SMM Evening Comments (Oct 14): Shanghai Nonferrous Metals Mostly Closed with Gains amid Inflation Fears

SHANGHAI, Oct 14 (SMM) – Shanghai nonferrous metals mostly closed in the positive territory as the market has been increasingly worried about the inflation.

Shanghai copper rose 3.32%, aluminium slid 0.4%, lead soared 3.79%, zinc surged 7.98%, tin gained 0.76%, and nickel edged up 0.33%.

Copper: The most-traded SHFE 2111 copper closed up 3.32% or 2330 yuan/mt to 72480 yuan/mt, with open interest up 18897 lots to 160785 lots.

On the macro front, US CPI for September rose 5.4%, slightly higher than the estimate of 5.3%, mainly driven by the high commodity prices, rising wages, etc. The China CPI for September rose 0.7% on the year (finalised at 0.8% in the previous session); while the PPI reading rose 10.7% year-on-year (finalised at 9.5% in the previous session), higher than expected. The readings today indicated the inflation pressure still exists, which boosted the intra-day non-ferrous market.

On the fundamentals, the copper inventory in China and overseas market both fell. And according to the General Administration of Customs, the imports of unwrought copper and copper products reversed the previous trend of declining for five consecutive months, showing that the domestic demand has picked up, which also offered some support to copper prices.

Tonight, the market shall watch the US jobless claims last week. Currently speaking, the transaction logic based on the heightening expectations of inflation still remains, and the movement of capitals becomes more active amid global low inventories, adding the risks of market volatility.

Aluminium: The most-traded SHFE 2111 aluminium closed down 0.4% or 95 yuan/mt to 23615 yuan/mt, with open interest down 16373 lots to 192435 lots.

On the fundamentals, the social inventory of aluminium rose 25,000 mt on the week to 887,000 mt as of today. The downstream demand was sluggish, which is the major cause of sufficient spot supply. The capitals have been cautious amid the weak supply and demand, and the rising inventory of aluminium.

Lead: The most-traded SHFE 2111 lead closed up 3.79% or 560 yuan/mt at 15335 yuan/mt, with open interest down 2878 lots to 59465 lots.

The market transaction has been active ahead of the delivery of SHFE lead, but in-plant inventory of smelters has been low. The supply of lead ingots in south and north China differed greatly. Meanwhile, according to SMM research, only a limited amount of primary and secondary lead smelters resumed their production in October, easing the pressures of rising social inventories. The overseas energy crisis, production cut of the smelters in the Eurozone, as well as the worries over inflation, have all offered support for SHFE lead prices. While the market shall watch the changes of the production activities after the profits of secondary lead recover.

Zinc: The most-traded SHFE 2111 zinc closed up 7.98% or 1900 yuan/mt at 25700 yuan/mt, with open interest up 3069 lots to 111555 lots.

The zinc prices hit limit up today as the influences of the greatly reduced output of overseas smelters continued lingered. On the fundamentals, the supply side still faced challenges like the power rationing in Guangxi. The LME inventory has dropped by nearly 100,000 mt in the past six years to 191,000 mt, while the domestic inventory has also hit a historical low at 136,600 mt.

Tin: The SHFE 2111 tin closed up 0.76% or 2090 yuan/mt at 278360 yuan/mt, with open interest down 497 lots to 27674 lots.

On the fundamentals, the current supply of spot is still tight, but the estimate remains unchanged that the future supply will pick up. The market shall also keep an eye on the influence of power rationing on the terminal sector.

Nickel: The most-traded SHFE 2111 nickel closed up 0.33% or 480 yuan/mt to 144920 yuan/mt, with open interest up 357 lots to 93863 lots.

The nickel prices rose in line with the broad market as SHFE zinc touched limit up amid production reduction of the smelters owned by Nyrstar, but fell later in the day as the market sentiment weakened.