SHANGHAI, Aug. 11 (SMM) –
SHFE copper fell immediately after opening Monday trading session and then tested RMB 37,540/mt. In the afternoon business, the price dropped to RMB 38,000/mt and followed Chinese stocks up, to finish up RMB 240/mt or 0.64% at RMB 37,990/mt. Trading volumes fell 87,610 lots and positions slipped 6,930.
Spot copper settled at a discount of RMB 20-70/mt against SHFE 1508 copper in Shanghai on Monday. Mainstream prices were RMB 38,180-38,240/mt for standard-quality copper and RMB 38,190-38,280/mt for high-quality copper.
Standard-quality and high-quality copper prices were lowered to excite trades and price gap between them disappeared. However, hydro-copper prices stayed firm thanks to shortage in supply. Few downstream buyers entered market early this week. Trades were thus mainly made between traders.
33% of industry insiders surveyed by SMM expect copper prices to fall to USD 5,120/mt and SHFE copper to slip to RMB 37,300/mt this week, partly basing their opinions on weak Chinese data, including declining copper imports. Besides, LME copper inventories have been growing for weeks and SHFE also reported copper stocks surged more than 10,000 mt last week. The rising copper stocks, combined with influx of imported copper, will bode ill for copper price.
Technically, both LME and SHFE copper prices have come under major moving averages, with other indicators pointing downwards. Continued spot discounts in China’s copper market also threaten to drag down futures prices.
60% of the respondents see copper prices to remain stable, with LME copper at USD 5,130-5,200/mt and SHFE copper in the RMB 37,500-38,200/mt range. US economic data were a mixed bag, which may leave the US dollar index hovering. In China, the foreign exchange reserves fell by USD 43 billion to USD 3.65 trillion, the lowest since August 2013. The People’s Bank of China intends to keep the yuan’s exchange rates stable when stock markets were volatile, which is helpful for stabilization of commodities.
The remaining 7% believe copper prices will rally this week, arguing that some investors will book profits after gaining from the US dollar, so the US dollar index is expected to edge lower. In addition, the PBOC announced to follow the current monetary policies, while China’s money supply (M2) growth was close to the full-year target and should speed up in the future. This may help with rebound in Chinese shares, in turn proffering impetus to copper prices.
SHFE 1510 aluminum failed in its attempts to climb above RMB 12,000/mt on Monday, and ended the day at RMB 11,965/mt. Trading volumes were down 9,350 lots to 27,690 lots, and positions were up 2,556 lots to 153,000 lots. China’s foreign trade data for July, released this past weekend, were depressing. China’s PPI continued falling in July. The contract should stay below the 5-day moving average in the short term.
Aluminum prices were mainly between RMB 11,900-11,920/mt in Shanghai on Monday, premiums of RMB 0-20/mt over August aluminum on the SHFE, versus RMB 11,890-11,910/mt in Wuxi and RMB 11,910-11,920/mt in Hangzhou. Traders were active in the market, but processors remained little interested in buying. In the afternoon, goods were offered at RMB 11,910-11,920/mt, but few deals were reported.
SMM surveyed 28 large aluminum smelters, traders and processors in China.
46% of them see little change in aluminum prices this week. LME aluminum should hold stable at USD 1,580-1,600/mt, versus RMB 11,940-12,000/mt for SHFE 1510 aluminum contract. More and more Chinese aluminum smelters are operating in the red, given continuous fall in aluminum prices. This, combined with production cuts in the sector, will put a floor under aluminum prices. On the other hand, a strong US dollar amid hopes for US interest rate hike, and depressing economic data, will offer no upward momentum to aluminum prices.
The rest 54% are bearish. LME aluminum should fall below USD 1,580/mt, and SHFE 1510 aluminum contract might drop below 6-year low of RMB 11,910/mt. Some loss-making aluminum smelters in China are still running. Falling production cuts will weaken cost support for aluminum prices. Aluminum stocks remain high. Processors buy only as needed in the off-season. Moreover, the US dollar will stay firm and recent Chinese economic data are discouraging, also boding ill for the light metal.
SHFE lead held strong around RMB 12,850/mt on Monday despite of China’s poor PPI and trade data. Then the contract advanced to RMB 13,110/mt as Chinese stocks headed for stability and ended up RMB 245/mt or 1.91% at RMB 13,060/mt. Trading volumes grew to 5,364 lots and positions rose 234 to 18,396.
