SHANGHAI, Oct. 14 (SMM) – 

 

The most active SHFE 1412 copper contract dipped to RMB 46,950/mt during last Friday’s night session after starting at RMB 47,140/mt. The price of the contract rebounded subsequently to close up RMB 220/mt at RMB 47,810/mt. During the night session, trading volumes for the SHFE 1412 copper contract rose to some 260,000 lots, but positions fell by 23,908 lots. Positions for the SHFE 1501 copper contract added by 12,246 lots.

 

On Monday, SHFE copper initially tested resistance at the RMB 48,000/mt mark after China’s trade data beat forecasts, but fell to RMB 47,850/mt afterwards to end up RMB 260/mt, or 0.55%, at RMB 47,850/mt. Trading volumes for the SHFE 1412 copper contract decreased by 20,572 lots, and positions dropped by 41,542 lots.

 

Physical copper in Shanghai was quoted Monday between a RMB 40/mt discount and a RMB 120/mt premium to the SHFE 1410 copper contract. Traded prices were RMB 48,500-48,600/mt for standard-quality copper and RMB 48,570-48,750/mt for high-quality copper.

 

As SHFE copper leveled off, the price gap between the 1410 and 1411 copper contracts remained at around RMB 300/mt. Cargo holders intended to push up premiums early on Monday, but buyers considered prices too high. Large quantities of imported copper flocked to the market after the SHFE/LME copper price ratio improved. In response, physical copper was largely quoted between a RMB 40/mt discount and a RMB 70/mt premium by the midday, with standard-quality copper sold quoted at a discount and hydro-copper at a RMB 80-90/mt discount. Middlemen and downstream producers were cautious in trading on Monday, and pressure from rising supply grew.

 

As SHFE copper hovered narrowly during the afternoon trading session, the price gap between the SHFE 1410 and 1411 copper contracts remained big. Physical copper was mostly quoted between a RMB 120/mt discount and a RMB 30/mt premium, and traded at RMB 48,480-48,650/mt during the session.

 

SMM’s latest survey shows 8% of market players are optimistic about copper price outlook this week, citing positive technical indicators. These players believe LME copper prices will break above USD 6,750/mt and SHFE copper prices will stand above RMB 48,000/mt.

 

67% of industry insiders expect LME copper to stay between USD 6,650-6,720/mt and SHFE copper to remain at RMB 47,200-48,200/mt. Upbeat trade data from China failed to give a boost to the market, raising doubts about the sustainability of the rebound in copper market. Meanwhile, the consolidation of US dollar index will also limit moving range of copper prices. In China, the Shanghai Composite Index fluctuated wildly and came under greater pressure influenced by plunging US stocks and increasing uncertainties. These factors, combined with the relatively stable liquidity conditions, will leave copper prices in the current range.

 

25% of industry participants are bearish, basing their opinions on the slowdown in major economies, particularly in the euro zone. In addition, the diverged views on economic outlook and financial results of publicly traded companies, as well as deflationary pressure on major economies may also put a dent in copper prices.

 

In China’s physical copper market, as the price gap between SHFE 1410 and 1411 copper contracts did not narrow before the last trading day for the front-month contract, spot premiums are expected to narrow. Besides, latest data indicate a sharp rise in China’s copper imports. Thus, supply of imported copper in China’s domestic markets will grow with the SHFE/LME copper price ratio recovering. In this context, one quarter of the respondents expect LME copper to test support at USD 6,600/mt, and SHFE copper to fall to RMB 47,000/mt. 

 Aluminum      

Last Friday night, SHFE 1412 aluminum contract started at RMB 13,705/mt. The most active contract dipped to RMB 13,675/mt, but then rebounded to finish the night session at RMB 13,770/mt. Trading volumes totaled 34,034 lots, with positions down 736 lots to 140,304 lots.

 

On Monday, the most active contract jumped to RMB 13,855/mt shortly after the release of unexpectedly positive China trade data for September, but then surrendered gains and closed at RMB 13,820/mt. Trading volumes totaled 48,570 lots, with positions down 10,844 lots to 129,460 lots. 

 

Spot aluminum largely traded at RMB 13,770-13,780/mt in Shanghai on Monday, discounts of RMB 0-10/mt over SHFE 1410 aluminum contract, versus RMB 13,770-13,780/mt in Wuxi and RMB 13,780-13,790/mt in Hangzhou. Spot aluminum prices inched down due to growing inventories, but this did not stoke much buying interest. In the afternoon, offers were little changed, with trading muted. 

 

30 Chinese aluminum smelters and traders surveyed by SMM are split over aluminum price movements this week.  

 

53% of those surveyed hold bearish views: (i) a firm US dollar and a lack of technical support may send LME aluminum down to USD 1,880-1,920/mt; (ii) the most active SHFE aluminum contract remains under downward pressure from technical side and poor market fundamentals, with prices expected between 13,550-13,700/mt; (iii) in domestic spot market, demand is unlikely to pick up anytime soon, which will bring spot aluminum prices down below RMB 13,720/mt. 

