SMM Evening Comments (Aug 2): Shanghai Nonferrous Metals Market Closed the Day with Mixed Performances in Response to Varied PMI Results

SHANGHAI, Aug 2 (SMM) – Shanghai nonferrous metals market closed the day with mixed performances in response to varied PMI results.

Shanghai copper edged down 0.28%, aluminium up slightly, lead increased 1.04%, zinc went up 0.69%, nickel down 0.43%, and tin climbed 0.41%.

Copper: The most-traded SHFE 09 copper closed down 0.28% or 200 yuan/mt to 71480 yuan/mt, with open interest down 1488 lots to 134600 lots.

From the macro front, president of Federal Reserve Bank of Minneapolis warned that the Delta mutant might hinder the recovery of US labour market. While the president of Federal Reserve Bank of St. Louis advised that the Fed shall shrink asset purchasing from autumn to March, 2022 as inflation was higher than expected. In China, July manufacturing PMI decreased from 50.9 in June to 50.4, lower than economists’ expectation. NBS explained that the broad maintenance and extreme weathers like high temperature and flood has hampered industry products market amid weakened expansion. Focus of tonight will be July Markit US Manufacturing PMI data. Foreign exchange investors shall be able to estimate the US economy outlook based on such data. If the result exceeds expectation, thus benefiting US Dollar and pushing down copper prices.

Aluminium: The most-traded SHFE 2109 aluminium closed up 50 yuan/mt to 19955 yuan/mt, with open interest down 8822 lots to 280000 lots. From the fundamentls, aluminium supply was disrupted by various factors. The production restriction in south-east China and the Inner Mongolia became stricter, and demand was not weaker than expected. While transportation in Henan will still be disrupted in the short term, sustaining de-stocking of social inventories, offering support to aluminium prices. Attention shall be paid to PMI in the US and Eurozone.

Zinc: SHFE zinc closed up 0.69% or 155 yuan/mt to 22570 yuan/mt, with open interest up 5619 lots to 110860 lots. From the macro front, China July manufacturing PMI stood at 50.3, indicating an expanding economy. The central bank will maintain the stability of macro policies, which may signal a shored-up consumption market in 2H. On the other hand, July manufacturing PMI in the Eurozone stood at 62.8, higher than expected, indicating strong overseas consumption. From the fundamentals, SMM said that July social inventories maintained de-stocking as released government reserves entered downstream market, which evidenced a high off-season. Follow-up re-stocking will be the focus. While zinc prices see limited upward spaces in the short term.

Lead: The most-traded SHFE 2109 lead closed up 1.04% or 165 yuan/mt to 16090 yuan/mt, with open interest down 5005 lots to 74024 lots. In sport market, primary lead smelters were more willing to deliver, while downstream sector was more cautious. The short opinion stayed somehow, leading to thinned transactions. Secondary lead prices rebounded, and discounts against SMM 1# lead widened greatly. According to SMM, lead social inventory added 5000 mt to 177700 mt from July 30, recording to historical high. Re-stocking pressure remained. In face of the repeated pandemic and disrupted transportation, raw materials purchasing and good delivery were not easy. From consumptions, battery companies were still recovering, indicating high-season of consumption, offering possible support to lead prices. Further uptrend in zinc prices may be limited.  

Tin: The most-traded SHFE 2109 tin closed up 0.41% at 234100 yuan/mt, with open interest down 91 lots. The market reaction to escalated pandemic control in Menglian, Yunnan was flat. The market may need time to assess the overall influence of the policy. Focus in the short term shall be the long capital’s returning to build and hold positions.

Nickel: The most-traded SHFE 2109 nickel closed down 0.43% or 630 yuan/mtat 146270 yuan/mt, with open interest down 11189 lots to 142000 lots. Though production restriction may linger among stainless steel companies, short-term gap in nickel market is unlikely to be resolved. In the short term, nickel prices will still fluctuate at high.