SHANGHAI, Aug. 12 (SMM)--
The most active SHFE 1410 copper contract started last Friday's night session at RMB 49,750/mt, meeting resistance at the RMB 50,000/mt mark, and closed up RMB 60/mt at RMB 49,850/mt. During the night session, trading volumes for the most active contract fell slightly to around 90,000 lots, and positions gained by 3,654 lots.
On Monday, SHFE copper prices rose initially to an intraday high of RMB 50,120/mt, but then hovered largely around RMB 50,000/mt due to profit-taking. The price of the red metal fell at the tail of the trading to finish up RMB 100/mt, or 0.2%, at RMB 49,890/mt. Trading volumes for the SHFE 1410 copper contract shed by 75,350 lots, and positions contracted by 3,340 lots. SHFE copper prices are expected to trade in ranges for the near term.
In the Shanghai physical market, copper was largely offered Monday between a RMB 30/mt discount and a RMB 40/mt premium over the SHFE 1408 copper contract. Traded prices were RMB 50,420-50,460/mt for standard-quality copper and RMB 50,460-50,520/mt for high-quality copper. After SHFE copper prices rebounded, the price gap between the SHFE 1408 and 1409 copper contracts remained at around RMB 200/mt, giving cargo holders an incentive to convert inventories into cash. The price of high-quality copper traded at a significantly lower premium, but that of standard-quality copper held firm. Most middlemen entered the market to hunt for bargains, while downstream producers bought only to need on Monday, leaving trading modest.
As SHFE copper prices fell slightly during the afternoon trading session, physical copper was largely offered between a RMB 30/mt discount and a RMB 50/mt premium and traded lower at RMB 50,380-50,480/mt. Some traders entered the market following a slide in copper prices, but overall trading activity remained light on Monday.
23% of market players surveyed by SMM are optimistic that LME copper prices will stand above USD 7,050/mt and SHFE copper will climb above RMB 50,200/mt. Upbeat data from China boosted market confidence and investors are also optimistic about economic figures to be released in the US. In addition, US stocks are expected to stabilize after sharp falls. China's stock markets rallied on Monday helped by positive news. These, combined with a series of government announcements pertaining to stimulus measures, are believed to bolster copper prices.
67% of industry insiders are cautious, noting that LME copper prices will remain between USD 6,980-7,050/mt, and SHFE copper prices will be RMB 49,800-50,200/mt. LME copper prices were struggling between short-term moving averages, and investors were still selling at highs and buying on dips, which will limit moving range for copper prices.
In China's physical copper market, the price gap between 1408 and 1409 copper contracts is expected to narrow before the expiration of the August-delivery contract, and cargo holders will try to offer prices close to SHFE 1408 copper contract prices. However, downstream buyers will be unwilling to purchase. In this context, many investors believe copper prices will be trapped in the current range.
10% of market players expect copper prices to fall, with LME copper prices testing a low of USD 6,950/mt and SHFE copper prices down to RMB 49,700/mt. These players based their opinions on escalating geopolitical crisis which will exert a drag on copper prices.
Last Friday night, SHFE 1410 aluminum contract slipped to RMB 14,070/mt after starting at RMB 14,110/mt, and finished the night session at RMB 14,115/mt. Trading volumes totaled 67,692 lots, with positions up 5,454 lots to 152,128 lots.
On Monday, the most active contract fluctuated in tight ranges before closing at RMB 14,130/mt. Trading volumes totaled 46,522 lots, with positions down 7,536 lots to 144,592 lots.
August aluminum on the SHFE moved sideways on Monday, creating little change in spot aluminum prices in east China. Spot aluminum largely traded at RMB 14,000-14,010/mt in Shanghai and Wuxi on Friday, a discount of RMB 30-40/mt over SHFE 1408 aluminum contract, versus RMB 14,030-14,040/mt in Hangzhou. Buying interest was low. A few cut offers slightly, but asked for higher prices after SHFE aluminum edger higher near lunchtime. In the afternoon, SHFE aluminum consolidated, driving sellers and buyers in spot markets to the sidelines.
SMM's recent survey of 41 aluminum smelters and traders in China reveals the following results:
24% of those surveyed are bullish that spot aluminum prices in China will rise above RMB 14,030/mt this week for two reasons. First, positive technical indicators are likely to push LME aluminum and SHFE 1410 aluminum contract up to USD 2,010-2,050/mt and RMB 14,130-14,230/mt. Second, falling aluminum stocks in major trading regions will encourage cargo holders to demand higher prices.
Another 66% expect spot aluminum prices to remain stable between RMB 14,000-14,030/mt. Escalating geopolitical tensions will prevent LME aluminum from rising, but solid support at the moving averages will put a floor under LME aluminum, keeping prices in check within USD 2,000-2,030/mt. SHFE 1410 aluminum contract may probably consolidate between RMB 14,030-14,150/mt. Buyers in spot markets will restock only as needed, leaving spot aluminum prices stable.
