SHANGHAI, Jun. 9 (SMM) –

Copper
SHFE 1508 copper contract prices opened at RMB 42,930/mt Friday night and tested a low of RMB 42,790/mt before rising to RMB 43,250/mt. The prices finished the session up RMB 40/mt at RMB 43,080/mt.

The most active SHFE copper contract held firm around RMB 43,150/mt during daytime trading Monday, and finished up RMB 120/mt at RMB 43,160/mt. Trading volumes dropped 86,524 lots and positions were down 8,608.

Spot copper quoted at premiums of RMB 50-90/mt to SHFE 1506 copper contract in Shanghai Monday morning. Traded prices were RMB 43,340-43,380/mt for standard-quality copper and RMB 43,360-43,420/mt for high-quality copper.

The price gap between SHFE 1506 and 1507 copper contracts widened to about RMB 100/mt. Some traders bought spot goods and sold in futures market. Cargo holders in spot market left spot premiums steady. Some downstream producers went bargain hunting as copper prices stabilized, but supply was limited.

As for this week’s price trends, 35% of industry insiders surveyed by SMM are bearish that LME copper will fall to USD 5,850/mt and SHFE copper to RMB 42,500/mt. Technical indicators showed resistance has enhanced after prices fell below several major moving averages, and the lack of buying support will push prices lower. Besides, markets are pessimistic about China’s economic figures due out this week, including the PPI and CPI.

65% see copper prices to move sideways with LME copper at USD 5,880-5,980/mt and SHFE copper at RMB 42,700-43,500/mt. These market players hold that the US dollar index will consolidate given uncertainty over the timing of Fed’s interest rate hike. Meanwhile, China’s stock market will experience increased volatility as investors are diverged on stock market outlook. In addition, although China’s liquidity conditions seem to be ample, funds available for industrial companies remain limited.

In spot markets, cargo holders are holding prices firm on falling stock inventories reported by LME and SHFE, but consumption remains unimproved. In this context, copper prices will be trapped in the current range.

Aluminum
SHFE 1508 aluminum contract hovered narrowly above RMB 13,000/mt on Monday morning. China’s exports of unwrought aluminum and aluminum semis fell to 410,000 mt in May from 430,000 mt in April, customs data showed. The negative caused the most active contract to close at an intraday low of RMB 12,950/mt. Trading volumes totaled 31,406 lots, and positions were down 1,378 to 132,024. More losses might lie ahead since bearishness is growing.

Spot aluminum largely traded between RMB 12,820-12,830/mt in Shanghai on Monday, discounts of RMB 50-60/mt over SHFE 1506 aluminum contract, versus RMB 12,800-12,820/mt in Wuxi, and RMB 12,850-12,860/mt in Hangzhou. Buyers sat tight as prices showed no signs of a turnaround. In the afternoon, some traders hunted for cheap goods, but sellers cut offers only slightly, driving negotiations into a deadlock.

SMM surveyed 34 large aluminum smelters and traders in China.

41% of them expect prices to stabilize this week: LME aluminum has found strong support, and should consolidate between USD 1,720-1,750/mt. The decline in prices of SHFE 1508 aluminum contract was not accompanied with sharp increase in positions, implying that shorts were cautious about entering. But a lack of positive news will keep the most active in check at RMB 12,900-13,050/mt. In domestic spot market, spot discounts will narrow further since the delivery of SHFE 1506 aluminum contract is nearing. Despite sluggish consumption, sellers will not sell in panic. This should help spot prices stabilize at RMB 12,800-12,850/mt.

The rest 59% are bearish: positive US employ data will keep the US dollar elevated, which will send LME aluminum down below USD 1,720/mt. Both the technical and macro front is negative, so SHFE 1508 aluminum contract might fall below RMB 12,900/mt. In domestic spot market, processors will show little buying interest out of pessimism, so spot aluminum might fall below RMB 12,800/mt.

Lead
SHFE 1508 lead followed LME lead down last Friday evening session, to end the session down RMB 100/mt at RMB 13,055/mt as shorts entered market.

The August-delivery lead grew to RMB 13,100/mt after opening Monday session. China’s trade balance for May was released with exports slipping 2.5% YoY, better than expected and previous one, but imports felling 17.6% YoY, short of expected and April’s, which failed to impact metals prices a lot. The contract fluctuated between RMB 13,060-13,150/mt and finished the day at RMB 13,110/mt, down RMB 45/mt. Trading volumes totaled 4,436 lots with positions up 504 to 11,754.

