SMM Base Metals Weekly Price Review and Forecast (Mar. 16-20, 2015)

SHANGHAI, Mar. 17 (SMM) –

Although China’s economic data released last week were disappointing, Remarks of PBOC’s governor Zhou Xiaochuan at a press conference cheered up the market. In the euro zone, economic signposts remained weak and the risk of a Greek default increased, pushing the euro to a 12-year low. That, combined with anticipation for Fed’s interest rate increase, drove the US dollar index to 100. Crude oil and gold were relatively firm.

SMMI.Al increased 1%, and SMMI.Cu posted a 0.71% rise laset week. SMMI.Pb edged up 0.42%, while SMMI.Zn dropped 0.96%. SMMI.Sn fell by 1.19% partly dragged by the 5% slump in LME tin. SMMI.Ni dropped 0.68%. SMMI rallied after initial falls and ended last week up 0.37%.

Copper
Chinese shares showed big swings last week and ended with a 3% gain. SHFE copper prices moved between RMB 41,800-42,800/mt, and both trading volumes and positions remained stable. SHFE copper may thus test resistance at RMB 43,300/mt.

In China’s spot copper market, cargo holders held prices firm. Dealers entered market to source lower-priced goods, and the price spread between standard and high-quality copper narrowed.

Aluminum
SHFE 1505 aluminum contract dropped to RMB 12,865/mt, but rallied to RMB 13,290/mt later in the week. Many investors exited the market, leaving the most active contract hovering around RMB 13,000/mt. In China’s spot market, inventories kept growing, but sellers did not panic. Processors sought cheap goods. Spot prices gained less than SHFE aluminum, causing spot discounts to expand.

Improving market sentiment will push SHFE 1505 aluminum contract up further, but poor market fundamentals will temper gains, with prices expected between RMB 13,000-13,200/mt this week. In China’s spot market, higher prices will cool buying. Spot aluminum should trade at discounts of RMB 170-220/mt over SHFE front-month contract.

Lead
SHFE 1505 lead contract underperformed LME lead at the beginning of last week and moved at RMB 12,200-12,300/mt, but started rising on Wednesday to climb above RMB 12,300/mt. SHFE 1505 lead contract prices are expected at RMB 12,300-12,450/mt and test resistance at RMB 12,450/mt.

Spot lead trading in China showed some improvement last week. Limited supply of branded goods in Shanghai left prices in the region RMB 100/mt higher than those in Henan. Thus, some downstream buyers preferred to purchase from Henan. However, tight cash supply and sizeable inventories prevented downstream producers from buying in large amounts.

Zinc
In Shanghai’s spot market, spot premiums of #0 zinc against SHFE 1505 zinc contract prices narrowed from RMB 30-90/mt to zero. Inventories at smelters were high. When combined with a large influx of imported zinc and selloffs by traders, supply was ample. Demand also improved, causing trading to grow. Discounts on #0 zinc price in Tianjin over Shanghai price contracted from RMB 140/mt to RMB 40/mt. Some smelters held back goods on falling zinc prices, which in turn bolstered zinc prices. Downstream galvanizers purchased modestly on low operating rates and falling zinc prices.

Discounts on #0 zinc price in Guangdong against Shanghai prices narrowed from RMB 50-60/mt to RMB 20-30/mt. Guangdong’s inventories stabilized. But large shipments arriving after the Chinese New Year holiday add to supply, which weighed on spot premiums/discounts against SHFE 1505 zinc contract prices. Trading was brisk early last week as downstream buyers purchased at lower prices, but weakened in the latter half of the week.

Few deliveries are expected in China’s spot markets this week, but a large inflow of imported zinc, combined with ample supply from smelters, will leave supply healthy. Downstream buyers, though, remain bearish towards near-term zinc prices, so are buying to need despite their own rising operating rates. Spot discounts against SHFE 1505 zinc contract prices should widen to RMB 100/mt.

Tin
Tin prices in Shanghai spot market were stable between RMB 122,000-125,000/mt last Monday, but fell to RMB 121,500-124,500/mt the next day as a USD 325/mt decline in LME tin turned market players in domestic market bearish. Prices dropped further to RMB 121,000-124,000/mt later in the week after LME tin retreated from USD 17,600/mt.

Nickel
SMM #1 spot nickel prices averaged RMB 104,240/mt last week, down by RMB 510/mt on a weekly basis. Transactions between traders picked up, while downstream producers were cautious towards purchases. Jinchuan Group cut prices twice last week by RMB 500/mt to RMB 104,500/mt.

The number of imported nickel entering Chinese market this week will remain limited, but Jinchuan Group will increase supply. Meanwhile, downstream demand is unlikely to improve. Thus, spot nickel prices will be RMB 103,500-106,500/mt.