The remaining 10% are bearish that spot aluminum prices might fall below RMB 14,000/mt. Weakness in other base metals may leave LME aluminum vulnerable at USD 2,000/mt. The most active SHFE aluminum contract is expected test support at RMB 14,000/mt. Dwindling buying interest in spot markets will expose spot aluminum prices to downward correction.
SHFE 1410 zinc contract prices opened lower at RMB 16,665/mt last Friday evening, and fluctuated between RMB 16,615-16,685/mt, and closing at RMB 16,645/mt, down RMB 155/mt or 0.92%. Trading volumes decreased by 149,212 to 196,196 lots, and total positions grew by 4,692 to 246,522 lots. SHFE 1410 zinc contract prices opened at RMB 16,645/mt on Monday, and inched down to a three-week low of RMB 16,585/mt as LME zinc prices were resistant to gains, and closing at RMB 16,640/mt, down RMB 160/mt or 0.95%. Trading volumes decreased by 273,294 lots, to 480,254 lots, and total positions decreased by 14,098 lots to 232,424 lots. SHFE 1410 zinc contract prices are expected to fall this evening to test RMB 16,585/mt since LME zinc prices maintained downward trend during European trading hours.
#0 zinc prices were between RMB 16,650-16,730/mt, with spot prices RMB 10-40/mt above SHFE 1410 zinc contract prices. #1 zinc prices were between RMB 16,630-16,650/mt. SHFE 1410 zinc contract prices opened at RMB 16,665/mt, then surged before falling back to RMB 16,600-16,650/mt. Cargo holders sold actively due to significant zinc price volatility, with some lower-priced goods released and a large number of bargain hunters entering the market, leaving trading brisk. SHFE 1410 zinc contract prices rallied to RMB 16700/mt during 10:30-11:30 am, so some speculators left the market. Supply from smelters remained tight, but as arbitrage traders moved goods and since some traders canceled warrants due to the approaching of delivery date. Nevertheless, downstream buyers took a wait-and-see posture, leaving transactions quiet. Shuangyan branded #0 zinc prices were RMB 16,670-16,730/mt, with RMB 16,650-16,680/mt for Yuguang, Feilong and Jiulong zinc. A small amount of Baohui zinc was traded around RMB 16,640/mt, with RMB 16,780-16,800/mt for Dongling zinc, and RMB 16,750/mt for Huize zinc. Prices for AZ and SMC brand zinc were between RMB 16,680-16,700/mt, and RMB 16,620-16,690/mt for other imported zinc. SHFE 1410 zinc contract prices fluctuated between RMB 16,630-16,680/mt in the afternoon, with spot premiums between RMB 20-30/mt against SHFE 1410 zinc contract prices, #0 zinc prices between RMB 16,650-16,690/mt.
LME zinc prices rose initially last week then fell back, down 2%. SMM surveyed 30 market players and ascertained that 37% believe LME zinc prices will hover between USD 2,275-2,325/mt, and SHFE 1410 zinc contract prices will move between RMB 16,500-16,850/mt. Few releases of headline economic indicators are scheduled for this week, when combined with the US dollar testing the heights of its current strength, zinc prices will have little room to fall. LME zinc prices will fluctuate between the 5 and 40-day moving average, with spot premiums against SHFE 1410 zinc contract prices between RMB 0-50/mt.
37% are bearish toward zinc prices, believing LME zinc prices will dip o as low as USD 2,240/mt, and SHFE 1410 zinc contract prices will slide to RMB 16,200/mt, with spot premiums between RMB 50-100/mt. euro zone June CPI industrial output slated for release this week are pessimistic. Uncertainties toward Ukraine crisis, combined with potential counter sanctions against Russia by the US Finance Ministry as well as a potential US attack on Iraq will fuel risk aversion, which will push down European stocks and zinc prices. In addition, growing LME zinc inventories caused spot contango on the LME zinc to expand, when combined with anticipation of growing China's zinc output, zinc prices will face downward pressure. In China's spot markets, arbitrage traders will release goods as SHFE zinc prices fell, causing supply to increase. This, coupled with the approaching of delivery date, spot zinc prices should be weighed down.
26% are bullish, predicting LME zinc prices will rise to USD 2,350/mt, and SHFE 1410 zinc contract prices will return to RMB 17,000/mt. LME zinc prices remain in an upward track. Besides, a large number of longs have closed positions last week, and the negative effects from geopolitical turmoil have been absorbed. In combination of optimistic economic data releases from China and the US, spot zinc prices should rise to RMB 16,950/mt.
Lead for October delivery, the most active contract, opened last Friday's night session at RMB 14,735/mt, and then fluctuated between RMB 14,730-14,750/mt. The SHFE 1410 lead contract, however, fell to RMB 14,690-14,710/mt subsequently due to decreasing buying and ended down RMB 75/mt at RMB 14,710/mt. Trading volumes totaled 21,192 los, and positions added 48 lots to 35,092 lots.
On Monday, SHFE lead prices fluctuated largely around RMB 14,730/mt during the morning trading session, reaching as high as RMB 14,765/mt, and ended down RMB 90/mt at RMB 14,695/mt. Trading volumes for the SHFE 1410 lead contract were 32,944 lots, and positions were off 848 lots to 34,196 lots.
