SHANGHAI, May 12 (SMM) – 

 

Copper 

The July-delivery SHFE copper dipped to a low of RMB 45,570/mt Monday and stayed near RMB 45,660/mt in the afternoon. The prices rose at the tail of trading and closed at RMB 45,790/mt, down RMB 100/mt. Trading volumes increased 24,164 lots, and positions dropped 5,514.

 

Spot copper quoted between a RMB 10/mt discount and a premium of RMB 50/mt to SHFE 1505 copper contract in Shanghai early May 11. Standard-quality copper traded at RMB 45,800-45,820/mt, and high-quality copper sold for RMB 45,820-45,820/mt.

 

Cargo holders offered prices on par with last Friday early on Monday. Later, some traders sourced standard-quality copper in the market, and supply of the product tightened. Thus, standard-quality copper was offered at a slight premium to SHFE 1505 copper contract prices. Spot trades improved some as downstream producers bought on dips.

 

SMM survey indicates that 68% of industry insiders expect copper prices to move sideways this week, considering limited economic releases. Besides, the US dollar index is expected to move higher and spot prices in Chinese market will be largely affected by the spread between SHFE 1505 and 1506 copper contracts before delivery date, limiting the increase in copper prices. Thus, these players believe LME copper will trade at USD 6,350-6,430/mt and SHFE copper at RMB 45,500-46,100/mt.

 

12% of industry participants remain bullish that LME copper will rise above USD 6,450/mt and SHFE copper will climb to RMB 46,200/mt. CFTC reported net short positions in Comex copper declined to 452 in the week ending May 5. In China, the one-month and three-month Shibor both hit the two-year low, heralding ample money supply. Meanwhile, China’s poor trade data again fueled expectation for more pro-growth measures. These factors, combined with continued decline in SHFE copper stocks, will proffer impetus to copper prices.

 

20% of industry insiders are bearish, noting that LME copper will fall below USD 6,300/mt and SHFE copper will test RMB 45,000/mt. These respondents argue that negative technical indicators and falling positions, especially a lack of buying, will weigh down copper prices.

 

Aluminum      

The PBOC’s interest rate cuts this past weekend had little impact on base metals market. SHFE 1507 aluminum contract fell to RMB 13,405/mt, but then rebounded to end at RMB 1,480/mt. Trading volumes totaled 42,292 lots, and positions were down 1,856 to 134,282.       

 

Spot aluminum largely traded between RMB 13,100-13,110/mt in Shanghai on Monday, discounts of RMB 190-210/mt over SHFE 1505 aluminum contract, versus RMB 13,070-13,090/mt in Wuxi, and RMB 13,110-13,120/mt in Hangzhou. Processors took a wait-and-see stance, while traders went bargain hunting in small amounts. In the afternoon, some traders went bargain hunting in small amounts. 

 

SMM surveyed 30 large aluminum smelters and traders in China. 

 

20% of them are bullish over aluminum prices this week: (i) strong crude oil will allow LME aluminum to rise above USD 1,900/mt; (ii) SHFE 1507 aluminum contract will break through RMB 13,500/mt since moving averages are pointing upward and MADC indicator is positive; (iii) in domestic spot market, spot discounts will narrow since the delivery date of SHFE front-month is nearing. Traders will be active in the market, so spot prices might rise above RMB 13,130/mt.     

 

Another 40% expect prices to stabilize: (i) relatively quiet macro front will keep LME aluminum in check within USD 1,860-1,900/mt; (ii) SHFE 1507 aluminum contract should move between RMB 13,400-13,500/mt; (iii) in domestic spot market, suppliers will refrain from selling at large spot discounts, which will help spot prices hold stable between RMB 13,090-13,130/mt.

 

The rest 40% are bearish: (i) exit of bulls and a strong US dollar will send LME aluminum down to below USD 1,860/mt; (ii) the PBOC’s interest rate cut has been digested and bears might enter, so SHFE 1507 aluminum contract might fall to RMB 13,400/mt; (iii) in domestic spot market, growing new capacity and inventories will cause pot prices to fall below RMB 13,090/mt. 

 

Lead

The metal touched Monday’s high of RMB 13,565/mt on China’s interest rate cut and finally finished up RMB 5/mt or 0.04% at RMB 13,495/mt. Trading volumes fell 2,620 to 5,804 lots whereas positions climbed 294 to 15,762.