 

The remaining 47% see aluminum prices to hold stable: (i) LME aluminum looks set to move in a tight range of USD 1,910-1,950/mt; (ii) the most active SHFE aluminum contract will draw support from upbeat Chinese trade data, and fluctuate between RMB 13,700-13,850/mt; (iii) spot aluminum prices in domestic market are poised to stop falling and stabilize between RMB 13,720-13,790/mt. 

 

Lead for November delivery on the Shanghai Futures Exchange, the most active contract, hovered between RMB 13,750-13,790/mt during last Friday’s night session after opening at RMB 13,780/mt. The price of the contract finished down RMB 80/mt at RMB 13,790/mt.

 

Encouraged by upbeat Chinese trade data, SHFE lead surged to RMB 13,875/mt, but fell later to close down RMB 55/mt, or 0.4%, at RMB 13,815/mt. Trading volumes for the SHFE 1411 lead contract shrank 474 lots to 1,998 lots, and positions lost 246 lots to 14,220 lots.

 

On the Shanghai physical lead market, Chihong Zn & Ge and Nanfang brands traded Monday at RMB 13,750/mt, a RMB 90-100/mt discount to the most active SHFE 1411 lead contract. Traded prices were RMB 13,730/mt for Humon and Hanjiang brands. Despite a fall in SHFE lead, spot lead prices remained firm since cargo holders were reluctant to sell at low prices. Downstream producers slowed purchases out of fears that lead prices will fall further for the near term. Trading volumes decreased on Monday.

 

A recent SMM survey of 30 industry insiders showed that 20% of the surveyed expect LME lead to rebound to the USD 2,100/mt mark and spot lead to rise slightly to RMB 13,750-13,850/mt this week. China’s trade figures for September, published on Monday, beat expectations, helping ease market concerns over the Chinese economy. Germany’s ZEW economic sentiment index for October and the euro zone’s industrial output for August and final CPI for September are projected to be disappointing. US September retail sales growth, industrial output, and housing starts, however, should be encouraging.

 

Expectations that the Chinese government may unveil more stimulus policies are likely to grow this week heading into Politburo’s 4th Plenary. The Chinese government recently loosened restrictions on home buying and initiated cross-board trading between the Shanghai and Hong Kong stock exchanges. LME lead is likely to bottom out after falling close to a 2-year trough. On China’s physical lead markets, lead supply is relatively tight since lead smelters are withholding goods at low prices and since some, especially in Henan, curtailed output or conducted maintenance.

 

Meanwhile, most traders and downstream producers are going bargain-hunting actively. In this context, spot lead prices should rise this week.

 

37% of respondents hold that LME lead will fall to USD 2,030/mt and spot lead will find support at RMB 13,600/mt this week. China’s GDP was reported over the weekend to grow at a lower rate in 2014 and 2015, and chances are slim that the Chinese government will unveil aggressive stimulus policies. European Central Bank President Mario Draghi reiterated the necessity of more stimulus measures, but faced strong resistance from other policymakers. A slowdown in China and Europe’s economic growth and the rising US dollar index should combine to weigh down base metals prices. Meanwhile, spot lead prices are set to find support at RMB 13,600/mt this week against bearish macroeconomic conditions.

The remaining 43% expect LME lead to remain flat at USD 2,050-2,100/mt and spot lead at RMB 13,700-13,800/mt this week. 

 

SHFE 1412 zinc contract prices opened at RMB 16,650/mt last Friday evening, and touched as high as RMB 16,760/mt, and closed at RMB 16,755/mt, down RMB 55/mt or 0.33%. Trading volumes decreased 38,426 to 230,204 lots, and total positions increased by 2,676 to 175,484 lots. SHFE 1412 zinc contract prices opened at RMB 16,750/mt October 13, touching as high as RMB 16,880/mt in the morning. But due to the lack of buyers, SHFE 1412 zinc contract prices lost early gains and and closed at RMB 16,805/mt, down RMB 5/mt or 0.03%. Trading volumes decreased 105,362, to 403,972 lots, and total positions were down by 5,634 lots to 167,174 lots. SHFE 1412 zinc contract prices are expected to fluctuate around the 5-day moving average.

 

#0 zinc prices were between RMB 16,970-17,030/mt, with spot premiums of RMB 180-230/mt against SHFE 1412 zinc contract prices. #1 zinc prices were between RMB 16,940-16,950/mt. SHFE 1412 zinc contract prices fluctuated between RMB 16,790-16,800/mt after opening, with spot premiums between RMB 180-230/mt. Smelters by in large sold normally which, combined with ample supply of Qilin zinc, cargo holders moved goods actively. This led to sufficient supply and caused spot premiums to fall slightly. Trading was brisk, but downstream buyers purchased as needed.

