SHANGHAI, May 19 (SMM) – The PBOC announced to cut interest rate again May 10, but investors still worried about China’s poor economic results, including fixed-asset investment, industrial output, retail sales and M2 growth. Meanwhile, US economic figures turned out mixed and the US dollar index kept falling. SMMI dropped 0.54%, with SMMI.Ni down 2.89% and SMMI.Sn falling 1.64%. SMMI.Zn dropped 1.13% and SMMI.Al slipped 0.76%. SMMI.Cu posted a 0.14% decline.
SHFE copper prices moved narrowly between RMB 45,600-46,400/mt last week, with trading volumes off by 360,000 lots and positions decreasing 12,000. Many longs left the market, while some shorts intended to open positions at highs. SHFE copper has been consolidating for nearly two weeks. SHFE copper prices will remain directionless and stay between RMB 45,300-46,300/mt unless investors switch to the red metal from other markets.
Spot copper trades in China remained stable last week as prices did not present big swings. Spot premiums in Shanghai rose, and those in north and south China also held up. In Shandong, prices varied largely as some smelters conducted maintenances, so trading activities decreased.
Positive impact from China’s interest rate cut was offset by a raft of discouraging Chinese economic data, including fixed asset investment, industrial output, retail sales and M2 growth. The exit of bulls drove SHFE 1507 aluminum contract down from above RMB 13,400/mt to RMB 13,270/mt. In China’s spot market, suppliers held back after spot prices fell to around RMB 13,000/mt. Traders and processors entered the market at such low prices, allowing spot discounts to narrow. However, traders lost buying interest after spot discounts shrank to about RMB 100/mt.
Recent Chinese economic data are negative, and it takes time for the PBOC’s interest rate cut to yield fruit. In this context, SHFE 1507 aluminum contract should move between RMB 13,250-13,400/mt. In China’s spot market, spot discounts will widen slightly after SHFE 1506 aluminum contract shifts to the new front-month contract. Spot aluminum should trade at discounts of RMB 150-200/mt over SHFE front-month contract.
SHFE 1507 lead suffered a sell-off after peaking at RMB 13,675/mt, falling back to RMB 13,300/mt. More long positions closed as shorts entered the market. SHFE 1507 lead should fluctuate between RMB 13,000-13,500/mt under pressure from a sell-off.
The spot lead price in China dropped just RMB 50/mt against the larger decline in LME lead and SHFE 1507 lead. Few cargo holders sold and a wait-and-see posture overshadowed the downstream market. Henan lead smelters held back sales against a dip in the spot price.
Trading in Shanghai’s spot market was muted last week. Spot discounts on #0 zinc against SHFE 1507 zinc contract prices stayed at RMB 140-110/mt despite a RMB 200/mt decline in SHFE zinc prices. Smelters sold normally, and traders also moved goods actively on falling SHFE zinc prices, leaving supply ample. Traders refrained from buying as the delivery date neared, while downstream buyers purchased modestly at lower prices, leaving overall transactions quiet.
In China’s spot markets, supply will remain abundant as smelters are active in selling, but downstream buyers will purchase as needed this week. Goods releases after delivery should also weigh on spot zinc prices, with spot discounts expected between RMB 100-150/mt against SHFE 1507 zinc contract prices.
SHFE 1507 tin contract ended last Thursday at RMB 119,500/mt, down RMB 2,530/mt from a week ago. Tin prices in domestic spot market also dropped, due to pullback in SHFE tin, growing supply and softening demand. Mainstream traded prices were RMB 118,000-120,000/mt last Friday.
SHFE nickel also pulled back to as low as RMB 107,060/mt last Friday. Trading volumes of the most active SHFE nickel contract grew 328,000 to 3.58 million lots last week and positions increased 7,920 to 127,000.
In China’s spot nickel market, SMM #1 nickel prices averaged RMB 105,770/mt last week, up RMB 1,670/mt on a weekly basis. Jinchuan Group sold actively at high prices, but downstream buyers were cautious towards purchases. Jinchuan’s price offers slipped RMB 500/mt to RMB 109,500/mt last week after two price adjustments.
Supply in China’s nickel market was sufficient last week, and profitable opportunities were witnessed for importing nickel. Jinchuan Group increased shipments, dragging down spot prices for the product. Spot nickel prices in China are expected to remain stable at RMB 100,000-106,000/mt this week.