SHANGHAI, May 19 (SMM) –
Copper
SHANGHAI, May 19 (SMM) – The most active SHFE copper contract remained stable Monday morning but rose to RMB 46,190/mt in the afternoon, to end the daytime trading at RMB 46,110/mt, up RMB 180/mt. SHFE 1507 copper contract positions grew 278, and trading volumes increased 7,946 lots.
Spot copper was still offered at premiums of 30-130/mt to SHFE 1506 copper contract in Shanghai Monday morning. Standard-quality copper traded at RMB 46,040-46,140/mt, and high-quality copper sold for RMB 46,080-46,200/mt.
Cargo holders offered high premiums after expiration of SHFE 1505 copper contract, but sales were poor. Thus, spot premiums narrowed later. Activities of dealers increased, while downstream producers only watched from the sidelines and bought on needs.
74% of industry insiders survey by SMM see LME copper to stay at USD 6,350-6,450/mt and SHFE copper at RMB 45,600-46,300/mt this week. The US dollar index is expected to fall further due to the weak economic data. However, the increase in gold and crude oil has been blocked lately. Besides, markets are relatively positive about the manufacturing PMI to be released this week considering the high demand months of April and May, cooling expectation for more stimulus measures. Last but not the least, investors are losing interest in nonferrous metals, reflected by continuous falls in trading volumes of SHFE copper, which will leave copper prices directionless.
19% of market players expect LME copper to fall to USD 6,300/mt and SHFE copper to drop to RMB 45,000-45,200/mt, citing negative technical indicators and growing risks in China’s stock markets, as well as tightening liquidity resulting from this week’s new share listings.
Still, 7% of industry participants expect copper prices to increase, noting that maintenance at Chinese smelters have cut output by 12% in the past two months. This, combined with the arrival of high demand season and the firm spot premiums in China’s copper market, In addition, sharp declines in SHFE copper stocks may also bolster copper prices.
Aluminum
On Monday, SHFE 1507 aluminum contract opened at RMB 13,280/mt. The contract ended the day down RMB 50/mt or 0.37% at RMB 13,285/mt. Trading volumes were down 5,408 lots to 20,192 lots, and positions were down 2,826 to 129,200. The contract will test support at the 20-day and 30-day moving average in the short term.
Spot aluminum largely traded between RMB 13,070-13,090/mt in Shanghai on Monday, discounts of RMB 150-170/mt over SHFE 1506 aluminum contract, versus RMB 13,050-13,070/mt in Wuxi, and RMB 13,080-13,100/mt in Hangzhou. Spot discounts widened by RMB 50/mt after delivery of SHFE 1505 aluminum contract. Processors went bargain hunting in small amounts. In the afternoon, trading was quiet.
SMM surveyed 34 large aluminum smelters and traders in China.
12% of them are bullish over aluminum prices this week: SHFE 1507 aluminum contract will rebound to RMB 13,400/mt; spot aluminum in domestic market will trade around RMB 13,150/mt, discounts of RMB 150-190/mt over SHFE front-month contract. They cited three positive factors: 1) the traditional high-demand season has not ended; 2) deliverable brand aluminum ingot is not highly available in the market, which will keep shorts cautious about entering; 3) market liquidity is relatively high.
Another 24% expect prices to stabilize: SHFE 1507 aluminum contract will range RMB 13,250-13,350/mt; spot aluminum in domestic market will trade at RMB 13,050-13,100/mt. Longs will take profit at highs once SHFE aluminum rise to RMB 13,400/mt. Shorts will be cautious about opening positions against low availability of deliverable brand aluminum ingot in the market.
The rest 64% are bearish: SHFE 1507 aluminum contract will fall below RMB 13,250/mt; spot aluminum in domestic market will trade lower to RMB 13,000-13,050/mt. They give five negative factors: 1) technically, SHFE aluminum will trend down; 2) LME aluminum is vulnerable to losses due to flooding of Chinese aluminum semis in overseas market; 3) aluminum stocks in China’s major regional markets have surpassed 1.2 million mt, higher than the same period last year; 4) aluminum prices in Guangdong are lower than in east China, which will prompt smelters to ship aggressively to east China, weighing on local prices; 5) demand remains soft.
Lead
Last Friday, SHFE 1507 lead opened at RMB 13,345/mt and closed at RMB 13,340/mt. The contract touched Monday’s high of RMB 13,460/mt as China’s April home sales of 70 big and medium sized cities rose 0.3% on the month, ending a straight 11-month drop. The metal finished the day up RMB 25/mt or 0.19%. Trading volumes dropped 1,172 to 5,910 lots while positions were up 386 to 15,244.