 

In China’s spot lead market, Chengyuan, Tongguan, and Nanfang brands quoted at RMB 13,740-13,750/mt, with a premium of RMB 250/mt to SHFE 1505 copper contract prices. Honglu was offered at a premium of RMB 50/mt to SHFE 1506 copper contract, or RMB 13,550/mt. High premiums continued to boost selling interest, but downstream buyers only watched from the sidelines. Smelters in Henan province remained reluctant to sell, quoting RMB 13,700-13,825/mt. Traded prices were RMB 13,410-13,500/mt in Guangdong.

 

SMM’s survey of 30 industry insiders shows that half of them hold lead prices will fall back this week. On the macro front, markets have digested the news on PBOC’s interest rate cut and a recovery of US nonfarm payrolls. Technically, LME lead has come under strong resistance after rising for seven weeks, and has flipped into a USD 8/mt contango from a USD 15/mt backwardation. In China’s spot market, lead supply will gradually grow after Yuguang Gold & Lead, Jinli Lead, Nanfang Nonferrous and Chengyuan Nonferrous completed maintenances. Besides, unlicensed secondary lead smelters also restarted production. Meanwhile, lead-acid battery industry has entered an offseason. As such, these market players expect LME lead to fall to USD 2,000-2,050/mt and spot lead prices to drop to RMB 13,500/mt this week.

 

20% of these respondents remain bullish that LME lead will climb to USD 2,080-2,100/mt and spot lead prices will rise to RMB 13,700-13,900/mt, arguing that China’s interest rate cut will bring more liquidity to commodities and stock markets. Besides, spot premiums in Shanghai have risen to RMB 200-250/mt driven by tight supply. Many primary lead smelters have not yet resumed production, and secondary lead production will be curbed by environmental protection inspections, meaning supply should remain limited, boding well for prices.

 

The remaining 30% of industry participants expect prices to stay in the current range, considering a lack of major reports. These participants also noted that strong caution among short sellers and relatively tight supply will prevent prices from falling sharply. 

 

 

 Zinc

SHFE 1507 zinc contract prices opened at RMB 17,120/mt last Friday evening, then touched RMB 17,190/mt, then fell back below the 10-day moving average and closed at RMB 17,040/mt, down RMB 100/mt or 0.58%. Trading volumes increased 14,350 to 76,636 lots, and total positions declined 1,104 to 153,454. SHFE 1507 zinc contract prices opened at RMB 17,040/mt on Monday, then dipped to as low as RMB 16,925/mt as the news of China’s interest rate cut had been absorbed, but rallied to RMB 17,000/mt in the afternoon, and closed at RMB 17,095/mt, down RMB 45/mt or 0.26%. Trading volumes decreased 4,856 to 160,890 lots, and total positions fell 3,476 to 151,082. SHFE 1507 zinc contract prices are expected to fall further in the near term.

 

#0 zinc prices were between RMB 16,860-16,900/mt, RMB 150-110/mt below SHFE 1507 zinc contract prices. #1 zinc was traded between RMB 16,820-16,830/mt. SHFE 1507 zinc contract prices fell to RMB 16,925/mt then rose to RMB 17,000/mt. Smelters mostly sold normally, and trading made between traders was brisk. Downstream buyers purchased as needed, with overall transactions active. Shuangyan and Huize #0 zinc prices were RMB 16,890-16,900/mt, RMB 120-110/mt below SHFE 1507 zinc contract prices. Yuguang #0 zinc prices were RMB 16,880-16,890/mt, RMB 130-120/mt below SHFE 1507 zinc contract prices. Qilin and Qinxin #0 zinc prices were RMB 16,860-16,880/mt, with spot discounts of RMB 150-130/mt against SHFE 1507 zinc contract prices. Baohui and Bailing #0 zinc prices were RMB 16,850-16,860/mt, with spot discounts of RMB 170-160/mt against SHFE 1507 zinc contract prices. SMC and AZ #0 zinc prices were RMB 16,830-16,840/mt, with spot discounts of RMB 150-140/mt against SHFE 1507 zinc contract prices. Indian #0 zinc prices were RMB 16,810-16,820/mt, with spot discounts of RMB 170/mt against SHFE 1507 zinc contract prices. SHFE 1507 zinc contract prices dropped more slowly in the afternoon, with spot discounts of Shuanyan and Yuguang #0 zinc expanding to RMB 140/mt. Transactions were brisk.

 

LME zinc prices touched USD 2,400/mt at one point last week. With regard to zinc price trends this week, SMM surveyed 30 market players to find that 40% are bearish, believing LME zinc prices will fall to USD 2,320/mt and SHFE 1507 zinc contract prices will test support from RMB 16,800/mt. China lowered interest rate again, meaning Chinese economy is facing pressure, and this news has been absorbed. Inventories in Shanghai, Guangdong and Tianjin stay high. Galvanizers in Tianjin’s Daqiu Village were impacted by environmental protections, which should take a toll on zinc prices in May.

