SHANGHAI, Mar. 31 (SMM) – 

 

The most active SHFE copper contract prices hovered near RMB 43,600/mt after opening on Monday and found support at RMB 43,400/mt. In the afternoon, the prices rallied helped by a 2% rise in Chinese stocks, to hti RMB 44,000/mt. The most active copper contract finished at RMB 43,830/mt during Monday’s daytime trading, down RMB 40/mt. Positions in SHFE 1506 copper contract rose by 8,820, and trading volumes dropped 129,000 lots.

 

Spot copper in Shanghai market was offered at discounts of RMB 50-120/mt to SHFE 1504 copper contract early Monday, with standard-quality copper trading at RMB 43,550-43,650/mt and high-quality products selling for RMB 43,570-43,700/mt.

 

Some high-quality copper holders offered larger spot discounts to promote sales in the afternoon, and price gap between standard and high-quality copper narrowed as supply of the former was limited. Downstream buyers mostly held on the sidelines, and trading declines significantly. However, most market players expect spot discounts to narrow.

 

SMM’s latest survey shows that 32% of industry insiders believe LME copper will rise further to USD 6,150/mt this week, and SHFE copper will climb above RMB 44,000/mt, citing partly the conflicts in the Middle East which will boost gold and crude oil prices.

 

Besides, the US dollar index may retreat should the nonfarm payroll data turn out disappointing, also lending support to metal prices.

 

With respect to liquidity conditions, the upbeat outlook for stock market and subscription of IPO shares, as well as payment of taxes, may stimulate the People’s Bank of China to inject money, probably through open market operations. In this context, futures markets may be buoyed by the rallying stock prices. In addition, spot goods holders will shy away from highs during peak demand season of April.

 

Half of the players, however, are cautious and note that LME copper will stay at USD 6,050-6,150/mt this week and SHFE copper will still trade at RMB 43,000-44,000/mt. As markets remain bearish about copper prices for the long run, some longs will book profits following recent price hikes, limiting upward room for the red metal. Technical indicators also pointed to a directionless copper price.

 

In China, recent economic indicators were weak, but the deflationary risk fueled expectation for more pro-growth measures, meaning copper prices may not fall significantly.

 

The remaining 18% expect LME copper to fall below USD 1,800/mt and SHFE copper to drop to less than RMB 43,000/mt. These respondents pointed out that although the euro zone recovery and capital inflow allowed the euro to strengthen lately, a weaker euro is just what has been support the euro zone economy. This contradiction will increase volatility in the currency, which will impact the US dollar index, in turn affecting base metals prices. Overall, these players expect the US dollar to stage a rally. 

Aluminum      

SHFE 1506 aluminum contract started last Friday’s night session at RMB 13,300/mt, and closed at RMB 13,305/mt. Trading volumes totaled 6,890 lots, with positions down 1,266 to 119,630. 

 

On Monday, June aluminum on the SHFE hit a ceiling after rising to RMB 13,340/mt, and ended at RMB 13,310/mt. Trading volumes totaled 26,856 lots, with positions down 750 to 120,146.  

 

Spot aluminum largely traded between RMB 13,150-13,160/mt in Shanghai on Monday, discounts of RMB 180-190/mt over SHFE 1504 aluminum contract, versus RMB 13,130-13,150/mt in Wuxi, and RMB 13,180-13,190/mt in Hangzhou. Downstream producers scrambled to buy in response to rising prices last Friday and limited market supply. This allowed spot discounts to narrow. In the afternoon, trading was muted. 

 

SMM surveyed 30 large aluminum smelters and traders in China. 

 

43% of them expect aluminum prices to hold stable this week (i) LME aluminum has met resistance at the upper end, but has found support at the bottom, with prices expected between USD 1,770-1,800/mt; (ii) the intense game between longs and shorts should keep the most active SHFE aluminum contract in check between RMB 13,250-13,350/mt; (iii) in domestic spot market, suppliers will hold back goods at lows, while buyers from resist higher prices, which will keep spot prices steady between RMB 13,100-13,150/mt.   

