SMM Evening Comments (Sep 30): Shanghai Nonferrous Metals Closed with Losses amid Surging US Dollar

SHANGHAI, Sep 30 (SMM) – Shanghai nonferrous metals closed all in the negative territory as the US dollar index hit a high in the past year.

Shanghai copper lost 1.01%, aluminium dropped 1.46%, lead edged down 0.45%, zinc slid 1.43%, tin fell 1.86%, and nickel down 0.77%.

Copper: The most-traded SHFE 2111 copper closed down 1.01% or 690 yuan/mt to 68360 yuan/mt, with open interest up 2231 lots to 119600 lots.

On the macro front, the U.S. Congressional Budget Office said that the cash and special measures to avoid federal default may be exhausted by the end of October. The current market expectations of the Fed tapering bond purchases continue to heat up. As such, the dollar index continued to rise sharply to a new high in the past year. The domestic manufacturing PMI for September stood at 49.6, which fell again from the previous sessions and was below the market expectation.

On the fundamentals, the power rationing has a greater impact on downstream demand, and the post-holiday inventory is likely to increase slightly.

Tonight, the market shall watch the latest US jobless claims (estimated at 330,000 and finalised at 351,000 in the previous session).

Aluminium: The most-traded SHFE 2111 aluminium closed down 1.46% or 335 yuan/mt to 22565 yuan/mt, with open interest down 35230 lots to 242075 lots.

On the fundamentals, the power shortage and energy consumption control has brought down the supply of aluminium. And the production costs of aluminium kept climbing amid rising prices of alumina and thermal coal. However, the social inventories of aluminium and aluminium billet have been on the rise due to massive suspension of production across the downstream sector.

Lead: The most-traded SHFE 2111 lead closed down 0.45% or 65 yuan/mt at 14350 yuan/mt, with open interest down 2326 lots to 72788 lots.

The processing fees of lead stood stable, and primary lead smelters mostly carried out maintenance, which will last until mid-October. The supply of secondary lead fell slightly. The advantages of primary lead were obvious, likely to underpin the prices of lead.

Zinc: The most-traded SHFE 2111 zinc closed down 1.43% or 325 yuan/mt at 22370 yuan/mt, with open interest down 11614 lots to 83508 lots. On the fundamentals, domestic zinc inventory continued to fall, which stood at 119,800 mt as of September 30, down 11,500 mt from September 27 and 9,400 mt from September 24. The inventory in Shanghai declined sharply amid increasing pre-holiday restocking by downstream plants. Guangdong saw a decrease in stocks as maintenance at smelters affected the shipments and downstream producers still have pre-holiday restocking demand. The inventory in Tianjin trended lower due to limited arrivals of cargoes and pre-holiday stockpiling. Inventories in Shanghai, Guangdong and Tianjin fell 9,600 mt, and inventories across seven Chinese markets decreased 9,400 mt.

Tin: The SHFE 2110 tin closed down 1.86% at 269460 yuan/mt, with open interest down 2427 lots. The SHFE 2111 tin was relatively stable today, with capitals leaving the market.

On the fundamentals, the power rationing keeps to disrupt the downstream sector, while the upstream smelter were relatively stable in production. Thus the post-holiday inventory remains as the market focus to see whether in will rise in the short term. The spot market was quiet after the pre-holiday restocking demand has been fulfilled.

Nickel: The most-traded SHFE 2111 nickel closed down 0.77% or 1070 yuan/mt to 138070 yuan/mt, with open interest down 6033 lots to 92554 lots.

On the fundamentals, the transactions of stainless steel and new energy were sluggish. But there have been news of resumed production of stainless steel mills as well as battery and new energy factories, sending out bullish signals over nickel prices.