SHANGHAI, Aug. 4 (SMM) – 

Copper 

SHFE 1510 copper contract rose RMB 38,350/mt Monday morning but then fell below RMB 38,000/mt. The price dipped to RMB 37,810/mt near session’s end, to close down RMB 510/mt or 1.33% at RMB 37,870/mt. Trading volumes grew 154,000 lots and positions were up 32,532.

Spot copper premiums fell to RMB 0-80/mt over SHFE 1508 copper early Monday, and traded prices were RMB 38,650-38,780/mt for stand-quality copper and RMB 38,680-38,830/mt for high-quality copper. In the afternoon, spot copper was offered between a discount of RMB 30/mt and a premium of RMB 30/mt.

More imported goods flowed into Chinese market, while buyers still held back despite lower quotes, driving spot premiums down further. Near noon, hydro-copper was shipped out at discounts. Spot premiums on standard-quality and high-quality copper decreased to RMB 0/mt and RMB 50/mt, respectively. Some traders hunted cheaper copper, and downstream buyers purchased as needed.

60% of industry insiders surveyed by SMM expect copper prices to fall this week, with LME copper down to USD 5,150/mt and SHFE copper to RMB 37,800/mt, considering weak Chinese data and risks from China’s stock market. Meanwhile, the falling gold and crude oil prices will also affect copper prices. Technical indicators point downwards and Chinese copper market was under strong selling pressure. As such, copper prices are likely to extend losses.

40% of the surveyed see LME copper to stay at USD 5,170-5,250/mt and SHFE copper still in the RMB 37,800-38,600/mt range. These market players believe that the impact of the US dollar on copper prices is receding recently. In China’s copper market, although spot discounts were reported Monday afternoon, copper smelters seemed to plan to hold prices up, which may help limit any downward room for the prices. 

Aluminum      

SHFE 1510 aluminum contract fell to RMB 12,000/mt on Monday due to disappointing China manufacturing PMI for July. The contract moved below the daily moving average for most of the day as shorts dominated. Trading volumes were up 18,114 lots to 45,728 lots, and positions were up 7,554 lots to 148,000 lots.

Aluminum prices were mainly between RMB 12,030-12,040/mt in Shanghai on Monday, discounts of RMB 50-70/mt over August aluminum on the SHFE, versus RMB 12,020-12,040/mt in Wuxi and RMB 12,030-12,040/mt in Hangzhou. Easing liquidity crunch and lower prices lured some downstream buyers to go bargain hunting. In the afternoon, market turned quiet. 

SMM surveyed 35 large aluminum smelters, traders and processors in China. 

43% of them see little change in aluminum prices this week. More aluminum smelters in China have cut output against losses. Smelters will postpone delivery of goods under term contracts to support prices. As such, spot aluminum in China should find solid support at RMB 12,000/mt. LME aluminum should hold stable at USD 1,600-1,625/mt, versus RMB 12,000-12,200/mt for SHFE 1510 aluminum contract.

The rest 57% are bearish. 1. Expectations for US interest rate hike will keep the US dollar index elevated, thus pressuring base metals. 2. China’s official manufacturing PMI for July was disappointing. Efforts to stabilize China’s stock market ended in vain. 3. Downstream consumption has shown no signs of a turnaround. 4. Production cuts are not enough to counterbalance growing new capacity in northwest China. In this context, LME aluminum should fall below USD 1,600/mt, and SHFE 1510 aluminum contract might drop below RMB 12,000/mt.  

Lead

The most active contract fluctuated between RMB 12,950-13,000/mt on Monday and finished the day at RMB 12,850/mt, falling RMB 165/mt on sell-offs. Trading volumes totaled 3,454 lots and positions increased 342 to 17,236.

Nanfang brand settled RMB 270/mt higher than SHFE 1510 lead at RMB 13,270/mt in Shanghai. Traded prices were RMB 13,220-13,230/mt for Humon, YT and Jinyuteng brands, versus RMB 13,150/mt for Shuangyan brand (packed in iron).

Only Shandong Humon Smelting Co. moved goods and market mainly was full of goods from traders. Downstream buyers increased purchase slightly early August. But base metals were depressed as a whole and thus downstream producers majorly watched from the sidelines.

