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SMM Base Metals Weekly Price Review and Forecast (Mar. 31-Apr. 4, 2014)
Apr 1,2014 10:52CST
price review forecast
Base metals prices were mixed last week. SHFE copper prices rebounded by almost 2%, giving downstream producers and traders incentives to buy in physical markets.

SHANGHAI, Apr. 1 (SMM) – Base metals prices were mixed last week. SHFE copper prices rebounded by almost 2%, giving downstream producers and traders incentives to buy in physical markets. This pushed premium of spot copper prices over SHFE 1404 copper contract all the way up. SMM.Cu led gains among base metals, up 2.6%. Rising SHFE aluminum prices allowed suppliers in spot markets to hold back goods at lows. Traders showed high buying interest, driving prices higher. SMM.Al climbed 0.81%. Lead and zinc prices gained less, with SMMI.Pb and SMMI.Zn up 0.17% and 0.16%, respectively. LME nickel prices snapped 15-day winning streak, pulling nickel prices in China down. Jinchuan Group raised prices slightly before cutting prices sharply by RMB 700/mt to RMB 101,800/mt. Buyers stayed out of the market against price declines, causing SMMI.Ni to lead losses among base metals, down 0.85%. Liquidity crunch left tin smelters in Yunnan anxious to sell while deterring downstream producers from entering the market, dragging SMMI.Sn down 0.69%. Overall, SMMI rose by 1.55%.  

SHFE 1406 copper contract prices rose 1.98% last week, and since this increase was greater than gains for LME copper prices, the SHFE/LME copper price ratio rose to 7.05. The most active SHFE copper contract prices rose from RMB 44,800/mt, to RMB 46,000/mt, with a weekly high of RMB 46,400/mt. Both traded volumes and positions were down slightly. SHFE copper prices should track LME copper price trends this week and move between RMB 45,000-46,500/mt.

Trading among middlemen was active in China’s physical copper markets last week. Downstream buyers increased purchase volumes, but became less active after SHFE copper prices rebounded later in the week. Trading turned especially quiet after spot premiums over SHFE 1404 copper contract prices climbed above RMB 200/mt.

Last week, HSBC’s flash China manufacturing PMI for March fell to 48.1, increasing expectations that the Chinese government will create new stimulus measures to boost economic growth. In response, SHFE 1406 aluminum contract prices rose to RMB 12,950/mt, but positions were down sharply. In China’s physical markets, prices continued to fall due to soft demand, but rebounded above RMB 12,400/mt later in the week since rising SHFE aluminum prices allowed cargo holders to hold back goods at lower prices. Rising prices also gave traders incentive to buy. 

This coming week, market expectations for new stimulus measures from the Chinese government will push SHFE 1406 aluminum contract prices up to RMB 12,900-13,070/mt. In China’s spot markets, inventories continue to grow, and downstream consumption has not yet recovered fully, so any upward momentum in spot aluminum prices will be limited, with spot discounts of RMB 250-320/mt expected over SHFE 1404 aluminum contract prices. 

The most active SHFE lead contract price moved last week between RMB 13,750-13,800/mt, hovering between the 10-day and 20-day moving averages. Positions increased by more than 4,000 lots as market sentiment gradually turned bullish. SHFE lead prices are likely to move higher to within the RMB 13,750-13,850/mt range, but will meet strong resistance at RMB 13,850/mt.

China’s physical lead markets encountered oversupply conditions last week due to tight liquidity at the end of the first quarter. In the Shanghai market, spot lead traded essentially at RMB 13,700/mt. Lead smelters, including Chengyuan, Nanfang, Chihong Zn & Ge, and Tongguan, all increased deliveries and inflated market supply, but other low-priced lead goods were barely found. Spot lead was sold between RMB 13,550-13,650/mt in thin trading in the Guangdong market. Trading activity improved after the price gap between Gejiu and other leading brands expanded. Traded prices in the Tianjin market last week were relatively high at RMB 13,700-13,800/mt after Liaoning Haicheng and Huludao Nonferrous Metals both restricted sales. Spot lead is set to trade this week higher between RMB 13,650-13,800/mt. Lead smelters will be less willing to move goods as tight end-of-month liquidity eases at the start of April, but supply will also fall due to maintenance or cuts in output at some smelters, lending support to lead prices. In addition, lead-acid battery producers will show stronger buying interest in early April as cash flows improve. 

Last week, spot zinc prices were weaker than SHFE zinc prices, with spot discounts for #0 zinc against SHFE 1406 zinc contract prices expanding by RMB 20/mt, to RMB 120-170/mt, and with spot zinc trading between RMB 14,650-14,690/mt. Some smelters were actively moving goods due to tight cash flows at the month and quarter’s end, but some brands were still in short supply as smelters conducted maintenance or were holding back goods. Traders lacked interest in transactions due to disappointing prices, but some traders increased purchases on Friday. Downstream enterprises mostly purchased on an as-needed basis, with trading volumes largely unchanged from the previous week.

Prices in Guangdong were RMB 30-40/mt below Shanghai prices. Supply in Tianjin was down since smelters held onto goods or delivered goods to other regions, causing #0 zinc prices in Tianjin to rise to RMB 10-20/mt below Shanghai prices. Prices for Huludao branded #0 zinc produced on older production lines were raised by RMB 30/mt, to RMB 15,270/mt.

In Shanghai physical tin market, prices extended losses last week, with prevailing traded prices down to RMB 138,000-140,000/mt last Friday. Liquidity crunch left smelters in Yunnan anxious to sell at lows prices while deterring downstream producers from entering the market. The price spread between different brands narrowed. Yunxi brand tin traded at RMB 139,500-140,000/mt, while other brands from Yunnan traded between RMB 138,500-139,000/mt. Prices for goods from Jiangxi fell to RMB 138,000/mt.  

Last week, the average price for SMM #1 nickel was RMB 101,860/mt, up RMB 1,700/mt on a weekly basis. Jinchuan Group cut ex-works prices twice by a total of RMB 700/mt to its final prices of RMB 101,800/mt. Trading was thin due to tightening liquidity at the month’s end. Only a few traders made deals in significant amounts necessary to meet demand from end users, while most downstream enterprises made only limited purchases. 

This week, most downstream producers in China’s domestic nickel spot markets will show little buying interest, preventing prices from rising. Traded prices for Russian nickel are expected to be between RMB 100,000-100,800/mt, creating a price gap of RMB 1,000/mt with Jinchuan nickel. 



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