In Shanghai market, traded prices were RMB 13,190-13,220/mt for Nanfang, Humon and Hanjiang brands, premiums of RMB 280/mt over SHFE 1510 lead. Later, the prices grew to RMB 13,300/mt but few deals were made. Jinyuteng brand quoted RMB 13,160/mt, versus RMB 13,070/mt for Shuangyan brand (packed in iron). Western Mining, Shandong Humon Smelting and Hechi Nanfang Nonferrous Metals Group moved goods out, but spot supply was still insufficient in market. Downstream buyers increased purchase due to expectation for spot price rises, resulting from surging SHFE lead prices Aug. 10.
SMM survey of 30 market players shows that 17% of them see LME lead to fall below USD 1,680/mt this week and China’s spot lead below RMB 13,000/mt. US non-farm payrolls number grew 215,000 in July, below previous 223,000 but still a high level, boosting hope for US Fed’s interest rate hike in September. Dollar increased initially but later fell with market sentiment eased. US dollar still poses pressures to lead prices.
Growth in China’s July PPI slipped faster and rise in export was far below estimates. Markets expect July’s year-on-year industrial output to be downbeat. Thus, weak consumption at home and aboard will not support lead prices. Besides, it is difficult for demand to really pick up. Demand from e-bike and auto sectors stays anemic, boding ill for lead prices.
Spot lead discounts widen. Henan-based spot lead turned to discounts of RMB 100/mt from a par against SMM #1 lead average price. Many traders are unwilling to buy even in this peak season. As such, lead prices will post a drop this week.
17% respondents note that LME lead will break out above USD 1,750/mt and that SHFE 1510 lead will hold stable around RMB 13,000/mt this week. Leading battery makers’ price hikes, followed by other battery makers, will excite operating rate at lead-acid battery producers, increasing demand for lead. Additionally, the rate will be stimulated by falling temperatures. This will also increase demand for lead and will thus support lead prices.
The rest of market players state that lead prices will hold flat this week with USD 1,700-1,750/mt for LME lead and RMB 13,100-13,300/mt for Chinese spot lead. Most investors are not bullish towards commodity prices but meanwhile lead prices have dropped to a low. Shorts will hence remain leery. Lead prices will be depressed by other base metals prices though technical indicators point upwards. Currently, batteries have entered a peak season but consumption in e-bike and auto sectors still stay sluggish. Consequently, lead prices should be left largely stable this week.
SHFE 1510 zinc contract prices opened at RMB 14,310/mt last Friday evening, then dipped to RMB 14,270/mt but rebounded to RMB 14,520/mt later, and closed at RMB 14,450/mt, up RMB 25/mt or 0.17%. SHFE 1510 zinc contract prices dipped to RMB 14,330/mt after opening on Monday, then rose to touch RMB 15,595/mt with surging A-share market in China and short covering, and closed at RMB 14,530/mt, up RMB 110/mt or 0.76%. Trading volumes decreased 70,488 to 190,408 lots, and total positions decreased 2,732 to 170,672. SHFE 1509 zinc contract prices are expected to test support from RMB 14,500/mt.
#0 zinc prices were between RMB 14,810-14,870/mt, RMB 350-460/mt above SHFE 1510 zinc contract prices last Friday. #1 zinc prices were RMB 14,780/mt. Spot premiums of imported #0 zinc were RMB 300-320/mt against SHFE 1510 zinc contract prices. SHFE 1510 zinc contract prices opened at RMB 14,445/mt, dipping to as low as RMB 14,335/mt and closing at RMB 14,500/mt. Smelters sold modestly at term contracts, leaving #0 zinc supply tight and raising spot premiums. Spot premiums shrank noticeably at the end of morning session as SHFE zinc price rose. Non-registered #0 zinc and imported zinc supply was tight. Downstream buyers remained cautious, leaving overall transactions quiet. SHFE zinc prices continued to rebound in the afternoon, with spot premiums down to RMB 360-450/mt against SHFE 1510 zinc contract prices. Shuangyan zinc prices were between RMB 14,880-14,950/mt, and registered #0 zinc prices were RMB 14,870-14,940, with trading quiet.
LME zinc price hit a two-year low of USD 1,846/mt last week. Will zinc price rebound this week?
SMM surveyed over 30 market players to find that 50% see LME zinc price remain stable, moving between USD 1,830-1,900/mt, and SHFE 1510 zinc contract prices are expected to hover between RMB 14,300-14,700/mt. The market will lack significant macroeconomic news. DH Fund Management and Chaos Investment retreated from the commodity market. However, domestic speculators are not overt pessimistic toward the market.