In the Shanghai physical lead market, goods from Chihong Zn & Ge traded Monday at RMB 14,590/mt, a RMB 140/mt discount over the most active SHFE 1410 lead contract. Traded prices were RMB 14,570-14,580/mt for Chengyuan, Nanfang, and Tongguan resources and RMB 14,570/mt for Humon supply. Traders sold off goods in large quantities, while lead smelters continued to hold prices firm. Most downstream producers were reluctant to buy on Monday out of fears that lead prices may fall.
SMM has recently carried out a survey of 30 industry insiders on lead price movements for this week. It turns out that 73% of the surveyed expect LME lead prices to test support at USD 2,200/mt and physical lead prices to fall to the RMB 14,450-14,600/mt range this week.
Geopolitical tensions between Russia and Ukraine as well as continued violence in Iraq will pose great uncertainties in base metals markets. The yields over German bunds have become negative in a sign of extremely low risk appetite. Investors thus are expected to sell off risk assets including base metals. China's July value added at large industrials, retail sales of consumer goods, and fixed asset investment all will be released this week. CPIs from the euro zone countries, the euro zone's June industrial output growth, as well as US retail sales growth are also set to be made public.
However, these economic reports are not expected to significantly boost base metals markets, while positive US figures may even stoke concerns over an interest rate hike by the US Fed. Meanwhile, SHFE lead positions have dwindled by 8,952 lots as longs are exiting the market following profit-taking and buying force is weakening. In China's physical lead markets, supply is increasing as lead smelters have essentially resumed production in August. Nevertheless, lead-acid battery producers will be disinclined to buy raw material against the backdrop of growing finished goods inventories and low battery prices.
7% of respondents, however, are bullish, expecting LME lead prices to rise to USD 2,230-2,280/mt and physical lead prices to RMB 14,550-14,700/mt. They hold that LME lead positions are increasing, and the cash-to-three-month contango has reached a renewed low level since the beginning of this year. A series of technical indicators are also positive. Meanwhile, tight lead concentrate supply will put a cap on output at lead smelters, which will help support lead prices. Automotive battery producers have begun building raw material stocks in August to prepare for the peak demand season in September, giving a boost to lead prices.
The remaining 20% believe that LME lead prices will largely hold flat at USD 2,230/mt and physical lead prices at RMB 14,550-14,650/mt. Uncertainties remain over geopolitical strains in Ukraine, while China's physical lead markets are sluggish. In addition, the price of zinc, extracted from lead-zinc ores, has fell from USD 2,400/mt to USD 2,280/mt. However, LME lead positions, cash-to-three month contango, and other technical indicators all are positive.
In Shanghai spot tin market, mainstream traded prices remained stable between RMB 139,500-141,500/mt on Monday. Trading activity improved in the morning, with downstream producers actively buying at RMB 139,500/mt.
Market players surveyed by SMM express mixed views over tin price movements this coming week.
An overwhelming 70% of those surveyed anticipate little change in tin prices. Upbeat Chinese economic data has boosted market sentiment, but growing geopolitical tensions are keeping investors cautious. This will keep LME tin in check within USD 22,300-22,500/mt. In domestic spot tin market, smelters will hold back goods at lows, while downstream producers will show little buying interest against poor orders, leaving spot tin prices hovering around RMB 14,000/mt.
Another 15% are bullish that tin prices will move higher. They understand that LME tin is building momentum for a rally and on track to return to near USD 22,500-22,700/mt. In China's spot tin markets, cheap goods have largely been consumed, lending support to prices.
The remaining 15% are pessimistic that tin prices remain under downward pressure. They note that LME tin is vulnerable at USD 22,300/mt. Tin prices in domestic spot markets may fall to RMB 139,000/mt should goods from Jiangxi flood in.
SMM #1 nickel prices were between RMB 129,300-129,700/mt, with spot trading quiet in the morning. Trading volumes were mostly below 50 mt, with prices between RMB 129,400-129,800/mt. Prices on the Wuxi electronic trading fell with LME nickel prices at 3:00 pm, causing spot quotes to drop in response. Trading volumes also increased, but were made within 100 mt, with prices between RMB 128,900-129,200/mt. End-user demand did not improve.
SMM surveyed 36 market players and found that 56% are neutral toward zinc prices this week, seeing nickel prices move between USD 18,500-18,800/mt. Nickel prices will lack ability to rise given sluggish downstream demand, but Indonesia will unlikely loosen regulations on the export of unprocessed ore.
33% are bearish, anticipating LME nickel prices will hover between USD 18,300-18,500/mt. LME nickel inventories have broken through 318,000 mt, and grown 21.66% since the start of the year. In addition, neither nickel ore nor NPI prices improved, with FOB nickel ore prices from the Philippines remaining on a downward track.
The remaining 11% are bullish, believing LME nickel prices will fluctuate between USD 18,800-19,100/mt. they think domestic spot nickel prices did not drop as significantly as LME nickel prices, and traders will purchase at lows whilst selling at highs. When combined with optimistic retail sales and industrial value added at large enterprises slated for release this week, LME nickel prices will find support.