SHANGHAI, Apr. 29 (SMM) – Last week, the US dollar index lost some ground. Upbeat European economic data drove the euro up. HSBC’s flash China manufacturing PMI rose in April, injecting upward momentum to base metals complex. SMMI gained 3.15%. Copper led gains among base metals, with SMMI.Cu advancing by 4.07%. Spot copper prices in Shanghai broke through RMB 50,000/mt at one point. LME nickel rose for four weeks in a row, allowing SMM.Ni to climb 3.69%. Jinchuan Group raised ex-works prices three times by a total of RMB 5,000/mt to RMB 128,000/mt. Spot aluminum prices in China also moved higher, boosted by Chalco’s planned production cuts and consumption recovery, with SMMI.Al up 3.08%. Zinc, lead and tin prices rose less sharply than other base metals, with SMMI.Zn, SMMI.Pb and SMMI.Sn inching up 0.96%, 0.75% and 0.69%, respectively.
Prices for the SHFE most active copper contract were less affected by volatility in Chinese stock markets last week. Contract prices outperformed LME copper prices and rose nearly 3%, from RMB 46,300/mt to nearly RMB 48,000/mt. SHFE nearby copper contract prices remained strong, trading at RMB 49,000/mt late last week, with the price gap with the distant-month contract widening to RMB 1,400/mt. Positions surged by 33,000 lots early last week, but fell by 25,000 lots on Thursday and Friday after prices surged. Traded volumes in night sessions declined, narrowing the trading range for SHFE copper, but on Thursday, night trading turned brisk as prices rose. This week, the July-delivery SHFE copper price may challenge RMB 48,000/mt, which is also the 60-day moving average this week, with solid support at RMB 47,000/mt.
Downstream buyers purchased as needed last week in China’s physical copper markets, but buyers fled markets after spot premiums over the SFHE 1405 copper contract prices surged later in the week. Trading between middlemen also turned quiet later in the week, but some speculators continued to enter the market.
SHFE 1407 aluminum contracts switched to the most active contract last Tuesday and prices rose to RMB 13,725/mt on strong bullish sentiment, with positions and trading volumes both up significantly. In China’s physical markets, sellers and buyers watched from the sidelines early in the week as SHFE aluminum prices were little changed, but cargo holders raised offers after SHFE aluminum prices rose sharply, with prices gaining more than RMB 100/mt for two consecutive days. Rising prices gave traders strong incentives to buy, but downstream producers were forced to purchase at high prices. Trading was brisk.
Markets will stay cautious ahead of the release of minutes from the latest US Federal Reserve policy meeting, as well as the release of the US non-farm employment report for April. In this context, LME aluminum should fluctuate this week in a USD 1,870-1,920/mt range, while SHFE 1407 aluminum contract prices should move between RMB 13,500-13,800/mt, and with investors likely to book profits at highs. In China’s spot markets, downstream producers will increase raw material purchases ahead of the May Day holiday, helping cut spot discounts to less than RMB 100/mt over SHFE 1405 aluminum contracts.
Prices for the most active SHFE 1405 lead contract tracked rising LME lead prices higher last week to RMB 13,900/mt, up from RMB 13,800/mt. Positions also grew by over 400 lots due to bullish sentiment. The most active SHFE 1405 lead contract price rose above RMB 13,900/mt last week, and with additional technical indicators being positive, should hover this week largely between RMB 13,900-14,000/mt.
SMM #1 lead prices rose last week by RMB 100/mt. Traded prices in the Shanghai market were mostly between RMB 13,900-14,000/mt, with prices for deliverable brands Nanfang, Chengyuan, and Chihong Zn & Ge all essentially above RMB 13,950/mt. Physical lead in the Guangdong market was sold between RMB 13,850-13,950/mt, but traders in Guangdong province showed little selling interest since they expected lead prices to rise. As a result, lead supply was relatively tight, with smelters in Hunan and Henan provinces, as well as others in north China all holding back goods. Traded prices should move higher this week in tandem with LME lead prices to the RMB 13,850-14,000/mt range. Shortages of lead concentrate last week forced widespread maintenance at smelters and dampened their selling interest. Downstream producers were suspending operations due to lower lead supply. This week, lead smelters are expect to control deliveries due to tight lead concentrate supply, but also since a growing number of downstream producers will also reportedly be closing for the May Day holiday. As a result, transactions this week for lead ingot will be light.
Last week, spot zinc prices remained firm, with spot prices rising from RMB 30/mt below SHFE 1407 zinc contract prices to RMB 30/mt above. #0 zinc prices climbed from RMB 15,050/mt early in the week to RMB 15,150/mt. Supply remains tight due to ongoing maintenance at zinc smelters, but higher zinc prices gave incentive to some smelters to begin moving goods, helping ease tight supply. Traders took a wait-and-see attitude as zinc prices hovered around RMB 15,200/mt and since spot discounts turned to premiums. Firm zinc prices also kept downstream buyers cautious, with most purchasing on an as-needed basis.
Last week, prices in Guangdong were RMB 50-60/mt below Shanghai prices, with the price spread expanding RMB 20/mt from two weeks ago. Spot prices in Guangdong rose above RMB 15,000/mt due to tight supply, and with downstream buyers continuing to purchase on an as-needed basis. Weak downstream buying interest erased zinc price gains in Tianjin, with the price spread between #0 zinc in Tianjin and Shanghai expanding by RMB 10/mt to hit RMB 60/mt. Prices for Huludao branded #0 zinc produced on older production lines rose by RMB 40/mt, to RMB 15,750/mt.
Spot prices should be on par with SHFE 1407 zinc contract prices this week.
In Shanghai physical tin market, mainstream traded prices were little changed at RMB 139,500-141,000/mt over the first half of the week, but followed LME tin up last Thursday. Prices rose to RMB 141,500-142,500/mt by Friday. Goods available in the market consisted largely of those from Yunnan. Traders showed high buying interest, but downstream producers in general stayed out of the market. Yunnan Tin Group and Yunheng Tin raised ex-works prices to RMB 143,000/mt.
Last week, the average price for SMM #1 nickel was RMB 124,350/mt, up RMB 4,170/mt from a week ago. Jinchuan Group raised its ex-works prices to RMB 128,000/mt, up by RMB 5,000/mt. The price gap between Jinchuan and Russian nickel narrowed to RMB 800-900/mt, but tight supply of Russian nickel has allowed prices of some domestic brands, such as Jiangli, Yuanjiang and Xinjiang, to move higher. Trading volumes were still limited, however.
Chinese markets will be closed this Thursday and Friday for the May Day holiday. A series of major economic reports, including US non-farm payrolls, unemployment, and manufacturing data, will be announced this week, but SMM expects investors to be cautious ahead of those results. LME nickel prices are expected to move between USD 17,800-USD 18,400/mt, with solid support at USD 18,000/mt.