SMM surveyed 30 industrial insiders to find that 30% of them see LME lead prices to fall to USD 1,680/mt this week and China spot lead prices to RMB 12,850/mt. On the macro side, most data from US are below forecast, but US economy posts a real improvement, depressing lead prices. This Friday will witness US July’s unemployment rate and non-farm payrolls. Markets expect the former to hold flat June’s 5.3% and the latter to be 225,000, above June’s 223,000, boding well for US dollar. Moreover, US active oil rigs grew 5 last week, hitting a three-month high. As such, investors worry that growth in US crude oil output will weigh on oil prices, which will also weaken investors’ confidence in commodity market.

China official manufacturing PMI for July comes in at 50, below forecast. Caixin’s manufacturing PMI, released previously, falls to a 15-month low, below 50 for five straight months. Markets expect additional stimulus measures, but China’s soft economy will be hard to drive lead prices up.

As for spot supply, Hunan’s Jingui Silver Industry, Zhuzhou Smelter Group, Yuteng Nonferrous Metals, Jinli Lead, Wanyang Group and Chifeng Shanjin Silver & Lead will restart operation in August. Besides, lead-acid batteries went a peak season in August, after which rising scrap batteries will send secondary lead supply up. Secondary lead with price edges will curb the growth in primary lead prices.

Sales for e-bike and auto stay weak currently. Downstream lead-acid battery makers will still buy raw materials on need. As such, lead prices should post declines this week.

17% respondents believe that LME lead prices will break out above USD 1,715/mt this week and that China spot lead will grow to RMB 13,300-13,400/mt. Large price hikes in batteries will drive operating rate up at battery makers in August. High temperatures will accelerate battery replacement. Both factors help to increase demand for refined lead.

Secondary lead smelters in Beijing, Tianjin and Hebei will cut or even halt production due to the military parade in Beijing. Consequently, lead-acid battery makers may buy more primary lead with shortfalls in secondary lead. Market players pose high expectation for the peak season of batteries in August.

The rest 53% note that LME lead prices will hold flat between USD 1,690-1,720/mt this week and RMB 12,850-13,100/mt for spot lead. Increasing supply will be offset by the expectation for rising demand in peak season.

Economic indicators may come disappointingly but high temperatures will quicken battery replacement. SHFE 1510 lead finds solid support below but also meet resistance at the 20 and 40-day moving averages. So SHFE lead should fluctuate in current ranges.

Zinc

SHFE 1510 zinc contract prices opened at RMB 14,815/mt last Friday evening, then rose to RMB 14,970/mt, and dropped back due to selling pressure and closed at RMB 14,730/mt, down RMB 150/mt or 1.01%.  Trading volumes increased 27804 to 75,236 lots, and total positions grew 7,862 to 136,028. SHFE 1510 zinc contract prices rose after opening today, then moved around RMB 14,750/mt. With a large number of shorts rushing into the market, SHFE 1510 zinc contract prices fell back to as low as RMB 14,540/mt, and closed at RMB 14,585/mt, down RMB 285/mt or 1.92%. Trading volumes increased 77,904 to 176,040 lots, and total positions increased 16,898 to 145,064. SHFE 1509 zinc contract prices are expected to test support from RMB 14,500/mt.

#0 zinc prices were between RMB 14,980-15,010/mt, RMB 240-260/mt above SHFE 1510 zinc contract prices on Monday. #1 zinc prices were RMB 14,920-14,940/mt. SHFE 1510 zinc contract prices hovered around RMB 14,740/mt, down RMB 80/mt. Spot premiums were RMB 260-300/mt in the morning, but fell later as some smelters delivered for term contracts. Downstream buyers entered the market as prices fell below RMB 15,000/mt, allowing overall transactions to improve. #0 zinc prices were around RMB 15,050/mt, with spot premiums between RMB 180-190/mt. Shuangyan zinc prices were around RMB 15,100/mt, with spot premiums of RMB 230/mt against SHFE 1510 zinc contract prices.

LME zinc prices surged initially but fell back last week. With LME zinc extend losses this week?

SMM surveyed over 30 market players to find that 60% are neutral, believing LME zinc prices will fluctuate between USD 1,870-1,930/mt, and SHFE 1510 zinc contract prices will hover between RMB 14,400-14,800/mt. They think zinc price will move in a wide range with the release of a series of economic indicators. Nonetheless, zinc prices have fallen below cost lines of RMB 15,000/mt, and this should deter supply from smelters, leading to supply tightness. But zinc price will lack ability to rise due to technical pressure.

