SHANGHAI, Jun. 2 (SMM) – 

 

Copper 

The August-delivery SHFE copper moved around RMB 43,720/mt early on Monday and closed down RMB 510/mt at RMB 43,650/mt. SHFE 1508 copper contract positions increased 12,390 and trading volumes grew 62,648 lots. Technical resistance enhanced.

 

Spot copper was quoted at premiums of RMB 30-90/mt to SHFE 1506 copper contract in Shanghai Monday morning. Traded prices were RMB 43,890-43,930/mt for standard-quality copper and RMB 43,910-43,990/mt for high-quality copper.

 

Although cargo holders offered high prices, ample supply and poor trades caused spot premiums to narrow. Prices of hydro-copper and standard-quality copper refused to decline due to tight supply. Downstream buyers only watched from the sidelines and traders bought on dips.

 

SMM’s most recent survey indicates that 48% of industry participants expect copper prices to move sideways this week, with LME copper at USD 6,020-6,100/mt and SHFE copper at RMB 43,700-44,200/mt. These respondents expect the US dollar index to consolidate with the US nonfarm payroll data due out this week. Besides, market may be cautious before release of China, US and euro zone PMIs. Although Monday’s stock market rally will help shore up market, a lack of trading will continue to curb copper price movements.

 

41% of industry insiders see LME copper to fall to USD 6,000/mt and SHFE copper down below RMB 43,500/mt, arguing that technical indicators are pointing to stronger resistance. In addition, the relatively weak demand will prevent copper prices from rising. SMM survey also shows that operating rates among downstream producers varied largely by size of companies.

 

The remaining 11% of the surveyed expect a technical rebound this week which will send LME copper above USD 6,120/mt and SHFE copper to RMB 44,200/mt. These respondents noted that falling copper inventories reported by both LME and SHFE will bolster copper prices. Besides, sufficient liquidity will help enliven copper trades. In spot markets, cargo holders are unwilling to sell at lows, and the spot premiums will bode well for copper prices as well. 

 

Aluminum      

China’s official manufacturing PMI and that released by HSBC both showed a pickup in manufacturing activity in May. This helped SHFE 1508 aluminum contract rise to RMB 13,200/mt on Monday before ending at RMB 13,175/mt. Trading volumes totaled 38,608 lots, and positions were down 2,202 to 125,170.     

 

Spot aluminum largely traded between RMB 12,940-12,960/mt in Shanghai on Monday, discounts of RMB 90-110/mt over SHFE 1506 aluminum contract, versus RMB 12,920-12,940/mt in Wuxi, and RMB 12,970-12,980/mt in Hangzhou. Suppliers held back goods after prices fell, while traders and processors were cautious about buying due to a lack of confidence over aluminum prices. In the afternoon, trading became muted.

SMM surveyed 30 large aluminum smelters and traders in China.

       

40% of them are bearish over aluminum prices this week: the US dollar will strengthen on market optimism over US economy, which will send LME aluminum down to USD 1,700/mt. SHFE 1508 aluminum contract has found no support and shorts are dominating, so prices might fall below RMB 13,100/mt. In domestic spot market, processors showed little buying interest out of pessimism, so spot aluminum might fall below RMB 12,920/mt.

    

Another 40% expect prices to stabilize: LME aluminum has found strong support and should consolidate between USD 1,720-1,770/mt. The decline in prices of SHFE 1508 aluminum contract was accompanied with fall in positions, implying that shorts were cautious about entering. The most active should hold steady at RMB 13,100-13,200/mt. In domestic spot market, suppliers will hold back goods at lows, which will help spot prices stabilize at RMB 12,920-12,960/mt.

        

The rest 20% are optimistic: technically, LME aluminum is poised to rebound above USD 1,770/mt. Prices in domestic spot market are expected to follow SHFE aluminum up above RMB 12,960/mt.  

 

Lead

SHFE 1507 lead followed LME lead down RMB 145/mt to end at RMB13,235/mt during night session Friday. The contract regained earlier losses on Monday as China’s PMI was 50.2 in line with forecast and as China’s A-share rose over 4%, to finish down RMB 95/mt at RMB 13,285/mt.

 

In spot market, Nanfang, Chengyuan and Shuangyan (packed in plastic) brands quoted at RMB 13,850-13,890/mt, versus RMB 13,400/mt for Shuangyan (packed in iron) and Honglu brands, and RMB 13,840/mt for Hanjiang brand, RMB 570/mt higher than SHFE 1507 lead contract prices.