 

Shuangyan branded #0 zinc prices were RMB 17,000-17,030/mt, and prices for Yuguang were RMB 17,000-17,020/mt. Qilin, Qinxin, Jiulong and Feilong zinc prices were RMB 16,980-17,010/mt. Prices for Tongguan, Tiefeng and Baiyin were RMB 16,970-16,990/mt. SHFE 1412 zinc contract prices consolidated in the afternoon. The price spread between SHFE spot-month and SHFE 1412 zinc contracts narrowed to RMB 100/mt, but spot premiums remained between RMB 180-220/mt, keeping traders on the sidelines. Spot zinc prices were RMB 16,960-17,020/mt.

 

LME zinc prices hovered above USD 2,300/mt after the Chinese National Day holiday. With regard to zinc price trends this week, SMM surveyed 30 market players and found that 50% take a neutral posture, believing LME zinc prices will fluctuate between USD 2,300-2,350/mt, and SHFE 1412 zinc contract prices will move between RMB 16,600-17,000/mt. They base their opinion on poor economic situations in China and other countries. The IMF lowered its forecast of global economic growth, which will also curb base metal demand. But China’s trade data released on Monday stabilized, and this will help soothe the market. Market expectations over zinc concentrate shortfalls will also bolster zinc prices.

 

30% are bearish, believing LME zinc prices will drop below USD 2,300/mt, and SHFE 1412 zinc contract prices will inch down to RMB 16,500-16,600/mt. Market concerns over euro zone economic recovery and a likelihood of deflation will negatively affect base metals. This will be all the more so now that it is clear that China will not advance any significant stimulus before year’s end. Moreover, China also lowered its forecast for economic growth. Shanghai supply tightness will improve now that Guangdong’s goods were shipped to Shanghai due to large price spread between the regions, which will in turn pull down spot premiums in the latter.

 

20% are bullish, seeing LME zinc prices rise to USD 2,370/mt, and SHFE 1412 zinc contract prices break through RMB 17,000/mt. The Fed’s Deputy Chairman Stanley Fischer worse-than-expected global economic growth will lead to a slower interest rate hike. This will weigh down the US dollar index whilst driving up base metals prices. Positive measures for China’s property market, combined with strong market fundamentals, will also pull up zinc prices in the near term.

 

In Shanghai spot tin market, most deals closed between RMB 137,000-139,500/mt on Monday. Downstream producers showed little interest out of growing bearishness and poor orders.

 

SMM’s recent survey of market players in China’s domestic tin industry reveals the following results:

 

Half of those surveyed hold bearish views: (i) technical indicators suggest that LME tin prices are vulnerable at USD 20,000/mt this week; (ii) orders at downstream producers, though up from August, are still considered poor. This, along with growing supply, may send tin prices in domestic spot market down to RMB 136,500/mt. 

 

Another 40% expect tin prices to stabilize: (i) LME tin prices will find support at USD 20,000/mt; (ii) supply will fall and orders at downstream producers increased compared with August, which will help keep tin prices in domestic spot market stable between RMB 137,000-139,500/mt. 

 

The remaining 10% express rosy opinions: (i) LME tin prices may bounce back to USD 20,600-20,700/mt following continuous declines; (ii) the depletion of cheap goods will help push the low-end price in domestic spot market up above RMB 137,500/mt. 

 

 Nickel   

SMM #1 nickel prices were between RMB 113,200-113,500/mt. As spot prices rose with LME nickel prices, traders purchased actively. Jinchuan nickel prices were RMB 500/mt below 1411 nickel contract prices on the Wuxi electronics trading, between RMB 113,200-113,800/mt, with trading brisk and mainly among traders, and traded prices between RMB 113,800-114,400/mt. Spot nickel prices in Shanghai dropped with LME nickel prices in the afternoon, but transactions were active. Russian nickel prices were only RMB 200/mt below Jinchuan nickel prices due to tight supply, but with trading extremely muted. Prices of South African nickel were RMB 300/mt below Jinchuan nickel. Nickel prices on the Wuxi electronics trading edged lower in the afternoon, causing cargo holders to hold back from selling. Traded prices were RMB 400/mt below 1411 nickel contract prices, between RMB 113,400-113,800/mt, with transactions quiet. Jinchuan lowered nickel prices by RMB 1,000/mt to RMB 113,500/mt.

 

SMM surveyed 30 market participants with regard to nickel price trends this week and found that 53% are bearish, believing LME nickel prices will fall to USD 16,000/mt. LME nickel prices have been growing rapidly since late September. As of October 10, LME nickel inventories grew 40.5% to 367,100 mt, mirroring soft demand worldwide. In the meantime, China’s NPI output dropped more slowly than expected. Prices weakened across the nickel ore, NPI and stainless steel markets.

 

34% see LME nickel prices fluctuating between USD 16,300-16,800/mt this week. China’s macroeconomic indicators scheduled for release this week are expected to be mild. When combined with sluggish fundamentals, nickel prices will consolidate.

 

13% are optimistic, anticipating LME nickel prices will technically rebound but meet resistance at USD 17,000/mt. Russian nickel prices were only RMB 200/mt below Jinchuan nickel prices due to tight supply, reflecting cargo holders are unwilling to sell at lower prices.