Deals for Tongguan, Nanfang and Hengbang brands closed at RMB 13,850-13,880/mt, with RMB 450-500/mt premiums over SHFE 1507 lead. Honglu brand remained a RMB 100/mt premium unchanged to SHFE 1506 lead. Lead smelters and traders in Shanghai held limited goods. Thus, some traders quoted high while downstream producers showed little buying interest, leaving trades quiet. Smelters and cargo holders still sold under term contract. Average price of spot goods in Henan was RMB 200/mt higher than SMM lead price, versus RMB 50-100/mt higher in Jiangxi. Quotes were RMB 13,400-13,460/mt in Guangdong. Few trades were made in North China.
SMM’s latest survey indicates that 30% of industry insiders are bearish that LME lead may fall to USD 1,950-2,000/mt and spot lead prices to RMB 13,500/mt this week for the following reasons. First, both e-bike and automobile battery sectors entered low demand season, which will dampen lead consumption. Second, production resumption of Nanfang Nonferrous and Chengyuan Nonferrous will allow lead supply in south China to increase. Meanwhile, the RMB 300/mt price gap between Guangdong and Shanghai markets will cause some goods to shift from Guangdong to Shanghai, weighing down spot premiums in the Shanghai market. Third, technical indicators began showing negative signs. Finally, weak economic data in the US, China and euro zone fueled concerns over the global slowdown, which will also pressure commodities prices.
23% of industry participants expect LME lead to move up to USD 2,030/mt and spot lead prices in China to break above RMB 14,000/mt, citing tight supply. Supply of primary lead remains limited, and secondary lead smelters are also discouraged from producing due to thinner profits.
The remaining 47% of market players see lead prices to remain stable this week, with spot lead trading at RMB 13,600-13,900/mt. These players believe that limited supply and anemic demand will leave prices in the current moving range. On the macro front, although economic signposts for the US turned out poor, the resultant decline in the US dollar index will lend some support to lead prices.
Zinc
SHFE 1507 zinc contract prices opened at RMB 16,860/mt last Friday evening, then dropped to RMB 16,800/mt, and closed at RMB 16,785/mt, down RMB 115/mt or 0.68%. SHFE 1507 zinc contract prices opened at RMB 16,785/mt on Monday, then rebounded with LME zinc prices, and closed at RMB 16,875/mt, down RMB 25/mt or 0.15%. Trading volumes increased 1,998 to 123,096 lots, and total positions fell 10,586 to 106,782. SHFE 1507 zinc contract prices are expected to fall further this evening.
#0 zinc prices were between RMB 16,700-16,750/mt, RMB 130-100/mt below SHFE 1507 zinc contract prices. #1 zinc was traded between RMB 16,670-16,680/mt. SHFE 1507 zinc contract prices fluctuated between RMB 16,820-16,840/mt, with spot discounts widening from RMB 120-100/mt to RMB 130-110/mt. Smelters sold normally, but traders were unwilling to purchase due to the lack of profit. Downstream buying interest was weak, leaving overall transactions quiet. Huize #0 zinc prices were RMB 16,740-16,750/mt, RMB 100-90/mt below SHFE 1507 zinc contract prices. Shuangyan #0 zinc prices were RMB 16,730-16,740/mt, RMB 110-100/mt below SHFE 1507 zinc contract prices. Yuguang #0 zinc prices were RMB 16,720-16,730/mt, RMB 120-110/mt below SHFE 1507 zinc contract prices. Qilin and Qinxin #0 zinc prices were RMB 16,700-16,720/mt, with spot discounts of RMB 130-120/mt against SHFE 1507 zinc contract prices. Baohui and Bailing #0 zinc prices were RMB 16,660-16,670/mt, with spot discounts of RMB 170-160/mt against SHFE 1507 zinc contract prices. SMC and AZ #0 zinc prices were RMB 16,670-16,680/mt, with spot discounts of RMB 160-150/mt against SHFE 1507 zinc contract prices. SHFE 1507 zinc contract prices edged up to RMB 16,900/mt in the afternoon, with spot discounts between RMB 140-110/mt, and trading muted.