 

Lead smelters allowed no goods to flow into market and most goods from Guangdong currently have been used to fill downstream orders. Thus, spot supply in Shanghai still remained tight.

 

Downstream producers replenished stocks early this month and some purchased to need for fear of a price fall. Trades still muted today.

 

Branded lead in Henan was offered a RMB 50-100/mt premium over SMM lead prices with goods trading at RMB 13,400-13,500/mt in Guangdong.

 

30% of industry insiders surveyed by SMM are bearish towards lead prices this week, expecting LME lead to fall to USD 1,900/mt and spot lead prices in China down to RMB 13,550-13,700/mt. Markets are upbeat about May’s ISM PMI data and nonfarm payrolls due out this week. Besides, the growing concern over a Greek default will push down the euro. Both factors will lend support to the US dollar index. In China, the stock market slumped last Thursday, triggering strong caution in financial markets.

 

In addition, cancelled warrant ratio for LME lead has declined to less than 20% from 40-50%, and a USD 16/mt contango was reported, boding poorly for LME lead prices.

 

In China’s lead market, supply is set for a rise after a number of smelters resumed operations, while lead demand will decline with operating rates at motive and ignition battery producers falling. In this context, spot premiums in lead market will face a pullback after holding high for nearly a month. Furthermore, companies will feel greater financial pressures as their loans are due for repayment at the middle of the year, which will prompt them to move goods actively.

 

17% of industry participants remain bullish that LME lead will rise to USD 1,950-1,980/mt and spot lead prices will increase to RMB 13,600-13,800/mt. Both Greek government and its creditors played down fears of a Greek default, and the euro is expected to strengthen should the two parties manage to reach a deal this week.

 

In China, investors are optimistic about stock price outlook for the long run, and sufficient liquidity conditions may allow players to invest in metal markets, enlivening metal trading.

 

As for market fundamentals, despite growing primary lead supply, operating rates at secondary lead smelters were relatively low due to thin profits and environmental protection inspections, which will bolster spot lead prices.

 

The remaining 53% expect LME lead prices to stay at USD 1,910-1,990/mt and SHFE lead to remain in the RMB 13,150-13,450/mt range, arguing that technical indicators point to directionless prices. 

 

Zinc

SHFE 1508 zinc contract prices opened at RMB 16,740/mt last Friday evening, then dropped to RMB 16,660/mt, and closed at RMB 16,660/mt, down RMB 160/mt or 0.95%. Trading volumes decreased 17,394 to 79,996 lots, and total positions grew 5,514 to over 144,000. SHFE 1508 zinc contract prices opened at RMB 16,660/mt on Monday, then inched lower to RMB 16,600/mt as a large number of longs left the market, and closed at RMB 16,615/mt, down RMB 205/mt or 1.22%. Trading volumes decreased 29,954 to 142,398 lots, and total positions fell 1,814 to 136,834. SHFE 1508 zinc contract prices are expected to fall to test the 60-day moving average this evening.

 

#0 zinc prices were between RMB 16,490-16,520/mt, RMB 100-80/mt below SHFE 1507 zinc contract prices. #1 zinc prices were RMB 16,420-16,490/mt. SHFE 1507 zinc contract prices fluctuated between RMB 16,590-16,600/mt, with spot discounts narrowing to RMB 100-80/mt. Smelters sold actively, but traders lacked interest in purchasing on slight SHFE zinc price volatility. Downstream buying interest, however, improved some due to easing cash tightness, allowing overall transactions to improve. SHFE 1507 zinc contract prices fell RMB 10/mt in the afternoon, causing spot discounts to narrow RMB 10-20/mt. Supply of less desirable brands was limited.

 

LME zinc prices stabilized at USD 2,200/mt last week. Will LME zinc prices gain momentum this week? SMM surveyed 30 market players to find that 53% are neutral, believing LME zinc prices will move between USD 2,180-2,230/mt, and SHFE 1508 zinc contract prices will move between RMB 16,550-16,850/mt. Investors will remain cautious ahead of the release of economic indicators from the US, and are split as to when the Fed will raise interest rate. Meanwhile, zinc prices are more resistant to both increases and declines than any other base metals.

