SMM Evening Comments (Sep 5): Shanghai Nonferrous Metals Closed with Gains amid Easing Rate Hike Worries

SHANGHAI, Sep 5 (SMM) – Shanghai nonferrous metals closed all with gains following a series of US labour market readings released last Friday, which eased market worries that the Fed would stick to aggressive rate hikes to tame high inflation.

The US non-farm payroll data in August released last Friday fell month-on-month, the unemployment rose, the wage growth slowed, and the monthly rate of factory orders in July also recorded negative growth.

Shanghai copper rose 1.24%, aluminium gained 2.06%, lead added 0.44%, zinc rose 1.7%, tin jumped 2.33%, and nickel advanced 5.52%.

Copper: The most-traded SHFE 2210 copper closed up 1.24% or 740 yuan/mt at 60,580 yuan/mt, with open interest down 354 lots to 167,403 lots.

In morning trade, standard-quality copper was in premiums of 380-400 yuan/mt in early trade, and the spread between good and standard-quality copper was around 10-20 yuan/mt. There existed standard-quality copper with premiums below 380 yuan/mt approaching the first trading session, which was quickly sold out. The cargo holders then turned more firm, and the transactions of standard-quality copper were mostly in the range of 380-390 yuan/mt, up 25 yuan/mt from last Friday.

Rising premiums are attributable to the following causes. First of all, the imports were unable to enter the warehouses due to typhoon Hinnamnor over the weekend, and the social inventory in Shanghai dropped. Second, SHFE 2209 and 2210 contract spread narrowed to less than 450 yuan/mt, supporting the premiums. Third, SHFE copper futures prices stood above the 40-day moving average, and the downstream inquiries and purchases were relative active. To sum up, limited sources available in the market have given traders confidence to raise the premiums.

Aluminium: The most-traded SHFE 2210 aluminium closed up 2.06% or 370 yuan/mt to 18,355 yuan/mt, with open interest down 4,719 lots to 166,953 lots.

The SMM aluminium ingot social inventories across China’s eight major markets totalled 681,000 mt as of September 5, down 2,000 mt from last Thursday and 62,000 mt lower than in the same period last year. Despite power rationing-induced smelter shutdowns in Sichuan in August, the total social inventory did not fall sharply. Downstream purchases picked up after aluminium prices fell to 18,000 yuan/mt last week. Downstream orders have shown signs of improvement.

Lead: The most-traded SHFE 2210 lead closed up 0.44% or 65 yuan/mt at 14,920 yuan/mt, with open interest up 67 lots to 62,173 lots.

In the spot market, power rationing ends gradually across the country, and the operating rates of smelters rose on a weekly basis, raising lead ingot supply. Coupled with slowly recovering consumption, lead prices were pressured. However, the circulation of cargos was hindered due to sudden pandemic outbreak in some regions, and the circulation of lead ingot showed signs of contraction. The influence of pandemic on lead prices is worth attention.

Zinc: The most-traded SHFE 2210 zinc closed up 1.7% or 405 yuan/mt at 24,165 yuan/mt, with open interest down 6,821 lots to 118,964 lots.

SHFE rose along with LME zinc. In China, the refined zinc output is likely to rise MoM in September, and domestic zinc concentrate TC has been raised to 3,950 yuan/mt. Hence SHFE zinc gained less support from the supply side. The consumption side extended the weakness. But SMM #0 zinc ingot retained high premiums amid scarce supply.

Tin: The most-traded SHFE 2210 tin closed up 2.33% or 4,040 yuan/mt at 177,330 yuan/mt, with open interest down 3,949 lots to 40,247 lots.

In the spot market, the smelters were slightly less willing to quote in morning trade, while some were quite firm to their prices, hence the spread of quotes among smelters expanded. The spot premiums quoted by the traders dropped slightly in the morning, and the sources were scarce. The shipments were stable, and weakened after the prices rose. The downstream players still purchased on rigid demand.

Nickel: The most-traded SHFE 2210 nickel closed up 5.52% or 8,870 yuan/mt at 169,570 yuan/mt, with open interest down 2,405 lots to 47,968 lots.

On the macro front, due to Powell’s hawkish remark on August 26, the expectation of the Fed raising interest rates in September strengthened, which was an unfavourable factor for the non-ferrous metals prices. In terms of fundamentals, as the overseas pure nickel still suffered small losses, the customs clearance volume was less than expected last week. Affected by the decline in futures prices, the premiums of pure nickel stabilised. In terms of NPI, the inventory of NPI plants continued to increase. In addition, the inflow of Indonesia NPI increased, hence the NPI supply was still in surplus. Therefore, NPI prices are unlikely to increase. On the demand side, according to SMM research, steel mills may continue to control the output. The prices of CRC and HRC increase slightly due to the tight supply. The overall transactions were slightly less than a week ago. Amid the expectation of production resumption of steel mills and the release of demand of nickel salt plants, the transactions of nickel briquette picked up slightly recently. In terms of alloys, as the superalloy sector still had rigid demand, the demand for Jinchuan nickel plates remained stable. To sum up, due to the decline in futures prices, the demand for nickel picked up. Meanwhile, the decline in social inventory provided support for nickel prices.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]