The Shanghai Composite Index rallied last week by over 2%, leaving SHFE copper prices more resistant to declines than LME copper. SHFE copper prices fell to a low of RMB 49,590/mt, with moving range down below RMB 51,000/mt. Trading volumes grew by over 500,000 mt, while holdings fell by more than 10,000 lots. Bearish mood still lingered in the market.

 

In the copper spot market, supply was sufficient after hedged copper entered the market, restricting copper premiums to a RMB 80-200/mt range. Traders bought spot and sold futures, and downstream producers increased purchases after prices fell to nearly RMB 50,000/mt in early week trading. Buying interest waned, however, after prices rebounded later in the week. Tight month-end cash flows were also blamed for weak buying interest.

 

SHFE 1402 aluminum contracts became the new most active contract last Thursday and hit a two-month low of RMB 14,130/mt. In China’s spot markets, cargo holders scrambled to sell early last week, but traders stayed out of the market due to thin margins. Downstream producers continued to purchase as needed. Suppliers began to hold back goods at low prices after SHFE 1312 aluminum contract prices rebounded later in the week. Spot aluminum prices moved between RMB 14,350-14,370/mt last week.       

 

In the coming week, worries over QE3 tapering will keep LME aluminum prices in check within a USD 1,750-1,800/mt price band, and with strong resistance at the 5-day moving average. HSBC’s flash November manufacturing PMI for China was down slightly from September, but was still the second highest reading in the past seven months. Mild inflationary pressures in China will force China’s central bank to continue easing monetary policy to support economic growth. As a result, any downward room for SHFE 1402 aluminum contract prices to fall will be limited, with prices this week expected between RMB 14,080-14,220/mt.     

SHFE lead prices moved below the 5-day moving average after falling on Monday, hovering most of the week between RMB 13,900-14,000/mt. Prices this week for the most-traded SHFE 1401 lead contract will fluctuate around the 5-day moving average and range between RMB 13,900-14,050/mt. Compared to global markets, China’s domestic lead market will be weaker due to tight liquidity and absence of major economic news. However, China’s stock market was boosted by the recent Third Plenary Session of the 18th CPC Central Committee. 

 

China’s spot lead market remained sluggish as lead smelters were reluctant to trade, leaving  most transactions made with lead warrants in Shanghai and Guangdong. Spot lead price failed to find solid support since downstream producers had little buying interest due to tight liquidity and fears that lead prices would fall further. In Shanghai, spot lead basically was sold between RMB 13,850-13,950/mt, and with the price gap between different brands narrowing to within RMB 50/mt. This week, traded prices will mostly move in a RMB 13,850-13,950/mt range. Lead smelters will be more active moving goods during the last week of November, while downstream purchases will be limited by tight cash flows.  

 

In China’s spot markets, #0 zinc prices were between RMB 14,900-14,960/mt, with spot premiums of RMB 70-130/mt against SHFE 1402 zinc contract prices. Supply of Lida branded #1 zinc was tight, keeping prices firm between RMB 14,880-14,910/mt and only RMB 30-40/mt below #0 zinc prices. Smelters moved goods normally, but traders stayed on the sidelines due to the lack of arbitrage opportunities. Downstream buyers purchased on an as-needed basis, leaving trading muted. 

 

Zinc prices in Tianjin were firm between RMB 15,040-15,080/mt due to tight supply, and were RMB 120-140/mt higher than #0 zinc prices in Shanghai. Huludao branded zinc produced at older production lines was quoted between RMB 15,880-15,900/mt, while #0 zinc prices in Guangdong province were RMB 80-90/mt below Shanghai prices, due to soft downstream demand. The local Baoding government in Hebei province ordered all the smelters in the city to close for one month beginning November 14th in an effort to counteract the heavy air pollution and haze in the region. SMM sources report all nonferrous metals enterprises in Hebei Province were affected, including galvanizing enterprises, which will further erode zinc ingot consumption in north China.

 

SHFE 1402 zinc contract prices will move in a RMB 14,800-14,900/mt band this week. Cargo holders will aggressively sell spot zinc to generate cash, but downstream buyers confronted with month-end cash flow issues will be unable to boost demand, leaving spot premiums between RMB 70-120/mt against SHFE 1402 zinc contract prices. 

 

In China’s spot tin market, traded prices held steady at RMB 144,000-146,500/mt in the first half of the week, but fell later to RMB 143,300-146,000/mt due to sluggish consumption. The falling prices stoked wait-and-see sentiment in spot market, leaving purchases downstream unimproved. Some tin smelters lowered ex-works prices given stronger sales pressure by year’s end.

 

LME nickel prices fluctuated below the 5-day moving average during the week of 15-21 November and closed on Thursday at USD 13,500/mt, down USD 313/mt. The minutes of the latest US Federal Reserve meeting included more discussions about ending the bond purchasing program, which weighed down base metals prices. In addition, a possible negative deposit rate by the ECB triggered a sell-off of the euro, further depressing nickel prices. The preliminary HSBC China manufacturing PMI released last Thursday was 50.4, the second highest reading in eight months, but still generated little market response. Falling initial jobless claims in the US and strong manufacturing data pushed up major US stock markets, but gave little support to nickel prices. LME nickel inventories were up by 3,732 mt, but positions were down by 7,780 lots. Trading was sluggish in China’s domestic nickel markets. In China’s nickel spot market, #1 nickel averaged RMB 95,180/mt, down RMB 920/mt from a week earlier. Jinchuan Group cut nickel prices by RMB 2,000/mt on November 21 to RMB 95,500/mt. Trading was sluggish last week. 

 

A series of economic reports will be released in the coming week and will affect market prices. LME nickel prices are expected to hover between USD 13,400-13,800/mt, but may fall further.  

 

In China’s spot nickel market, buying interest is expected to remain low. Prices for Jinchuan nickel are expected between RMB 94,000-96,000/mt, creating a price gap between Jinchuan and Russian nickel of around RMB 1,000/mt.