 

37% are neutral, seeing LME zinc prices fluctuate between USD 2,330-2,370/mt, and SHFE 1507 zinc contract prices moving between RMB 16,850-17,150/mt. Positions on SHFE zinc declined nearly 30,000 recently, and market fundamental is still weak. Operating rates at zinc smelters are higher than the same period last as domestic zinc concentrate TCs climbed to RMB 5,400-5,500/mt (zinc content). Despite decreasing zinc imports from low SMM/LME zinc price ratio, zinc remains in oversupply, with spot discounts above RMB 100/mt.

 

23% are bullish, thinking LME zinc prices should rise to USD 2,380/mt, and SHFE 1507 zinc contract prices will edge up to RMB 17,200/mt. They base their opinion on improving economic indicators from the euro zone. Meanwhile, US employment data were poor, weighing down the US dollar index. Crude oil prices stay above USD 60/bbl. China’s second interest rate cut this year will be positive for base metals prices. Some cargo holders were unwilling to sell on falling zinc prices, suggesting they are still optimistic toward the market.

 

  Tin

In Shanghai spot tin market, most deals closed between RMB 120,000-121,000/mt on Monday. Goods from Yunnan Tin Group traded between RMB 121,000-121,500/mt. A small number of processors and trades entered the market. Overall trading was moderate.  

 

SMM surveyed market players in domestic tin industry. 

 

45% of them are bullish over tin prices this week: SHFE 1507 tin contract is expected to challenge RMB 126,000/mt. LME tin has found solid support and will challenge resistance at RMB 16,400/mt. In domestic spot market, suppliers will hold back goods out of bullishness, which will push spot prices up to RMB 125,000/mt. 

 

Another 35% expect tin prices to hold stable this week: LME tin should hover around USD 16,000/mt. SHFE 1507 tin contract is expected to move between RMB 119,500-123,500/mt. The recent tin price rise was due to temporary closures of two large tin smelters and looser monetary policy. Despite production suspensions at Yunnan Tin Group and China Tin Group, these two smelters still have goods on hand available to sale. As such, prices in spot market are expected between RMB 120,000-122,000/mt.      

 

The rest 20% are bearish: Prices in domestic spot market might fall to RMB 118,000-120,000/mt, due to downward corrections and a lack of downstream buying.

  

 Nickel   

SMM #1 nickel prices were between RMB 105,000-110,200/mt. Jinchuan Group only raised prices by RMB 500/mt as SHFE and LME zinc prices remained stable. Premiums of Jinchuan nickel fell to RMB 4,200/mt against prices for the most actively traded contracts on the Wuxi electronic trading. Downstream buying interest was weak, with traded prices between RMB 105,600-110,100/mt. Traders were sourcing new goods from Jinchuan Group, causing discounts of Russian nickel to expand to RMB 600/mt. Downstream buyers are expected to replenish stocks soon, and traded prices were between RMB 105,600-110,200/mt. Jinchuan raised ex-works prices by RMB 500/mt to RMB 110,500/mt.

 

SMM surveyed 30 market players to find that 14 are bullish, 13 are neutral and 3 are bearish toward nickel prices this week.

 

The 47% bullish investors see LME nickel prices rising to USD 14,500-15,000/mt. China lowered interest rate again, which will benefit real economy. Jinchuan Group holds prices firm. Nickel consumption in South China increased, and demand should improve in May due to the peak demand month. A large inflow of capital will also boost nickel prices. SHFE 1507 nickel contract prices will rise to RMB 114,000-117,000/mt.

 

43% are neutral toward nickel prices, believing LME nickel prices will move between USD 14,200-14,500/mt. Global demand is relatively weak, and a strengthening US dollar index, combined with economic pressure in China should weigh on base metals prices. There has been a large inflow of capital, and investors should turn cautious after price surged. SHFE 1507 zinc contract prices will fluctuate between RMB 112,000-114,000/mt.

 

10% are bearish, thinking LME nickel prices will fall to USD 14,000-14,200/mt. The US dollar index is expected to regain ground. China’s further interest rate hike means sluggish economy. China’s port nickel ore inventories grew, and exports from the Philippines returned to normal level. As large NPI producers reach full operation, NPI output should grow. In addition, favorable SMM/LME nickel price ratio should precipitate additional inflows of imported nickel. SHFE 1507 nickel contract prices will move between RMB 110,000-112,000/mt.