LME zinc prices fell below USD 2,300/mt last week. Will LME zinc stop falling this week? SMM surveyed 30 market players to find that 40% are bearish toward zinc prices, believing LME zinc prices will fall to USD 2,250/mt this week, and SHFE 1507 zinc contract prices will test support from RMB 16,500-16,600/mt. SHFE zinc prices had been boosted by LME zinc prices. LME zinc prices fell recently, but total positions surged 340,000, meaning growing shorts. Besides, combined inventories in Shanghai, Guangdong and Tianjin reached nearly 300,000 mt, up over 140,000 mt from early this year. China’s economic pressure, combined with slow demand, have kept spot zinc prices below SHFE 1507 zinc contract prices over two months.
37% are neutral, seeing LME zinc prices moving between USD 2,270-2,320/mt, and SHFE 1507 zinc contract prices fluctuating between RMB 16,700-17,050/mt. Despite an exodus of longs, the number of shorts entering the market is expected to be small. Meanwhile, the US dollar index weakened, and crude oil prices remained above USD 60/bbl, lending support to zinc prices. But backwardation on LME zinc decreased from USD 33/mt to USD 12/mt, weighing on zinc prices.
23% are bullish, thinking LME zinc prices will rebound to USD 2,330/mt, and SHFE 1507 zinc contract prices will rise to RMB 17,150/mt. LME zinc prices have dropped 6% to as low as USD 2,300/mt. When combined with support from crude oil prices, zinc prices should find some support.
Tin
Tin prices in Shanghai spot market fell to RMB 117,000-119,000/mt on Monday due to poor demand. Goods from Yunnan Tin Group was offered at RMB 120,000/mt.
SMM surveyed market players in domestic tin industry.
20% of them are bullish over tin prices this week: The US dollar index hovered at lows on disappointing US economic data released this past weekend. This will help LME tin rise to challenge resistance at USD 16,300/mt. Should LME tin rise, SHFE 1507 tin contract will break through RMB 120,000/mt and the low-end tin prices in domestic spot market will rise above RMB 118,500/mt.
Another 45% expect tin prices to hold stable this week: LME tin will move between USD 15,800-16,400/mt. SHFE 1507 tin contract will consolidate between RMB 118,500-120,000/mt. Supply in domestic spot market will remain low since Yunnan Tin Group and China Tin Group will not return to production until next week at the earliest. As such, spot tin prices will stabilize between RMB 118,000-120,000/mt.
The rest 35% are bearish: LME tin will test support at USD 15,800/mt, while SHFE 1507 tin contract will fall to RMB 117,000-118,000/mt. Small and medium tin smelters in China will become eager to sell, but demand will remain poor. This will drag spot tin prices down to RMB 116,000/mt.
Nickel
SMM #1 nickel prices were between RMB 101,400-106,100/mt. Nickel futures prices fell slightly in the morning, but premiums of Jinchuan nickel rose to RMB 3,600/mt against prices for the most actively traded contracts on the Wuxi electronic trading. Downstream buyers were inclined to purchase Russian nickel at RMB 101,500-105,600/mt. Nickel prices stabilized in the afternoon, some traders looked for sumitomo nickel on increasing downstream inquiries, but trading did not improve, with traded prices between RMB 101,700-105,700/mt. Jinchuan Group lowered prices by RMB 1,500/mt to RMB 108,000/mt.
SMM surveyed 30 market players to find that 7 are bullish toward nickel prices this week, 12 are neutral, and 11 are bearish.
The 23% optimistic ones see LME nickel prices rising to USD 14,000-14,200/mt. Sluggish economic indicators from the US weighed down the US dollar index. The Fed will not raise interest rate soon, either, positively affecting base metals prices. Home prices in China’s 70 medium and large cities increased in April. Besides, China’s port inventories also fell as demand grew, boosting nickel ore prices, and giving support to nickel prices. SHFE 1507 nickel contract prices will rise to RMB 110,000-112,000/mt.
40% think LME nickel prices will hover between USD 13,600-13,900/mt. A falling US dollar index and the delay of interest rate hike by the Fed will bolster base metals prices. But Jinchuan Group increased supply. When combined with a large inflow of imported nickel, and capacity release at large domestic NPI producers, SHFE 1507 nickel contract prices will move between RMB 107,000-109,500/mt.
37% see LME nickel prices falling to USD 13,300-13,600/mt. A series of economic indicators from the US including housing starts and existing home sales slated for release this week are optimistic, which will drive up the US dollar index and weigh down base metals prices. Demand has yet to improve significantly. When coupled with capacity release at domestic large NPI producers and supply from Jinchuan Group, SHFE 1507 nickel contract prices should fall to RMB 104,000-107,000/mt.
