SHANGHAI, Oct. 14 (SMM) – The US dollar index fell back after the Chinese National Day holiday, allowing some base metals to rebound. Zinc outperformed other base metals, with SMMI.Zn gaining as much as 2.51%. SHFE zinc prices rose, so did spot zinc prices in China’s domestic market, with trading brisk. Chinese lead smelters held back goods at lows, and downstream producers increased purchases, pushing SMMI.Pb up 0.55%. In domestic spot copper market, traders actively went bargain hunting, allowing sellers to hold offers at premiums over SHFE front-month copper contract and driving SMMI.Cu up 0.28%. Aluminum, tin and nickel, in contrast, performed badly. Weak LME tin prices and sluggish domestic consumption forced tin smelters to cut offers, sending SMMI.Sn down 0.33%. Trading in China’s spot nickel market was muted since downstream producers had stockpiled sufficient goods before the holiday, causing SMMI.Ni to fall 0.14%. Aluminum led losses among base metals, with SMMI.Al down 0.72%. SHFE aluminum prices drifted lower after the holiday, and spot aluminum prices followed suit due to growing supply and poor demand. SMMI inched up 0.37%.
SHFE copper prices were confronted with growing downward pressure after the Chinese National Day holiday. The most active SHFE copper contract hovered near RMB 47,800/mt last week, and dipped to a low of RMB 47,210/mt for a time.
SHFE copper prices may sink to RMB 46,500-46,800/mt once falling below RMB 47,000/mt as short positions are increasing and as LME copper prices may test support at USD 6,600/mt.
An increasing amount of imported copper flowed into China’s physical copper market last week. Some dealers went bargain hunting, and cargo holders intended to lift copper premiums. Spot trades improved before the weekend as downstream buyers built some stocks after the week-long holiday.
The most active SHFE aluminum contract fell to RMB 13,760/mt last Thursday, drawing no support from China’s official manufacturing PMI for September. The contract followed LME aluminum up above RMB 13,900/mt last Thursday night, but remains under downward pressure. In China’s spot market, sellers rushed to sell due to growing arrivals following the week-long holiday. But downstream buyers showed little purchasing interest, causing spot discounts to widen to RMB 10-40/mt over SHFE 1410 aluminum contract.
Final readings on CPI from major economies are scheduled for release this coming week. The most active SHFE aluminum contract will move between RMB 13,700-13,950/mt. In China’s physical market, downstream demand is expected to pick up slowly, which will help prevent spot discounts from expanding. Spot aluminum should trade at discounts of RMB 0-40/mt over SHFE front-month aluminum contract.
Lead for November delivery on the Shanghai Futures Exchange, the most active contract, advanced to RMB 13,800-13,900/mt early last week, but later fell. Positions for the most active contract decreased from levels before the Chinese National Day holiday. The most active SHFE 1411 lead contract recently is set to advance to RMB 13,800-14,000/mt this week as a rising number of shorts are liquidating positions.
On China’s physical lead markets, traded prices were largely in a RMB 13,650-13,750/mt band last week. Lead supply fell short of demand since smelters in Shanghai moved goods in light volumes due to low prices and since traders ramped up purchases given low inventories. Lead smelters in Henan, Anhui, and Jiangxi were disinclined to sell, causing ex-factory prices in these regions to exceed those in Shanghai. Physical lead prices are expected to advance slightly to RMB 13,750-13,850/mt this week. Lead smelters will ramp up sales if lead prices rise this week, helping increase market supply. Traders are likely to be more willing to buy given their current low inventories and as physical discounts are expanding. Meanwhile, bargain-buying should ramp up for delivery under the SHFE 1410 lead contract, lending a boost to spot lead prices. Lead-acid battery producers, however, will hold to the sidelines this week as most built sufficient input inventories starting in late September.
In China's spot markets, spot premiums of #0 zinc against SHFE 1412 zinc contract prices stayed between RMB 200-230/mt in Shanghai. 10,000 mt of goods shipped from south China arrived, with ample supply of Qilin, Tiefeng and Feilong zinc. But supply remained tight as traders held back from selling on slight arbitrage opportunities. Downstream buyers watched on the sidelines, leaving trading muted.
Zinc prices are expected to be more resilient than any other base metals this week, and move sideways in the near future.
Shanghai's tight supply situation is expected to improve this week as goods shipped from Guangdong arrive, but cargo holders will hold spot premiums firm, especially as supply from smelters remains modest. Buyers are thus likely to hold more to the sidelines, keeping trading in Shanghai muted. Spot premiums against SHFE 1412 zinc contract prices will hold around RMB 200/mt. Shipments from Guangdong to Shanghai, as well as supply from Yunnan and Sichuan, will cause the price spread between Shanghai and Guangdong to narrow. Nonetheless, Shanghai supply will remain tighter than in Guangdong, keeping the spread between the two regions around RMB 150/mt.
Tin prices in Shanghai spot market followed LME tin down slightly last week. Demand was tepid since most had stockpiled sufficient goods before the holiday. The flood of goods from Jiangxi added to oversupply pressure, sending mainstream traded prices down to RMB 137,500-140,000/mt. Small amounts of Nanshan and Jinlong brand tin traded at RMB 137,000/mt. Most smelters in Yunnan held offers firm, but China Tin Group and Yunnan Chengfeng Non-Ferrous Metals began to cut ex-works prices to RMB 139,000-139,500/mt last Thursday.
In China’s spot nickel market, the average price for SMM #1 refined nickel inched up RMB 100/mt from pre-holiday level to RMB 114,250/mt last week. The price spread between Russian and Jinchuan nickel shrank to RMB 200-300/mt. Sellers held back goods at lows. Traders and downstream producers were little interested in buying.
This coming week, nickel prices in China’s spot market are expected between RMB 113,500-116,500/mt. Russian nickel will likely trade at discounts of less than RMB 300/mt over Jinchuan nickel.