SMM Base Metals Weekly Price Review and Forecast (May 4-8, 2015)

SHANGHAI, May 5 (SMM) –

Copper:
SHFE copper drifted higher but failed to advance further after a brief rally to RMB 44,230/mt with strong resistance at RMB 44,000/mt and support at RMB 43,500/mt. Thus, SHFE/LME copper price ratio slipped from 7.2 to 7.17-7.18. Trading volumes declined before the May Day holiday, but technical indicators pointed upwards.

Imported copper flowed into China’s spot market when the SHFE/LME copper price ratio was relatively high last week, with more brands available for trading. Selling interest improved among traders by the end of the month, and the resultant growth in copper supply narrowed spot premiums.

SMM prediction is that SHFE copper may trade at RMB 43,200-44,200/mt this week.

Aluminum:
SHFE 1507 aluminum contract followed LME aluminum above all moving averages early last week, but the price rise slowed significantly later. Bulls began to exit after prices failed to break though RMB 13,400/mt. In China’s spot market, sellers were eager to sell, causing spot discounts to widen to RMB 200/mt. Traders lost buying interest, and downstream producers watched from the sidelines.

SHFE 1507 aluminum contract should rise to RMB 13,300-13,450/mt, driven by positive technical side and entry of bulls. In China’s spot market, oversupply and weak downstream demand will keep spot prices in check. Spot discounts of RMB 170-220/mt are expected over SHFE front-month contract.

Zinc:
SHFE 1507 zinc contract followed LME zinc up to RMB 17,150/mt and then pulled back slightly. Buying activities increased marginally.

The discount on #0 zinc ingot in the Shanghai spot market expanded to RMB 120-100/mt against SHFE 1506 zinc last week. Zinc smelters increased supply on rallying prices, but traders refrained from selling as their goods were tied up in futures market. Downstream buyers rarely entered the market after zinc prices neared RMB 17,000/mt, so purchases did not improve before the May Day holiday.

Spot discounts of #0 zinc ingot in Tianjin widened from RMB 10/mt to RMB 20-30/mt against SMM #0 zinc ingot price. Premiums on #0 zinc ingot in Guangdong narrowed from RMB 20-30/mt to RMB 0/mt against SMM #0 zinc ingot.

SHFE 1507 zinc contract prices are unlikely to rise sharply without any major positive reports, only hovering near RMB 17,000/mt.

Lead:
SHFE lead followed LME lead, hovering between RMB 13,600-13,800/mt last week. The SMM/LME lead price ratio dipped from over 6.6 to between 6.5-6.6.

Spot lead in Shanghai, Henan and Jiangxi traded at a RMB 50-100/mt premium against SMM #1 lead on tightening spot lead supply. Lead smelters sold only small quantities at high prices at month’s end. Traders were eager to replenish stocks, pushing spot lead prices up. Downstream producers purchased to need, replenishing some inventory before the May Day holiday. Price gap between secondary and refined lead was RMB 300-400/mt, encouraging more downstream producers towards secondary lead.

SHFE lead prices will track LME lead trends, but resistance will be strong at RMB 13,900-14,000/mt.

Tin:
SHFE 1507 tin contract soared to RMB 117,960/mt last Monday as bulls jumped in, but began to fall back the next day. The most active contract closed last Wednesday at RMB 115,370/mt, up RMB 2,430/mt from a week ago.

In China’s spot market, prices followed SHFE tin up. Mainstream traded prices were RMB 115,000-117,000/mt last Wednesday. Rising LME and SHFE tin cheered market up, luring downstream producers to step up purchases. However, demand cooled after SHFE tin fell back. Spot prices stabilized last Wednesday.

Nickel:
SHFE nickel prices outperformed LME nickel, and posted sharp rises to touch RMB 104,530/mt, the highest since the launch of SHFE nickel trading. Trading volumes surged 545,000 lots to 1.18 million lots as of last Thursday morning, and positions increased 6,556 to 120,000.

SMM #1 nickel prices averaged RMB 99,088/mt last week, up RMB 5,138/mt. The number of imported nickel entered China’s spot market declined with the Shanghai/LME nickel price ratio down, and availability of Jinchuan nickel remained limited. Spot trades improved some. Jinchuan Group’s price offers increased RMB 6,300/mt to RMB 101,300/mt following two price adjustments.

SMM expects China’s spot nickel prices to rise slightly this week to RMB 102,000-105,000/mt on limited inflow of imported goods and tight supply of Jinchuan nickel.