SHANGHAI, Nov. 19 (SMM) – Markets were focusing on a new reform agenda last week unwrapped in the communiqué of the Third Plenary Session of the 18th CPC Central Committee. Investors were in a cautious mood as market expectations were dented by the absence of details on this agenda. Most commodities were subdued by extensive sell-offs, while LME copper prices were no more resistant to declines and suffered great losses. LME copper dipped below milestones and SHFE copper and spot copper fell as well. SMMI.Cu lead the drop in base metals complex, down 1.54%. LME nickel saw around ten sessions of drop, down 7% in two weeks or USD 1,000/mt. Metals prices were volatile despite no price adjustment by Jichuan Group last week. SMMI.Ni fell 1.14%. LME lead dropped around USD 2,100/mt, while domestic lead prices were no longer resistant to declines and fell below USD 14,000/mt. SMMI.Pb was down 1.07%, but in light transactions amid bearish investor sentiment. SMMI.Zn and SMMI.Sn both dropped 0.69%, while SMMI.Al fell 0.2%. SMMI was down 1.18% and markets turned bearish due to increasing sell-offs.
In China, A-shares fell last week by 1% and SHFE copper prices were down nearly 2.5% to a low of RMB 50,000/mt due to a growing number of short positions. Total positions grew by over 80,000 lots and traded volumes were up nearly 700,000 lots. Technical indicators pointed downward, and SHFE copper prices lost support at all moving averages.
In China’s copper spot market, plunging copper prices allowed large amounts of hedged copper to enter the market, creating ample supply. Spot premiums narrowed to RMB 50-150/mt with the approach of the delivery date.
Falling LME aluminum prices and a lower Shanghai Composite Index sent SHFE 1401 aluminum contract prices down below RMB 14,200/mt last Wednesday. Prices for the most active SHFE aluminum contracts, however, found solid support at RMB 14,200/mt the next day after the Shanghai Composite Index returned above 2,100 points. In China’s spot markets, the price gap between SHFE 1311 and 1312 aluminum contracts widened to more than RMB 100/mt due to imminent delivery of SHFE 1311 aluminum contracts, driving most downstream producers to the sidelines. Cargo holders became anxious to sell, dragging prices down sharply.
The KDJ indicator is pointing upward, a sign that LME aluminum prices may stop falling this coming week and move in a USD 1,775-1,825/mt price band. Any downside space for SHFE 1401 aluminum contract prices should be limited, with prices expected between RMB 14,165-14,315/mt. SHFE 1402 aluminum contracts will likely shift to the new most active contract this week.
SHFE lead prices were no more resistant to declines and followed LME lead prices down. SHFE 1401 lead contract replaced SHFE 1312 lead contracts to be the most active contract, but both contracts both were restrained by the 5-day moving average and fell below previous support levels. The most active SHFE 1401 lead contract prices will move between RMB 14,100-14,250/mt this week, boosted by stronger LME lead prices .
In China’s spot lead market last week, transactions were sluggish, with traded prices falling below 14,000/mt. Lead smelters were reluctant to move goods and downstream producers were also expecting prices to fall further. Last Friday marked the latest delivery date, so a large number of deliverable goods entered the market with a premium of RMB 10/mt over SHFE current month lead contracts. This week traded prices will hover above RMB 14,000/mt. Lead smelters will trade more actively and downstream producers are also expected to increase purchases once SHFE lead prices stabilize. Transactions should pick up, but a surge in deliverable goods from futures markets will put downward pressure on spot lead prices.
SHFE 1402 zinc contracts became the most actively traded contract last Thursday, with prices falling from RMB 14,985/mt in early week trading, down 1.5% to RMB 14,765/mt and tracking LME zinc prices. After the Shanghai Composite Index returned to 2,000, SHFE zinc prices bottomed out and hovered between RMB 14,800-14,840/mt.
Traded prices for #0 zinc moved last Monday between RMB 15,000-15,050/mt, but then fell slightly to RMB 14,900-14,980/mt, with premiums between RMB 80-140/mt. #1 zinc supply continued to fall as well since producers were holding back goods, causing the price spread between #1 and #0 zinc to narrow to RMB 40-50/mt. Traded prices fell from RMB 14,980-14,990/mt early in the week, to RMB 14,870-14,920/mt. Smelters were generally moving goods normally, but traders reported soft demand, keeping overall transactions muted.
Due to soft demand, traded prices in Guangdong were RMB 90-100/mt below Shanghai prices, with the price spread expanding by RMB 20/mt from the previous week. Baiyin Nonferrous Metals suspended production, Honglu branded zinc availability was low, and supply from Dongling was also disrupted by transportation problem, leaving supply in Tianjin tight and keeping prices RMB 20-90/mt above Shanghai prices. Prices for Huludao brand #0 zinc produced by older production lines were cut by RMB 60/mt, to RMB 15,880/mt, while # 0 zinc produced at newer production lines was popular due to tight Dongling and Honglu branded supply, causing the price spread with goods from older production lines to contract to only RMB 170/mt.
SHFE 1402 zinc contract prices will move between RMB 14,800-14,950/mt this week, with spot premiums of RMB 60-120/mt. Smelters will move goods normally, while downstream buyers will likely purchase on an as-needed basis.
Spot tin prices in China fell last week with trading muted. Despite limited changes for LME tin prices, weakening prices for other base metals dragged spot tin prices down to RMB 143,800-146,000/mt. Some smelters were forced to lower ex-works prices due to poor sales. Besides, some market players turned bearish to tin price outlook, and downstream buyers only purchased cautiously, dampening transactions in spot market.
In the Shanghai nickel spot market, #1 nickel averaged RMB 96,100/mt, down RMB 1,700/mt from a week earlier. Traded prices for Jinchuan nickel were between RMB 96,000-97,800/mt, creating a price gap with Russian nickel of RMB 1,000/mt. Trading was quiet last week due to low buying interest and trader reluctance to sell after prices rallied.
LME nickel prices are expected to fluctuate in the USD 13,700-14,000/mt range this week. In China’s spot nickel market, buying interest is expected to improve. Prices for Jinchuan nickel are expected between RMB 97,000-98,500/mt, with the price gap between Jinchuan and Russian nickel moving around RMB 1,000/mt.