In China’s spot market, Nanfang brand was offered a RMB 560-570/mt premium over SHFE 1508 lead at RMB 13,660-13,670/mt with Shuangyan (packed in plastic) at RMB 13,600-13,620/mt and older Honglu brand goods at RMB 13,200-13,300/mt.

Some lead smelters were unwilling to sell at lows while wait-and-see posture overshadowed downstream market. Besides, downstream producers kept low operating rate and cheaper secondary lead attracted more buyers.

Branded goods settled at RMB 13,450-13,550/mt in Henan and at RMB 13,300-13,350/mt in Guangdong.

SMM’s survey of 30 industry insiders shows that 57% of them are pessimistic about lead prices this week, partly citing the rebounding dollar boosted by upbeat US hiring and housing data. The delayed payments from Greece will deal a blow to the euro, also boding well for the US dollar.

Technical indicators for LME lead are pointing downwards, and the cash-to-three month contango continue expanding. In this context, LME lead prices are likely to fall with the absence of any major encouraging news.

In China’s spot lead market, supply will grow with smelters resuming operation from maintenance and moving goods actively against financial pressures. Demand, in contrast, will decline, as operating rates at downstream producers remain low. As such, a majority of industry participants expect LME lead to fall to USD 1,850-1,900/mt and spot lead prices in China to slip to RMB 13,300-13,500/mt.

Only 10% of market players are bullish that LME lead prices will rise to USD 1,900-1,950/mt and spot lead prices will grow to RMB 13,500-13,700/mt. These players hold that chances are slim for MSCI to include of China’s shares in its equity benchmarks, which will cause investors to leave stock market. That, combined with China’s tighter regulation of stock trading, will allow funds to shift to commodity markets. In addition, the El Niño Phenomenon will also help buoy metal market.

The remaining 33% of respondents see lead prices to remain stable, arguing that the stable positions versus growing trading volumes in LME lead indicates that strength of shorts and longs was somewhat balanced. Besides, although primary lead supply is on the rise, secondary lead supply will decline in busy farming season, which will help limit any decline in lead prices.

Zinc
SHFE 1508 zinc contract prices opened at RMB 16,230/mt last Friday evening, then moved between RMB 16,230-16,300/mt, and closed at RMB 16,270/mt, down RMB 40/mt or 0.25%. SHFE 1508 zinc contract prices opened at RMB 16,280/mt, then fluctuated below RMB 16,300/mt on Monday, and closed at RMB 16,275/mt, down RMB 25/mt or 0.21%. Trading volumes decreased 58,178 to 80,784 lots, and total positions fell 1,610 to 128,556. Any downward room for SHFE 1508 zinc contract prices are expected to be limited this evening.

#0 zinc prices were between RMB 16,250-16,280/mt, RMB 30-10/mt below SHFE 1508 zinc contract prices. #1 zinc prices were RMB 16,180-16,240/mt. SHFE 1508 zinc contract prices fluctuated between RMB 16,270-16,290/mt, flat at last Friday’s level, with spot discounts narrowing RMB 20/mt. Smelters sold modestly, causing supply to tighten and allowing cargo holders to hold prices firm, and in turn contracting spot discounts. Traders took a wait-and-see attitude, but downstream buyers purchased as needed, leaving overall transactions largely unchanged from last Friday. SHFE 1508 zinc contract prices remained steady in the afternoon, with spot discounts of #0 zinc between RMB 40-20/mt and trading quiet.

LME zinc prices dropped below the 60-day moving average last week. Will LME zinc prices rebound this week?

SMM surveyed 30 market players to find that 43% are neutral, who believe LME zinc prices will move between USD 2,120-2,160/mt, and SHFE 1508 zinc contract prices will hover between RMB 16,150-16,450/mt. Better-than-expected US non-farm employment data bolstered the US dollar index to rise above 96, which will weigh down base metals prices. China’s export data in May were upbeat, but imports fell far short of market expectations, suggesting sluggish domestic demand. But additional stimulus measures by the PBOC will positively affect base metals prices. On the demand side, the automobile market has been lackluster this year, unfavorable for zinc consumption. When combined with the lack of capital, zinc prices will lack impetus to rise, but any possible drop will be limited either as some smelters held back goods on continuously falling zinc prices.

37% are bullish, believing LME zinc prices will rebound to USD 2,170-2,180/mt, and SHFE 1508 zinc contract prices are expected to rise to RMB 16,500/mt. poor economic indicators triggered market expectations of additional stimulus measures from China, boosting market sentiment. Contango on LME zinc increased after dipped to USD 10/mt, which will support LME zinc prices. Zinc inventories in Shanghai, Guangdong and Tianjin have fallen for three consecutive weeks, lending support to zinc prices. Spot discounts have been close to zero as cargo holders hold prices firm.

