latest SMM survey shows that 70% market players see zinc prices falling this week. LME zinc prices are expected to fall to USD 1,950/mt, and SHFE 1312 zinc contract prices will test RMB 14,900/mt, with spot discounts reversing to premiums of RMB 50/mt. US officials stated that the US Federal Reserve (Fed) will likely scale back QE3 in September. The market will lack economic news from the US this week, but Fed's minutes of its July meeting to be released on Thursday will be a focus of markets. If the minutes show the Fed is inclined to wind down QE3, the US dollar index will find support, which will push down zinc prices.
20% are optimistic towards zinc prices, believing LME zinc prices will soar to USD 2,050/mt after standing at USD 2,000/mt, and SHFE 1312 zinc contract prices will rise to RMB 15,500/mt, with spot discounts expanding to RMB 50-80/mt. August PMIs from China, many European countries and the Eurozone will be released this week, and are expected to rise above 50, which will boost market confidence and drive up zinc prices. HSBC's PMI for China remained below 50, but is unlikely to deteriorate. Besides, NBS reported new home prices in 62 of 70 medium and large cities in China rose on the month in July, and prices in 69 cities advanced on a YoY basis, and level out on June's. Demand for homes was strong despite the low demand season, which boosted market confidence over the property sector, and strengthened expectations over demand for base metals in China.
The remaining 10% are neutral towards zinc prices this week, anticipating LME zinc prices will hover around USD 2,000/mt, and SHFE 1312 zinc contract prices will move between RMB 15,000-15,300/mt, with spot discounts between RMB 0-50/mt. Zinc oversupply worldwide, when combined with shrinking demand for zinc in China, will not give support to zinc prices. Delivered goods in the market will also impact zinc prices. Nevertheless, domestic leading zinc smelters conducting maintenance will lend support to zinc prices.
Spot tin in Shanghai was mainly traded at RMB 142,500-144,000/mt on Monday. Quotes from well-known smelters remained relatively firm, but SMEs reported difficulties in selling goods. Downstream consumption showed no improvement with pervasive wait-and-see sentiment in the market.
According to SMM survey on tin market outlook this week, 45% of industry insiders surveyed believe spot tin prices will hold steady this week. Despite the resistance at USD 22,300, LME tin prices will find support and remain resilient to decline. As a result, LME tin prices will neither rise significantly nor show sharp declines this week. In China’s domestic spot markets, although consumption remains tepid, smelters will continue to refrain from selling, preventing prices from falling.
30% of market players expect spot tin prices to rise, noting that LME tin prices will stage a pullback after rapid growth. However, LME tin prices closed higher on Friday, boosting market confidence. Coupled with the weakening US dollar and improving economic data recently, these market players believe LME tin prices may possibly break through the resistance at USD 22,300/mt, driving up spot tin prices. Besides, the low selling interest of domestic tin smelters will also help support prices.
25% of market players are pessimistic, noting that LME tin prices will unlikely break above the resistance and may fall back down this week. In domestic spot tin markets, the anemic consumption will add to a drag on spot tin prices. Therefore, low-priced goods may increase in spot markets if LME tin fails to make any breakthrough, pushing spot tin prices down.
In Shanghai, transactions were mainly made among traders. Jinchuan raised nickel prices by RMB 300/mt, to RMB 103,800/mt, but most traders all discounted goods due to market pessimism. #1 nickel prices were between RMB 102,600-103,800/mt, with Jinchuan nickel prices between RMB 103,600-103,800/mt, and Russian nickel prices between RMB 102,200-102,400/mt.
SMM surveyed 36 market players recently and found that 45% believe LME nickel prices will move between USD 14,650-14,900/mt this week.
35% believe LME nickel prices will hover between USD 14,350-14,650/mt. LME nickel prices failed to break through USD 15,000/mt last week, when combined with soft demand, LME nickel prices should fall. Meanwhile, the number of US initial jobless claims last week hit a record low since 2007, and when combined with Egypt land clearing, gold prices broke through USD 1,350/mt, which will push up the US dollar index and weigh down LME nickel prices.
20% market players believe LME nickel prices will move between USD 14,900-15,100/mt. They think PMIs from many countries to be released this Friday will be positive, which will boost base metals prices. Besides, the price spread between NPI and refined nickel prices continued to narrow due to rising NPI prices, which will boost demand for refined nickel and nickel prices.