SHANGHAI, May 12 (SMM) –HSBC’s China manufacturing PMI for April missed forecasts. US ADP employment report for April also fell short of expectations, sending the US dollar index down. The euro rebounded on positive economic data in the euro zone. Nickel led gains among base metals, with SMMI.Ni up 6.39% and SHFE nickel rising 7.5%. In domestic spot market, Jinchuan Group held back goods, tightening market supply and allowing prices to rise. SMMI.Sn gained 4.3%. Spot tin prices followed SHFE tin up, but followed SHFE tin down later, with demand remaining weak. SMMI.Cu gained 3.75%. SHFE copper rose about 5%. Spot copper suppliers were eager to sell at highs, causing spot premiums to narrow and finally reversed into spot discounts. SHFE zinc fell back from RMB 17,500/mt. Smelters rushed to sell after spot zinc prices rose above RMB 17,000/mt. Spot discounts narrowed as hedged goods were tied up and since fewer imported zinc flowed in. SMMI.Zn rose a mere 0.9%. SHFE aluminum rose slower than LME aluminum. Suppliers in domestic spot aluminum market were eager to sell at highs. SMMI.Al inched up 0.33%. SHFE lead fell due to profit-taking at highs, dragging spot lead down as well. SMMI.Pb lost 1.27%. SMMI gained 2.57%, driven by hopes for stimulus measures.
China’s stock market was volatile last week. SHFE copper jumped to touch 46,400/mt last Monday, up 3.5%, but mounting resistance from RMB 46,000/mt and a shift of funds into other commodities – particularly nickel – caused copper prices to pull back. Positions in SHFE copper declined significantly. SMM expects SHFE copper to move between RMB 45,000-46,200/mt this week.
Rallying copper prices curbed spot trades in China last week, narrowing premiums in Shanghai, north China, and south China. Prices in Shandong held elevated due to smelter maintenances.
SHFE 1507 aluminum contract met resistance at RMB 13,450/mt in the first half of last week before following LME aluminum up to RMB 13,620/mt. However, the most active contract surrendered gains later in the week. In China’s spot market, suppliers were eager to sell at highs. Some traders bought spot aluminum while selling SHFE aluminum, preventing spot discounts from expanding significantly. Downstream producers sourced only to need.
SHFE 1507 aluminum contract is likely to rise to RMB 13,350-13,500/mt this week. In China’s spot market, spot discounts will not widen further, since holders of hedged goods will be reluctant to sell at large spot discounts and since the delivery date of SHFE 1505 aluminum contract is nearing. That said, sluggish downstream consumption will prevent spot discounts from narrowing. Spot aluminum should trade at discounts of RMB 170-220/mt over SHFE front-month contract.
SHFE 1507 lead suffered a sell-off after climbing above RMB 14,000/mt. The contract later dropped back to RMB 13,500/mt as the SMM/LME lead price ratio slipped to 6.45.
Spot lead prices have fallen only RMB 200/mt. Lead smelters stayed away from the market as a small number of traders sold off hedged positions. Shanghai spot lead prices were RMB 200/mt higher than SHFE 1507 lead. Spot lead in Henan tightened with branded lead at a premium over SMM lead.
SHFE lead is expected around RMB 13,300-13,800/mt this week due to sell-offs. China’s spot lead should trade at RMB 13,600-13,900/mt this week.
Spot discounts on #0 zinc in Shanghai against SHFE 1507 zinc contract prices narrowed from RMB 160-130/mt to RMB 140-110/mt last week. Smelters sold actively as spot zinc prices rose above RMB 17,000/mt. Traders, however, held onto their goods due to the lack of arbitrage opportunity and expectations of narrower spot discounts on decreased inflows of imported zinc. Some traders purchased lower-priced goods as the delivery date neared. Downstream buyers, confronting with cash tightness, purchased as needed, leaving overall transactions muted.
In China’s spot market, smelters will move goods enthusiastically at high prices this week, leading to ample supply. But downstream buyers will purchase as needed on high costs, keeping trading quiet. Spot zinc prices will be close to SHFE spot-month zinc contract prices as the delivery date nears, and RMB 100/mt below SHFE 1507 zinc contract prices.
SHFE 1507 tin contract jumped to RMB 125,910/mt as large number bulls entered, but fell back to RMB 121,000/mt later in the week. The price rise was driven largely by hopes for stimulus measures from the Chinese government. In domestic spot market, trading was thin. Mainstream traded prices were RMB 121,000-123,000/mt, but dropped to RMB 120,000-122,000/mt last Friday, tracking SHFE tin.
SHFE 1507 nickel contract prices also rose significantly and hit a new high of RMB 115,300/mt. Trading volumes of the most active SHFE nickel contract surged 1.75 million lots in the first four days last week to 3.15 million lots, while positions dropped 692 to 125,278.
In China’s spot nickel markets, SMM #1 nickel prices averaged RMB 104,100/mt last week, up RMB 5,012/mt. Jinchuan Group was uninterested in selling, and the resultant tightening in spot nickel supply drove up prices. Demand declined as downstream buyers abstained from buying at highs. Jinchuan Group adjusted price offers four times last week, allowing the quotations to increase RMB 8,700/mt to RMB 110,000/mt.
Spot nickel prices in China are expected to rise further to RMB 112,000-116,000/mt.