20% are bearish, seeing LME zinc prices falling to USD 2,100/mt, and SHFE 1508 zinc contract prices down to RMB 16,100/mt. A strengthening US dollar index, combined with ongoing Greek crisis keep the market pessimistic. When coupled with the lack of longs and capital outflows into the stocks market, zinc futures prices look set to inch down.

Tin
In Shanghai spot tin market, mainstream traded prices were RMB 113,300-115,000/mt on Monday morning, but prices rose by RMB 200-300/mt in the afternoon. Downstream demand picked up. Supply of goods from Jiangxi and Yunnan was tight. Goods from Yunnan Tin Group traded at RMB 114,500-115,000/mt.

SMM surveyed market players in domestic tin industry.

55% of them expect tin prices to hold stable this week: falling LME tin inventories will allow LME tin prices to hold stable. But a lack of other positive news will deprive LME tin of upward momentum. LME tin is expected to hover around USD 15,400/mt. SHFE 1507 tin contract will also stabilize between RMB 114,000-115,000/mt due to a lack of speculative activity. In domestic spot market, limited supply will help spot prices stabilize at RMB 113,000-115,000/mt. Although some smelters will resumed some production, market supply did not recover immediately. Some distributors of Yunxi brand tin said inventories have run out and new goods have yet to arrive.

The rest 45% are bearish: the traditional off-season is nearing, so prices in domestic spot market might fall to RMB 112,000-112,500/mt. Fear of interest rate hike will keep the US dollar index elevated, which will leave LME tin vulnerable to losses. Speculative activity triggered by production cuts at smelters has faded, so SHFE tin might fall to test support at RMB 112,500/mt.

Nickel
SMM #1 nickel prices were between RMB 96,500-99,700/mt. Jinchuan Group adjusted their quotes slightly on rising nickel futures prices in the morning, with premiums of Jinchuan nickel against the most actively traded nickel contracts on the Wuxi electronic trading remaining at RMB 2,500/mt. A few traders sold at lower prices, but downstream buying interest was weak, leaving trading muted and traded prices between RMB 96,500-99,400/mt. SHFE nickel prices returned above RMB 100,000/mt in the afternoon, but premiums of Jinchuan nickel against the most actively traded nickel contracts on the Wuxi electronic trading fell to RMB 2,000/mt. Supply increased as Jinchuan Group ramped up supply, but downstream demand softened, muting trading and with traded prices between RMB 96,800-99,300/mt. Jinchuan Group hiked prices by RMB 1,000/mt to RMB 100,000/mt.

SMM surveyed 30 market participants early this week to find that 5 are bullish toward nickel prices trends this week, 16 are neutral and 9 are bearish.

The 17% optimistic ones believe LME nickel prices will rise to USD 13,200-13,500/mt this week. China’s official PMI in May was 50.2, compared to the 50.3 expected and 50.1 in April. HSBC’s manufacturing PMI in May was 49.2, in line with market expectations, and slightly higher than the flash 49.1. This suggests Chinese economy appeared to have bottomed. NPI producers have been holding back goods recently, lending support to nickel prices. SHFE 1509 nickel contract prices are expected to rise to RMB 102,500/mt but meet resistance at the 20-day moving average.

53% see LME nickel prices fluctuating between USD 12,900-13,200/mt. The number of jobs added in US non-farm sector hit a five-month high in May, with salary also rising. This left US companies optimistic toward economic outlook and boosting the US dollar index. But any effect on base metals should be limited. Growing NPI output and nickel oversupply will constrain nickel price gains, despite the fact that nickel ore supply decreased recently and NPI producers held back goods. One trader from Shanghai reported sluggish downstream purchases, which were made mostly at the low-end of the price range. SHFE nickel prices are expected to fluctuate between RMB 98,000-100,000/mt.

30% see LME nickel prices falling to USD 12,600-12,900/mt. Despite of stabilizing Chinese economy, HSBC’s manufacturing PMI for China in May was 49.2, meaning SMEs are shrinking. US economy is relatively upbeat, boosting the US dollar index and weighing on base metals prices. Ongoing Greek crisis will affect eurozone economy. Anti-dumping investigations on stainless steel from China by US and India will take a toll on China’s stainless steel sector, in turn biting into nickel demand. SHFE nickel prices will also drop to RMB 96,000-98,000/mt.