SMM Evening Comments (Jul 25): Shanghai Nonferrous Metals Closed Mixed ahead of Upcoming Rate Hike Resolutions

SHANGHAI, Jul 25 (SMM) – Shanghai nonferrous metals closed mixed ahead of the US Federal Reserve monetary meeting, with investors eying the rate hike resolution.

Shanghai copper rose 1.36%, aluminium fell 0.64%, lead gained 0.73%, zinc added 0.99%, tin lost 0.17%, and nickel jumped 1.95%.

Copper: The most-traded SHFE 2208 copper closed up 1.36% or 770 yuan/mt at 57,220 yuan/mt, with open interest down 10,155 lots to 97,352 lots.

The US Dollar Index continued to fall after surging to a near 20-year high of 109.3 on July 14, with the index falling 1.33% last week as market expectations cooled for the Federal Reserve to continue to increase interest rate hikes aggressively.

In the spot market, sources in the spot market were relatively tight, and the premiums were firm on the last trading day of long-term orders. In morning trade, standard-quality copper was initially in premiums of 500 yuan/mt, with a few traded at premiums 480 yuan/mt. On the whole, the traders would not lower the premiums below 500 yuan/mt, and the downstream had to accept such price level approaching the end of long-term orders. The spread between good and standard-quality copper was quite narrow, and premiums of CCC-P and Guixi copper were also around 500 yuan/mt, while the market players showed little interest.

Aluminium: The most-traded SHFE 2208 aluminium closed down 0.64% or 115 yuan/mt to 17,810 yuan/mt, with open interest down 11,303 lots to 93,348 lots.

In the spot market, SMM aluminium ingot social inventory rose 3,000 mt from last Thursday to 671,000 mt, and the weekly shipments leaving the warehouses fell 20,000 mt from the previous week. Spot prices of A00 aluminium were mostly flat over Friday July 22, and the transactions were modest. The downstream purchased mainly on dips during the seasonal low. Therefore, spot prices are likely to remain in discounts in the near term.

Lead: The most-traded SHFE 2209 lead closed up 0.73% or 110 yuan/mt at 15,215 yuan/mt, with open interest up 13,511 lots to 56,903 lots.

Discounts of primary and secondary lead offered by smelters expanded amid abundant sources in the spot market and as SHFE lead hovered at a high level. The downstream, however, turned cautious. Traders mainly quoted with narrow premiums, but the transactions were still poor.

Zinc: The most-traded SHFE 2209 zinc closed up 0.99% or 220 yuan/mt at 22,500 yuan/mt, with open interest up 13,659 lots to 97,329 lots.

SHFE zinc failed to broke the resistance for lack of upside momentum. Considering easing ore supply tightness that resulted in weaker cost supply, market sentiment was still lacklustre, especially when the consumption side has not yet reached the pivot. As of July 25, SMM zinc ingot social inventory across the seven markets in China dropped 10,200 mt from last Monday, but it was merely the result of less arrivals instead of robust consumption. Therefore, support on the fundamentals weakened.

Tin: The most-traded SHFE 2208 tin closed down 0.17% or 330 yuan/mt at 190,100 yuan/mt, with open interest down 8,029 lots to 26,115 lots.

In the spot market, smelters preserved the interest in making quotes, but were less firm to their prices, among which the prices of imported goods were in discounts of 1,500 yuan/mt. In morning trade, prices of non-deliverable brands were in premiums of -500 – 300 yuan/mt, and deliverable brands 300-1,500 yuan/mt. The downstream turned away from high prices. SHFE warrants rose 42 mt to 3,382 mt, and LME tin inventory added 50 mt to 3,490 mt.

Nickel: The most-traded SHFE 2208 nickel closed up 1.95% or 3,260 yuan/mt at 170,680 yuan/mt, with open interest down 8,377 lots to 66,573 lots.

On the supply side, domestic pure nickel premiums dropped following rising SHFE nickel, and market demand picked up. Profits of spot pure nickel imports were lucrative amid improving SHFE/LME price ratio, despite high premiums in the bonded zone. For alloy, the purchasing willingness was boosted by slumping futures prices last week. To sum up, pure nickel supply tightened slightly against expanding demand, but the macro sentiment remains the key factor steering SHEF 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.]