SHANGHAI, Feb. 13 (SMM) –Last week, base metals prices rallied after initial falls.
The rising US dollar index and a fallback in crude oil prices weighed down the market early last week. Later, however, as the Greek crisis showed a sign of easing and a peace agreement has been reached to stop the conflict in Ukraine, the euro strengthened, driving down the US dollar. Crude oil hovered near USD 50/bbl. Base metals prices stabilized as a result.
SMMI fell by 0.47% last week, led by a 1.74% decline in SMMI.Al and a 1.6% drop in SMMI.Ni. Aluminum prices suffered from a wave of sell-offs and nickel prices were dragged by a 3% fall in LME nickel and light trading in Chinese market. SMMI.Sn slipped 0.62%, and SMMI.Pb posted a 0.36% slide. SMMI.Cu edged down by 0.04% and SMMI.Zn fell by 0.15%.
Copper
Chinese stocks rebounded nearly 5.67% at the beginning of last week. SHFE most active copper contract climbed to RMB 42,000/mt powered by short-covering, but failed to make a breakthrough. Positions dropped sharply. SHFE 1502 copper contract expired early on February 10 due to the upcoming Chinese New Year holiday.
Spot discounts in China’s copper market widened last week as cargo holders were eager to sell before the Chinese New Year holiday. Discounts hit RMB 200/mt for high-quality copper and RMB 300/mt for standard-quality copper. Large spot discounts lured dealers into buying.
Positions in SHFE copper have declined to about 800,000 last week, presaging limited trading activities this week. Thus, SMM expects SHFE copper to trade at RMB 41,000-42,200/mt.
Aluminum
A flood of negative news dragged SHFE 1504 aluminum contract below RMB 13,000/mt. Trading volumes of the most active contract did not fall sharply, though, due to pre-holiday caution. In China’s spot market, supply and demand diminished as the Chinese New Year holiday is nearing. Large spot discounts lured some traders into buying for hedging between physical and futures market. Sellers held back goods later in the week, preventing spot discounts from widening.
The most active SHFE aluminum contract is expected to trade between RMB 12,900-13,100/mt before the Chinese holiday. In China’s spot market, trading will come to a virtual standstill with the approaching of week-long holiday. Spot discounts are expected between MB 100-140/mt over the SHFE 1503 aluminum contract.
Lead
SHFE 1504 lead contract also fell to RMB 12,225/mt following a wave of sell-offs, but then tracked LME lead up. Despite the upcoming holiday, trading volumes increased significantly as volatile prices enticed investors to enter the market.
Traded prices for spot lead in Shanghai moved lower to RMB 12,225/mt as of last Friday, more than RMB 100/mt higher than SHFE 1504 lead contract prices. Smelters mostly ceased operations, and those still producing reported poor sales due to transporting problem and anemic demand. Trading activities in spot market almost stalled in the latter half of the week. Downstream buyers had replenished sufficient stocks a week earlier, but a few companies built some stocks before logistics firms stopped operation.
There will be just two trading days in China this week, and most investors will leave the market for holiday. A decline in short positions may lend support to SHFE lead prices. SHFE lead may thus hover near RMB 12,500/mt.
Zinc
In the Shanghai spot market, #0 zinc spot premiums against the SHFE 1504 zinc contract price widened to RMB 50/mt at one point, a complete reversal from the RMB 0-50/mt discount the previous week. Smelters will maintain normal production during the Chinese New Year holiday, but have suspended selling and sourcing last week. Arriving shipments, however, proved sufficient due to normal traffic flows on rail transportation networks. Traders withdrew and held prices firm. Downstream buyers purchased modestly, though overall activity remained muted.
Discounts on #0 zinc in Tianjin over Shanghai prices widened from RMB 110/mt to RMB 240/mt. Demand weakened significantly while some smelters continued to sell at lower quotes, weighing down spot zinc prices. A few traders purchased at lower spot premiums against SHFE three-month zinc contract prices, and downstream buying interest was extremely weak, keeping overall transactions quiet.
Discounts on #0 zinc in Guangdong against Shanghai prices expanded from RMB 10/mt to RMB 20/mt. Some traders retreated from the market for the holiday, but smelters sold actively, causing shipments arriving to increase. Some traders lowered their quotes to promote sales. When coupled with soft demand, spot prices inched lower, with trading lackluster.
Most traders and downstream buyers have left the market for the Chinese New Year holiday as transportation was also suspended. Spot prices should range from RMB 40/mt to RMB 30/mt above SHFE 1504 zinc contract prices this week.
Tin
Tin prices in Shanghai spot market held largely stable last week. Most smelters have closed for holiday, allowing traders to hold back goods at lows. But sluggish consumption prevented prices from rising. Sales volumes tumbled to 20 mt last Wednesday from 100 mt last Monday. Nanshan and Jinlong brand tin traded around RMB 125,000/mt, RMB 125,000-126,000/mt for Yunxiang, Tianti and Yunshan brand tin, and RMB 126,500/mt for Yunxi brand tin.
Nickel
SMM #1 refined nickel prices averaged RMB 107,250/mt last week, down RMB 174/mt on a weekly basis. Traders and downstream producers have suspended operation for holiday, with transactions reducing. Jinchuan Group lowered prices once last week by RMB 1,500/mt to RMB 107,000/mt.
Spot nickel in China’s domestic market is likely to trade at RMB 105,500-107,500/mt this week.