 

Another 37% are bullish: (i) negative key US economic data will prevent the US dollar index from rising above 100, which will help push LME aluminum up above USD 1,800/mt; (ii) favorable policies in China’s housing market will drive the most active SHFE aluminum contract up above RMB 13,350/mt; (iii) supply in domestic spot market will tighten as delivery of SHFE front-month contract is drawing near. This will help spot prices rise above RMB 13,150/mt. 

 

The remaining 20% are bearish. 

SHFE most active lead contract prices moved at RMB 12,400-12,420/mt after opening on Monday and rose rapidly in the afternoon, touching a high of RMB 12,500/mt. Later, however, the prices fell to RMB 12,415/mt to finish at RMB 12,415/mt, down RMB 20/mt. Total trading volumes were 2,634 lots, and positions declined 1,544.

 

In spot lead market, prices for Nanfang’s goods were offered at RMB 12,410-12,420/mt, and price offers of Humon were RMB 12,395-12,400/mt. Downstream buyers reduced purchases following last week’s stockpiling. In Henan, spot lead quoted at a discount of RMB 50/mt to SMM refined lead prices, narrowing from last week, as local inventories declined.

 

SMM’s survey of 30 industry insiders indicates that 27% of them are bullish about lead prices this week, expecting LME lead to climb to USD 1,850-1,860/mt and China’s spot lead prices to rise to RMB 12,400-12,550/mt.

 

These players based their opinions on a series of favorable policies expected from the Boao Forum for Asia and a relatively weak US dollar following Fed’s most recent policy meeting. Moreover, some noted that the crisis in the Middle East is unlikely to be resolved soon, which will give a boost to crude oil prices.

 

In China, an increasing number of lead smelters cut production for maintenance operations, while motive battery demand remained robust, lending support to spot lead prices.

 

23% of industry insiders are bearish that LME lead may fall back to USD 1,800/mt and spot lead prices are likely to drop to RMB 12,300-12,400/mt, arguing that the US dollar index has shown a sign of leveling out, which will bode poorly for metal prices. In addition, the nuclear talks with Iran are making progress, meaning crude oil supply from the country is set for a rise.

 

As for physical lead market, lead-acid battery producers which ramped up production in March will come under inventory pressure in April with onset of low-demand season, which will hurt lead consumption, in turn weighing down lead prices.

 

The remaining 50% of industry insiders predict that prices will move sideways citing anticipation for growth-fanning policies from China and declining demand for spot lead.

SHFE 1506 zinc contract prices opened at RMB 15,965/mt last Friday evening, then rose but met resistance at RMB 16,000/mt, and closed the day at RMB 15,985/mt, up RMB 10/mt or 0.06%. Trading volumes decreased 22,574 to 26,096 lots, and total positions were down 1,066 to 120,592. SHFE 1506 zinc contract prices opened at RMB 15,990/mt on Monday, then hovered around RMB 16,000/mt, and closed the day at RMB 15,965/mt, down RMB 10/mt or 0.06%. Trading volumes decreased 33,970 to 77,676 lots, and total positions increased 300 to 121,958. SHFE 1506 zinc contract prices are expected to fluctuate around RMB 16,000/mt this evening.

 

#0 zinc prices were between RMB 15,870-15,900/mt, RMB 80-50/mt below SHFE 1505 zinc contract prices and RMB 100-70/mt below SHFE 1506 zinc contract prices. #1 zinc was traded between RMB 15,750-15,780/mt. SHFE 1506 zinc contract prices hovered around RMB 15,980/mt after opening, and inched lower during 10:30-11:30 AM, but up RMB 40-50/mt from last Friday. Spot zinc price gains were stronger than SHFE zinc prices, with spot discounts narrowing RMB 30/mt. This is due to increased purchases by traders. Smelters were unwilling to sell, and traders reduced purchases. A few downstream buyers replenished stocks, with overall transactions unchanged. Shuangyan and Huize #0 zinc prices were RMB 15,890-15,900/mt, RMB 60/mt below SHFE 1505 zinc contract prices. Qinxin and Qilin #0 zinc prices were RMB 15,870-15,880/mt, with spot discounts of RMB 80-60/mt against SHFE 1505 zinc contract prices. SMC #0 zinc prices were RMB 15,830-15,850/mt, with spot discounts of RMB 120-110/mt against SHFE 1505 zinc contract prices. Indian #0 zinc prices were RMB 15,760-15,780/mt, with discounts of RMB 190-180/mt against SHFE 1505 zinc contract prices. SHFE 1506 zinc contract prices remained steady in the afternoon.