 

20% see LME zinc prices rising to USD 2,150/mt and SHFE 1508 zinc contract prices climbing to RMB 17,000/mt. China’s major economic indicators for April were downbeat, triggering market expectations of additional stimulus measures to grow, which will boost market sentiment. LME zinc prices found support from the 60-day moving average. Positions on SHFE zinc increased last week due to the entry of longs. Contango on LME zinc contracted as inventories fell, with selling pressure also light. China’s inventories have been falling for two consecutive weeks, and out-shipments increased, which should bolster zinc prices.

 

27% are bearish, expecting LME zinc prices to fall below USD 2,150/mt, and SHFE 1508 zinc contract prices to drop below RMB 16,500/mt. A series of promising employment data from the US will help the US dollar index stabilize at the 60-day moving average, weighing down base metals prices. April manufacturing data from China fell short of market expectations, suggesting Chinese economy is still facing pressure, and distressing market sentiment. When combined with the low-demand month of June, zinc prices are pessimistic.

 

Tin

In Shanghai spot tin market, trading remained light on Monday. Most deals closed between RMB 114,500-116,000/mt, unchanged from the previous trading day. Yunxi brand tin traded at RMB 115,500-116,000/mt.

 

SMM surveyed market players in domestic tin industry.

        

Half of them expect tin prices to hold stable this week: LME tin has found support at USD 15,400/mt and SHFE tin has found support at RMB 115,000/mt. Supply of goods from Jiangxi has been limited recently. Yunnan Tin Group and China Tin Group are gradually resuming production, but the near-term impact on market supply will be limited. Tin prices in domestic spot market are expected at RMB 115,500-117,500/mt.

 

  

Another 35% are bearish: the traditional off-season is nearing, and production resumptions at smelters will add to market supply. So, prices in domestic spot market might fall to RMB 114,000-115,000/mt. Fear of interest rate hike will keep the US dollar index elevated, which will leave LME tin vulnerable at USD 15,400/mt. SHFE tin will test support at RMB 113,500/mt.  

 

The remaining 15% are bullish: recent downbeat Chinese economic data might prompt the Chinese government to introduce more stimulus, which will help push spot tin prices in domestic market up to RMB 115,000-116,000/mt.

   

 Nickel   

SMM #1 nickel prices were between RMB 93,400-98,400/mt. Jinchuan Group lowered ex-works prices slightly. Jinchuan’s sales were affected recently as downstream buyers turned to imported nickel on falling prices and growing Sumitomo and Norwegian nickel. Premiums of Jinchuan nickel against the most actively traded contracts on the Wuxi electronic trading fell to RMB 4,200/mt. Downstream buyers thus entered the market, with traded prices between RMB 93,700-98,300/mt. Nickel price volatility was up in the afternoon, allowing downstream buyers to leave the market, muting trading, and with traded prices between RMB 93,600-98,000/mt. Jinchuan Group lowered prices by RMB 2,500/mt to RMB 98,500/mt.

 

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

 

The 10% optimistic ones believe LME nickel prices will rise to USD 12,850-13,000/mt. China is expected to inaugurate another reform on the property market this year. Meanwhile, home prices in the 100 cities in China rose 0.45% MoM in May. Stabilizing property market should boost the steel industry. The monsoon season in the Philippines and El Nino will affect nickel ore supply. LME nickel prices are expected to have bottomed. SHFE 1509 nickel contract prices are expected to rise to RMB 98,500-100,000/mt.

 

47% see LME nickel prices stabilizing between USD 12,500-12,900/mt. China’s May PMI suggests Chinese economy remains weak, which will allow the PBOC to lower interest rate again. The monsoon season in the Philippines caused nickel ore supply tightness in some regions, bolstering nickel prices. However, upbeat economic indicators from the US sent the US dollar index to an upward track. A large inflow of imported nickel added to oversupply. Slow progress of domestic projects also curbed demand. In this scenario, SHFE 1509 nickel contract prices are expected to fluctuate between RMB 96,500-98,500/mt.

 

43% are bearish, seeing LME nickel prices falling to USD 12,300-12,500/mt. The US dollar index strengthened on upbeat economic indicators from the US, weighing on base metals prices. policy supports from China failed to boost economy due to capital inflows into the stock market. Profit at industrials in April was mostly contributed by investment. Despite declining nickel ore supply, nickel will not fall short in the near term on soft demand. SHFE 1509 nickel contract prices are expected to fall to RMB 93,000-96,000/mt.