Macquarie Bank - China Commodities Weekly

SHFE copper prices picked up last week following the strong price recovery on the LME. The SHFE copper front month contract rose to Rmb62,000/t (US$8,052/t) by the market close on Friday, up by Rmb1,030/t (US$132/t), or 1.7%, from the previous week's close.

SHFE aluminium prices came under downward pressure last week, despite the strong price recovery in copper. The front month aluminium contract went down by 0.8% WoW to close at Rmb19,450/t (US$2,526/t) on Friday. Although SHFE aluminium inventories decreased, we hear growing reports of a significant inventory buildup elsewhere.

Following continuous strength in international spot alumina prices, Chalco raised domestic alumina selling prices by 8% to Rmb3900/t ($506/t) last week. Non-Chalco refineries had already been quoting prices of Rmb4000/t($519/t) to Rmb4200/t($545/t) since the beginning of the month.

The final data on Chinese production and trade for January and February show massive growth in Chinese aluminium (+40.7%) and alumina production (+59.9%); very strong growth in refined zinc production (+29.7%), but a fall in zinc mine output; huge nickel production growth (+62.3%), when nickel pig iron production is included; and a 0.9% fall in refined copper production.

On 23 March, the China Coking Industry Association (CCIA) held an information conference in which representatives from the NDRC and China Customs indicated that the government is planning to further increase the coke export tax in the near future to "protect China's precious coking coal resources."

Last week, steel hot rolled coil prices declined by 0.7% WoW and 0.6% MoM to US$472/t, while cold rolled coil prices dropped by 1.2% WoW to US$554/t, ex-Vat. Galvanised steel prices were down to US$603/t, ex-Vat, a fall of 1% WoW and 1.4% MoM. Rebar prices slid to US$355/t, ex-Vat, posting declines of 0.3% WoW and 0.1% MoM.

The price for Hebei iron ore fines edged up by 0.1% WoW and 1.6% MoM to US$88/t, ex-Vat, and the Indian iron ore CIF prices hit another record high of $93/t, including US$25/t freight.