 

LME zinc prices hovered around the 60-day moving average last week. With regard to zinc price trends this week, SMM surveyed 30 market players to find that 33% are bullish toward zinc prices, believing LME zinc prices will rise to USD 2,110/mt, and SHFE 1506 zinc contract prices will test RMB 16,150/mt. HSBC’s March PMI hit an 11-month low, which will precipitate additional monetary stimulus measures. Infrastructure construction will also give hope to the market. In China’s spot markets, some market players ramped up purchasing due to market optimism, causing spot discounts to narrow to RMB 100/mt, which will also support spot zinc prices.

 

67% are neutral, seeing LME zinc prices fluctuate between USD 2,060-2,100/mt, and SHFE 1506 zinc contract prices moving between RMB 15,800-16,100/mt. SHFE 1506 zinc contract prices failed to break through the 60-day moving average. Spot consumption remains weak. When combined with the lack of speculative fund, zinc prices should hover in a narrow range.

In Shanghai spot tin market, mainstream traded prices fell to RMB 118,000-120,500/mt. The price decline was the result of falling LME tin and slack downstream demand. 

 

SMM surveyed market players in domestic tin industry. 

 

70% of them are bearish toward tin prices this week: market is still dominated by bearish sentiment. LME tin reentered downward track, and SHFE tin lacks upward momentum. Falling supply and weakening demand in domestic spot market will bode ill for spot prices. LME tin should move between USD 16,800-17,100/mt, SHFE tin should range RMB 116,000-118,500/mt, and spot prices in China are expected between RMB 117,000-119,500/mt. 

 

The remaining 30% expect tin prices to hold stable: smelters of delivery brand tin will hold back goods, allowing SHFE tin to stabilize. Demand should improve at the beginning of the month, which will support spot prices stable between RMB 118,000-120,500/mt. LME tin is expected to move between USD 17,000-17,300/mt, and SHFE tin is expected between RMB 117,500-120,000/mt.  

SMM #1 nickel prices were between RMB 99,300-100,900/mt. SHFE three-month nickel contract prices closed at RMB 98,510/mt Monday, weighing down spot nickel prices. Nonetheless, spot premiums rose on tight supply, but with trading muted and traded prices between RMB 99,500-100,900/mt. Spot nickel prices in Shanghai remained low in the afternoon. Jinchuan Group did not lower ex-works prices. Spot premiums on Jinchuan nickel climbed. Downstream buyers purchased at lower prices, with transactions brisk and traded prices between RMB 99,800-100,800/mt.

 

SMM surveyed 30 market players to find that 12 are bullish toward nickel price trends this week, 6 are neutral, and 12 are bearish.

 

The 40% optimistic ones believe LME nickel prices will rise to USD 13,400-13,600/mt on falling US dollar index and rebounding crude oil prices. Falling NPI output and tight Jinchuan nickel supply will bolster nickel prices. China lowered down payment for the first and second home purchase, giving support to the real estate and stainless steel sector.

 

20% see LME nickel prices moving between USD 13,220-13,500/mt. A large inflow of shorts in LME and SHFE nickel market pushed down nickel prices. Domestic NPI output will fall further due to environmental protection inspections, which will lead to tight supply and underpin nickel prices. However, dropping nickel ore prices will constrain any LME nickel price gains. SHFE nickel prices are expected to fluctuate between RMB 98,000-99,700/mt.

 

40% believe LME nickel prices will slide below USD 13,000/mt. The US dollar index rose further and is expected to climb on promising US non-farm employment. Crude oil prices should return to a downward track on high reserves. Shorting is dominating SHFE nickel market. When combined with a large inflow of Russian nickel this week, LME nickel prices will dip to USD 13,000/mt this week, and SHFE nickel prices should fall below RMB 98,000/mt.