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SMM Base Metals Weekly Price Review and Forecast (Apr. 7-10, 2015)
Apr 8, 2015 10:56CST
Last week, SHFE nickel showed wide swings after its launch, and SHFE tin started with a 1% loss after LME tin prices touched a low last seen in June 2010.

SHANGHAI, Apr. 8 (SMM) – Last week, SHFE nickel showed wide swings after its launch, and SHFE tin started with a 1% loss after LME tin prices touched a low last seen in June 2010.

SMMI.Sn posted a 1.42% decline, and SMMI.Ni tumbled 4.6%. Jinchuan Group’s price offers were down by RMB 4,500/mt after the company adjusted its prices twice. Other base metals closed with gains. SMMI.Al increased 1.31%, and SMMI.Zn grew 1.27%, followed by a 0.84% rise in SMMI.Pb and a 0.04% rise in SMMI.Cu. Copper trading improved some with consumption recovering. In lead and zinc market, traders sourced goods actively, helping narrow spot discounts.

Chinese stocks climbed above 3,800 following big swings last week, but iron ore and rebar prices continued to trend down. SHFE copper prices moved between RMB 43,000-43,500/mt, with the SHFE/LME copper price ratio increasing. Trading volumes of SHFE copper contracts declined. Positions soared early last week but shrank later with investors exiting the market before the Tomb Sweeping Day holiday (April 4-6). SHFE copper prices may move between RMB 42,850-44,000/mt.

Limited supply of low-priced goods and increased purchasing volumes of dealer caused spot discounts in China’s copper market to narrow, with premiums heard late last week.

SHFE 1506 aluminum contract fared better than LME aluminum. The most active contract hit RMB 13,420/mt, buoyed up by Chinese government’s relaxation of controls over the housing market. Although the contract dropped below RMB 13,400/mt later in the week, the lower-end of its moving band inched up. In China’s spot market, suppliers continued to hold back goods as strong SHFE aluminum turned them bullish. Traders were active in the market, allowing spot discounts to narrow to around RMB 100/mt.

SHFE 1506 aluminum contract is poised to rise to RMB 13,300-13,450/mt, underpinned by positive technical side and improved market sentiment. In China’s spot market, reduced supply from suppliers withholding goods will help spot discounts shrink further. However, soft downstream demand will slow the pace at which spot discounts narrow. Spot aluminum is expected to trade RMB 80-130/mt below SHFE front-month contract.

The most active SHFE lead contract prices followed LME lead up to RMB 12,300-12,600/mt, to stand above major moving averages. Spot lead prices also increased RMB 100-150/mt. Smelters became less willing to sell. Meanwhile, bullish traders sourced goods aggressively, and downstream producers replenished stocks for the Tomb Sweeping Day holiday. Supply in Shanghai and Henan tightened, and discounts for goods in Henan against SMM refined lead prices narrowed.

Growing long positions will bode well for SHFE lead, but resistance has formed at RMB 12,700/mt. The June delivery lead contract is expected to trade at RMB 12,500-12,750/mt.

Spot discounts on #0 zinc against SHFE 1506 zinc contract prices narrowed from RMB 150/mt to RMB 100/mt. Spot discounts contracted in the latter half of the week as spot zinc prices rose with SHFE zinc prices. Most cargo holders were bullish toward the market due to proactive purchasing by traders and so held back goods, leading to tight supply and causing price spread to narrow. Traders purchased at lows actively. Downstream buyers increased purchases but were still cautious at RMB 16,000/mt. Overall trading improved but was mainly made between traders.

Premiums on #0 zinc in Tianjin against Shanghai prices expanded from zero to RMB 10-20/mt, once expanding to RMB 30-40/mt. Some large cargo holders held onto their goods on strong prices in Tianjin. In the meantime, operating rates at galvanizers increased thanks to improving steel prices, causing zinc demand to strengthen significantly. In this scenario, traded prices climbed, with trading brisk and inventories falling noticeably.

Premiums on #0 zinc in Guangdong over Shanghai prices turned from RMB 10-20/mt to RMB 0-10/mt. Spot discounts on #0 zinc against SHFE 1506 zinc contract prices remained steady. Spot discounts of Qilin, Tiefeng and Feilong zinc against SHFE 1506 zinc contract prices were RMB 60-80/mt. Traders ramped up purchasing at lower prices, and downstream producers purchased modestly.

In China’s spot markets, downstream buyers returning from the Tomb-sweeping Day on Tuesday will replenish stocks modestly this week. Cargo holders will be reluctant to sell, which will keep supply tight and support zinc prices. Spot discounts against SHFE 1506 zinc contract prices will be around RMB 100/mt.

Prices in China spot tin market extended losses in the first half of last week, with mainstream traded prices down to RMB 117,500-120,000/mt last Wednesday. Falling prices soured downstream sentiment. But prices stabilized last Thursday as LME tin stopped falling and as trading activity picked up.

SHFE 1507 nickel contract presented sharp movements last week, with low-end price at RMB 91,600/mt. The prices staged a rally late last week to rise above the 5-day moving average and then stayed at RMB 97,000-98,000/mt. Trading volumes reached 670,000 lots and positions grew to 82,000.

In Chinese market, SMM #1 refined nickel prices fell by RMB 6,320/mt to RMB 97,670/mt. Jinchuan Group remained reluctant to sell, so the price gap between Jinchuan nickel and imported nickel was still large. Russian nickel was offered at discounts of RMB 1,500/mt to Jinchuan nickel. Price offers from Jinchuan Group fell by RMB 4,500/mt to RMB 99,500/mt following two price adjustments.

Supply of imported nickel may decrease this week, but refined nickel prices remain on a downward track. Now that ex-works prices from Jinchuan Group have fallen below RMB 100,000/mt, any rise in spot market will be limited. SMM expects spot nickel prices to be RMB 98,000-101,000/mt this week.

SHFE copper prices
SHFE aluminum prices
SHFE lead prices
SHFE zinc prices
Shanghai tin prices
Shanghai nickel prices

For queries, please contact Frank LIU at liuxiaolei@smm.cn

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