SMM Evening Comments (Oct 27): Shanghai Nonferrous Metals All Closed in the Negative Zone amid Increasingly Definite Regulations over Coal Prices

SHANGHAI, Oct 27 (SMM) – Shanghai nonferrous metals all closed in the negative zone amid increasingly definite regulations over coal prices; and the State Council also issued the carbon peak action plan.

Shanghai copper lost 2.01%, aluminium slumped 4.62%, lead slid 1.18%, zinc shed 2.69%, tin fell 0.74%, and nickel dropped 2.51%.

Copper: The most-traded SHFE 2112 copper closed down 2.01% or 1450 yuan/mt to 70560 yuan/mt, with open interest down 9845 lots to 150037 lots.

On the macro front, the market has been increasingly cared about the signs for an early interest rate hike ahead of the Fed’s interest rate meeting. The US dollar index pushed up the previous high recorded on October 18 to 94.02 in the last trading day, pressuring copper futures to some extent. While domestically speaking, the “black swan event - ferrous metal version” has been dragging down the broad non-ferrous metals and industrial products, as the government has been regulating the coal prices. The proportion of LME cancelled warrants still stood at a high level with little changes, and the LME inventory has dropped again by 4650 mt to 155150 mt, a historical low.

Tonight, the market shall watch the initial reading of US durable goods orders for September on a monthly basis. A sound reading will benefit the greenback.

Aluminium: The most-traded SHFE 2112 aluminium closed down 4.62% or 975 yuan/mt to 20135 yuan/mt, with open interest up 11673 lots to 220904 lots. The coal futures hit limit down once again, triggering market panics. And the shorts continued to gain momentum.

Lead: The most-traded SHFE 2112 lead closed down 1.18% or 190 yuan/mt at 15900 yuan/mt, with open interest up 4520 lots to 51668 lots.

On the macro front, the State Council issued the carbon peak action plan, and was determined to regulate and stabilise coal prices, which pushed down the broad non-ferrous metals prices.

In the spot market, the downstream sector was less interest in taking in goods, and the secondary lead smelters were inclined to hold the prices firm amid limited supply, quieting the spot market, which also suppressed the lead prices.

The secondary lead smelters became more active in producing in light of the expanding profits of secondary lead, though the impacts of power rationing sustained. Therefore, the market is expected to see more supply. But there are still bullish factors including the power cuts in Anhui and around the globe. Thus the short-term lead prices are likely to stay congested.

Zinc: The most-traded SHFE 2112 zinc closed down 2.69% or 660 yuan/mt at 23895 yuan/mt, with open interest down 2000 lots to 87591 lots.

On the fundamentals, the supply and demand of zinc are both weak, and the rising social inventories of zinc ingots have exacerbated market pessimism, pushing down zinc prices. However, the current zinc prices have fallen below the comprehensive costs of overseas smelters, so the overseas production activities should stay on the radar of market anticipants, as it may underpin zinc prices.

Tin: The SHFE 2112 tin closed down 0.74% or 2070 yuan/mt at 278290 yuan/mt, with open interest up 131 lots to 33726 lots.

On the fundamentals, the downstream companies mostly purchased on rigid demand, and the spot market was modest. While from the perspective chart movement, the shorts seem to be less active amid the bearish commodity market, indicating the inventors were not positive about further declines of tin futures. The demand outlook was comparatively optimistic, which will support the long-term tin prices.

Nickel: The most-traded SHFE 2112 nickel closed down 2.51% or 3800 yuan/mt to 147890 yuan/mt, with open interest down 950 lots to 91390 lots.

On the fundamentals, the stainless steel futures prices performed weakly, and the downstream demand shrank, bringing down spot prices. The steel mills’ interest in purchasing also weakened. On the new energy front, the transaction of nickel sulphate was quiet, and the market was largely wait-and-see amid high nickel prices.

Tonight, the market shall watch the EIA oil inventory in the week of October 22, and Canada central bank’s interest rate resolution as of October 27.