40% are bearish, expecting LME zinc price to fall to USD 1,800/mt, and SHFE 1510 zinc contract price to dip to RMB 14,000/mt. China’s PPI for July fell for the 42nd straight month, meaning growing deflationary pressure. When combined with sluggish import data and big volatility in China’s stock market, market sentiment will barely receive a boost. Spot premiums are firm. But a large influx of imported zinc is expected due to the rising SMM/LME zinc price ratio, which will weigh down zinc price. Besides, galvanizers and steel plants in Beijing, Tianjin and Hebei will be forced to cut output due to environmental protection inspections in mid-August, dampening zinc consumption. Zinc prices also lack technical support.
10% are bullish, seeing LME zinc price rise to USD 1,930/mt, and SHFE 1510 zinc contract price rally to RMB 15,000/mt. Additional stimulus measures are expected against soft demand in Q3. Reforms including the “One Belt One Road” will help ease market concerns. A growing number of zinc smelters plan to cut output now that zinc prices have dropped close to their cost lines, tightening supply and lending support to zinc price. Spot premiums of #0 zinc against SHFE 1510 zinc contract prices expanded to RMB 400/mt, bolstering market sentiment.
In Shanghai spot tin market, falling LME tin and slack demand caused mainstream traded prices to fall to RMB 107,500-108,500/mt on August 10. Goods from Yunnan Tin Group traded at RMB 108,300-108,700/mt.
SMM’s latest survey of market players in domestic tin industry reveals the following results:
60% of them expect tin prices to hold stable this week. SHFE 1509 tin has found solid support at RMB 106,500/mt. SMM’s latest survey has found that more and more tin smelters in China have cut output, due to poor demand and difficulty in finding cheap raw materials. Tin ore prices began falling last week, but fell slower than tin prices, which will offer support to tin prices. Production cuts, though not to have an immediate impact on market supply, will allow smelters to hold back goods at lows.
Another 25% are bearish. LME tin will test support at USD 14,600/mt due to a strong US dollar amid expectations for US interest rate hike. This, plus the ongoing off-season in domestic market, will push spot tin prices down below RMB 108,000/mt to RMB 107,000/mt.
The rest 15% are bullish. SHFE 1509 tin might rise to challenge resistance at RMB 109,200/mt due to upward correction following continuous declines. This will help drive up spot tin prices in domestic market to RMB 109,000-110,000/mt.
SMM #1 nickel prices were between RMB 80,000-81,100/mt. Premiums of Jinchuan nickel against the most actively traded contracts on the Wuxi electronic trading were RMB 200/mt in the morning. Jinchuan nickel was actively traded at term contracts, while downstream buyers remained on the sidelines, with traded prices between RMB 80,200-80,800/mt. Nickel futures prices rebounded in the afternoon, with spot premiums of Jinchuan nickel narrowing to RMB 100/mt. Trading among traders was sluggish, but downstream replenished stocks proactively on market optimism, with traded prices between RMB 80,600-81,100/mt. Jinchuan Group lowered nickel price by RMB 500/mt to RMB 80,700/mt.
SMM surveyed 30 market players to find that 5 of them are bullish, 17 are neutral and 8 are bearish.
The 17% optimistic ones believe LME nickel price will move between USD 11,000-11,200/mt. China’s A-share market stabilized now that measures by Chinese government had shown results, helping ease market concerns and bolstering base metals. US economic indicators fell short of market expectations, especially inflation rate was sluggish. This may put off a possible interest rate by the Fed and weigh on the US dollar. With the exception of Greece, other economies in the eurozone improved. LME nickel prices are expected to rebound to the 20-day moving average, but any upward room for SHFE 1509 nickel contract prices will be limited due to oversupply, moving between RMB 81,500-83,000/mt.
56% think LME nickel prices will fluctuate between USD 10,850-11,000/mt. Some economists believe the Fed will raise interest rate in September. Major economic data from the US released last week remained high, though worse than market expectations, meaning US economic is on an upward track, which will bolster the US dollar. Despite positive economic indicators from eurozone, Greek problem remains a concern of markets. China’s A-share market surged Monday, but China real economic remained lackluster. Besides, domestic stainless steel plants cutting output and growing nickel inventories will constrain nickel price gains. SHFE 1509 nickel contract prices will move between RMB 80,500-81,500/mt.
27% are bearish, seeing LME nickel prices falling to USD 10,650-10,850/mt. China’s CPI in July slid, and M2 met its target. Nickel imports surged, and NPI capacity grew, adding to oversupply. However, demand for nickel will weaken due to anti-dumping measures imposed on China’s stainless steel and output cut by stainless steel plants. Besides, China’s real estate market has just stabilized. SHFE 1509 nickel contract prices will dip to RMB 79,000-80,500/mt.