SMM Evening Comments (Aug 12): Shanghai Nonferrous Metals Mostly Closed with Gains amid Warming Market Sentiment

SHANGHAI, Aug 12 (SMM) – Shanghai nonferrous metals closed mostly with gains after the market sentiment eased as both US CPI and PPI in July were lower than expected. But investors believe that despite fresh evidence of cooling inflation, the Federal Reserve still needs to aggressively raise interest rates to fully tame rising consumer prices.

Shanghai copper advanced 1.34%, aluminium fell 0.03%, lead added 0.96%, zinc lost 0.08%, tin gained 2.83%, and nickel jumped 4.32%.

Copper: The most-traded SHFE 2209 copper closed up 1.34% or 830 yuan/mt at 62,930 yuan/mt, with open interest up 1,639 lots to 162,236 lots.

On the macro front, U.S. Department of Labor data showed that the PPI fell 0.5% from the previous month and rose 9.8% from a year earlier. Core PPI rose 0.2% MoM and 7.6% YoY. Both figures were lower than expected. In terms of US stock market, the Nasdaq and S&P 500 retreated with a losing session on Thursday as markets realised that despite fresh evidence of cooling inflation, the Federal Reserve still needs to aggressively raise interest rates to fully tame rising consumer prices.

In the spot market, some traders began to quote against SHFE 2209. Standard-quality copper was originally in discounts of 20-10 yuan/mt in morning trade, and market transactions were thin. Some traders held the quotes around the flat level based on the SHFE 2208 and 2209 spread. Good and standard-quality copper was in discounts of 20 yuan/mt, and it did not appeal the buyers.  

Aluminium: The most-traded SHFE 2209 aluminium closed down 0.03% or 5 yuan/mt to 18,725 yuan/mt, with open interest down 4,299 lots to 170,334 lots.

The fundamentals of aluminium changed little today with weak transactions and poor demand, and aluminium ingot inventory rose slightly since entering August. Aluminium prices will be pressured amid sluggish demand.

Lead: The most-traded SHFE 2209 lead closed up 0.96% or 145 yuan/mt at 15,315 yuan/mt, with open interest up 2,965 lots to 60,029 lots.

The macro sentiment warmed today, and LME lead extended the winning session for six straight days. The contract was still resilient today, and it is more than likely that it will still close the night session with gain. In the spot market, the power rationing in Anhui province extends, and the consumption begins to pick up.

Zinc: The most-traded SHFE 2209 zinc closed down 0.08% or 20 yuan/mt at 25,160 yuan/mt, with open interest down 4,163 lots to 133,077 lots.

In the spot market, SMM zinc ingot social inventory across the seven major markets in China totalled 139,200 mt, up 2,600 mt from Monday August 8 and 4,800 mt from last Friday August 5. Transactions in the spot market were sluggish as downstream players received fewer new orders from terminal companies.

Tin: The most-traded SHFE 2209 tin closed up 2.83% or 5,620 yuan/mt at 204,380 yuan/mt, with open interest down 10,726 lots to 45,537 lots.

In the spot market, quotes from the smelters rose in morning trade along with rising futures prices, but were less firm to the prices, and the premiums dropped slightly. The number of quotes for non-deliverable brands from traders was still low, and the spot premiums also dropped after the futures prices rose. More quotes of imported goods were heard. But transactions in the spot market were sluggish.

Nickel: The most-traded SHFE 2209 nickel closed up 4.32% or 7,500 yuan/mt at 181,200 yuan/mt, with open interest down 9,687 lots to 83,116 lots.

On the supply side, domestic pure nickel output stood at 16,000 mt in July, up 2.89% MoM. For NPI, the oversupply situation in China was still in place with the constant import of Indonesia NPI. On the demand side, domestic stainless steel mills have shown signs of ramping up the production. For alloy, the buyers mostly stood on the sidelines amid great uncertainties in the pure nickel market. In the mid and long run, nickel prices will remain on the downward track amid slightly sufficient supply. But the decline may be slow amid pessimism on the macro front.

[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.]