33% are bearish, believing LME zinc price will dip to USD 1,850/mt, and SHFE 1510 zinc contract prices will fall to RMB 14,200/mt. US non-farm employment data slated for release this week are expected to improve, which will push up the US dollar and weigh down base metals. Besides, Caixin’s final manufacturing PMI for China released early this week was 47, falling short of market expectations and flash data, meaning soft demand from SMEs and depressing market sentiment. Total positions on SHFE zinc grew over 10,000 on Monday as shorts increased, which will negatively affect zinc prices.

7% are bullish, seeing LME zinc price rising to USD 1,950-1,960/mt and SHFE 1510 zinc contract prices up to RMB 15,000/mt. They believe zinc futures prices should technically rebound. Fundamentals of zinc is also stronger compared to other base metals. In addition, mines and smelters will continue to hold back goods on low zinc prices, tightening supply. Downstream buying interest in Shanghai improved at lows. When combined with low inventories on hand, trading is expected to get a boost. Spot premiums of #0 zinc in Shanghai against SHFE 1510 zinc contract prices widened to RMB 250-300/mt, which should also bolster zinc prices.

Tin

In Shanghai spot tin market, trading was lackluster. Mainstream traded prices were RMB 109,500-111,000/mt on August 3. Goods from Yunnan Tin Group traded at RMB 110,500-111,000/mt. 

SMM surveyed market players in domestic tin industry. 

Half of them expect tin prices to hold stable this week. On the one hand, Indonesia’s new export rules will put a floor under tin prices. On the other hand, a strong US dollar amid expectations for US interest rate hike will prevent tin prices from rising. LME tin might consolidate at USD 16,000-16,400/mt. SHFE 1509 tin contract should stabilize at RMB 108,000-111,000/mt. Spot tin prices are expected at RMB 109,500-112,000/mt. 

Another 30% are bearish. Growing supply in domestic spot market will send spot prices down below RMB 109,000/mt. LME tin lost upward momentum, and is expected to hover around USD 16,000/mt. SHFE 1509 tin contract should test support at RMB 107,000/mt.  

The rest 20% are bullish. Indonesia’s new export rules will allow LME tin to challenge resistance at USD 17,000/mt. The SHFE/LME tin price ratio is becoming favorable for exports, which will help alleviate oversupply pressure in domestic market. Spot tin prices are thus expected to rise. However, weak demand in the off-season will curb the upside room. The low-end spot tin prices are expected to climb above RMB 110,000/mt. 

Nickel   

SMM #1 nickel prices were between RMB 80,800-82,100/mt. Premiums of Jinchuan nickel against the most actively traded contracts on the Wuxi electronic trading were RMB 500/mt in the morning. Jinchuan Group lowered ex-works prices in the morning as nickel prices fell. Traders built stocks at lows, while downstream buyers took a wait-and-see posture, with traded prices between RMB 80,900-81,700/mt. Nickel futures prices slumped in the afternoon, muting trading. Russian nickel prices dropped below RMB 80,000/mt, allowing market pessimism to prevail in the market. Downstream buying interest was also weak, with traded prices between RMB 80,000-80,900/mt. Jinchuan lowered ex-works price by RMB 1,300/mt to RMB 81,500/mt.

SMM surveyed 30 market players to find that no one is bullish toward price trends, 20 are neutral, and 10 are bearish.

The 53% think LME nickel prices will fluctuate between USD 10,700-11,050/mt. China’s PMI in July continued to fall, reflecting downward pressure for Chinese economy. US economic indicators fell a touch short of market expectations but proved better. This fueled market expectations of a nearing interest rate hike by the Fed. China’s stainless steel market will unlikely turn around in the near term. But a falling SHFE/LME nickel price ration from slumping LME nickel prices will constrain nickel imports. Besides, Philippine suppliers will hold nickel ore prices firm, giving support to nickel prices. SHFE 1509 nickel contract prices will stabilize around RMB 80,000/mt.

The 47% bearish ones believe LME nickel prices will move between USD 10,450-10,750/mt. US non-farm employment data slated for release this week are promising, which will bolster the US dollar. China’s July PMI hit a record low, boding ill for Chinese economy. This triggered concerns over China’s demand for nickel. SHFE 1509 nickel contract prices will fall toward RMB 75,230/mt.