SMM Base Metals Weekly Price Review and Forecast (Apr. 13-17, 2015)

Published: Apr 14, 2015 11:25
The Shanghai Composite Index finished last week above 4,000.

SHANGHAI, Apr. 14 (SMM) –

Copper:
The Shanghai Composite Index finished last week above 4,000. The rallying stock prices prompted many investors to jump into stock markets, and the resulting decline in trading activities in futures market left SHFE copper at RMB 43,000-43,800/mt. Besides, the Tomb Sweeping Day holiday also caused trading volumes to decrease 1.86 million lots. Positions increased early in the week but shrank later, with a weekly growth of less than 10,000. Transactions during night sessions declined.

SHFE copper prices are likely to stay in the current range of RMB 42,800-44,000/mt this week.

In China’s copper market, cargo holders held goods back last week, pushing up spot premiums. The price spread between different brands narrowed.

Aluminum:
SHFE 1506 aluminum contract followed LME aluminum up to RMB 13,445/mt early last week before falling back slightly, due to profit-taking at highs. The most active contract dived to RMB 13,050/mt after China announced power tariff cuts. But prices bounced back above RMB 13,200/mt later as some bears exited. In China’s spot market, narrowing spot discounts and high prices gave suppliers incentive to sell in the first half of the week. But demand was limited. Aluminum prices tumbled in the second half of the week, prompting suppliers to hold back goods. Lower prices lured some traders and processors in, allowing spot discounts to continue shrinking.

Many bears withdrew and bulls entered when SHFE 1506 aluminum contract dropped to RMB 13,050/mt last week, which should offer some support for prices this week. The most active contract will face corrections after sharp losses earlier, with prices expected between RMB 13,200-13,350/mt. In China’s spot market, sellers did not go panic after prices dived last week. Spot discounts are expected to narrow further to RMB 50-90/mt over SHFE front-month contract since the delivery date of SHFE 1504 aluminum contract is nearing.

Zinc:
Spot #0 zinc prices in Shanghai climbed in tandem with zinc futures, with discounts of RMB 100/mt against SHFE 1506 zinc contract prices. Cargo holders believed the falling SMM/LME zinc price ratio should constrain imported zinc inflows, tightening supply, so they held back goods and kept prices firm. Traders purchased at lows, but cheap resources were limited. Downstream buyers purchased as needed at RMB 16,000/mt. Trading improved in the latter half of the week thanks to bargain hunters.

Premiums on #0 zinc price in Tianjin against Shanghai prices inverted from RMB 10-20/mt to discounts of RMB 0-10/mt. Zinc prices in Tianjin were stable as cargo holders held prices firm. Downstream demand weakened, though, as galvanizers in Tianjin’s Daqiu Village suspended production for a week due to ongoing environmental protection inspections.

#0 zinc prices in Guangdong remained RMB 0-10/mt above Shanghai prices. Spot prices held steady as cargo holders kept prices firm. Qilin and Tiefeng zinc was quoted RMB 80-100/mt below SHFE 1506 zinc contract prices. Traders pushed for lower prices. Downstream buyers purchased limitedly. #1 zinc demand was strong thanks to galvanized tube/pipe producers.

In China’s spot markets, some smelters will stay on the sidelines on rising prices this week. Market expectations that zinc imports will decrease on falling SMM/LME zinc price ratio will allow cargo holders to hold onto their goods. Downstream buyers should purchase on an as-needed basis. Spot discounts against SHFE 1506 zinc contract prices are expected to hover around RMB 100/mt.

Lead:
SHFE 1506 lead contract prices grew more slowly than LME lead early last week, with the SMM/LME lead price ratio once down to 6.45. But the contract rose by the daily limit last Friday, allowing the price ratio up to 6.7.

SMM expects SHFE lead to trade at RMB 13,000-13,500/mt this week.

Spot lead prices surged RMB 500-600/mt as smelters refrained from selling and bullish traders sourced goods aggressively. Downstream buyers were less willing to buy for fear of a fallback in prices. Prices in Henan and Jiangxi neared or exceeded SMM lead prices. Spot lead prices are expected to move higher to RMB 13,100-13,400/mt this week.

Tin:
SHFE 1507 tin contract touched a session low of RMB 115,320/mt last Thursday night as investors opened about 1,000 short positions. The most active contract ended Thursday down RMB 1,830/mt on a weekly basis at RMB 116,790/mt.

In Shanghai spot tin market, prices moved all the way down, especially Thursday and Friday. Mainstream traded prices dropped to RMB 114,000-115,500/mt last Friday. The price decline was due to growing supply of cheap goods from Jiangxi and price cuts by large smelters.

Nickel:
SHFE nickel prices also met resistance at the 5-day moving average and stayed at RMB 94,000-94,500/mt last week, with the low-end price at RMB 93,180/mt. Trading volumes declined to 520,000 lots, while positions grew to 102,000.

SMM # 1 refined nickel traded at an average price of RMB 96,300/mt last week, down by RMB 1,370/mt on a weekly basis. Spot nickel prices slumped as supply of imported nickel continued to grow. Jinchuan Group was forced to cut price offers. Meanwhile, downstream buyers purchased in limited amounts. Prices of Jinchuan nickel dropped RMB 4,000/mt to RMB 95,500/mt last week after the company adjusted prices four times.
Nickel inventories in bonded zones tumbled with imported nickel flooding into China’s spot markets. As profits on nickel imports expanded, nickel imports may continue to grow. Spot nickel prices in China’s market are likely to stay low at RMB 92,000-97,000/mt this week.
 

Jinchuan Group will continue to hold goods back this week due to depressed prices, but may be forced to lower prices should an increasing number of Russian nickel enter the market. Spot nickel is expected to trade at RMB 102,000-105,000/mt.

 

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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