SMM Evening Comments (Aug 31): Shanghai Nonferrous Metals Closed Mixed following China August PMI Readings

SHANGHAI, Aug 31 (SMM) – Shanghai nonferrous metals closed with mixed following China PMI readings in August, with manufacturing PMI at 49.4 and non-manufacturing PMI at 52.6. Though the manufacturing PMI was still in the contraction range, it picked up slight compared with July when the reading was 49.

Shanghai copper fell 0.5%, aluminium lost 0.67%, lead inched up 0.07%, zinc gained 0.16%, tin declined 1.9%, and nickel added 3.53%.

Copper: The most-traded SHFE 2210 copper closed down 0.5% or 310 yuan/mt at 62,060 yuan/mt, with open interest down 3,093 lots to 159,941 lots.

In the spot market, the spot premiums extended the downward trend yesterday. The premiums of standard-quality copper dropped quickly from 300 yuan/mt to 250 yuan/mt, as the sellers focused on selling to gain cash around the end of the month. The transactions picked up already when the premiums fell to 230-240 yuan/mt, though the sellers anticipated the level of 200 yuan/mt. In the second trading session, the premiums rebounded to 300 yuan/mt amid active purchases, and some were raised to 320-350 yuan/mt, indicating the market prospect on premiums entering September, that is, tomorrow.

Aluminium: The most-traded SHFE 2210 aluminium closed down 0.67% or 125 yuan/mt to 18,410 yuan/mt, with open interest down 2,640 lots to 165,690 lots.

Non-ferrous metals still faced pressure on the macro front due to accumulating possibilities of rate hike. For aluminium, the purchases were on rigid demand, alluding weak demand as a whole. The supply will need some time to recover. As such, aluminium prices are expected to move in a wide range recently, and the investors shall watch the support around the 40-day moving average.

Lead: The most-traded SHFE 2210 lead closed up 0.07% or 10 yuan/mt at 14,915 yuan/mt, with open interest down 1,185 lots to 59,661 lots.

In the spot market, SMM #1 lead prices were flat from yesterday. Nonetheless, the market transactions picked up as some buyers turned to primary lead after the spread between primary and secondary lead narrowed as a result of secondary refined lead traders holding the prices firm though both the prices of primary and secondary lead fell. The most-traded SHFE lead contract repeatedly risked the cost line of secondary refined lead, and the decline is expected to be narrow. Investors shall watch the supply at 14,900 yuan/mt tonight.

Zinc: The most-traded SHFE 2210 zinc closed up 0.16% or 40 yuan/mt at 24,965 yuan/mt, with open interest up 2,220 lots to 134,491 lots.

On the macro front, China manufacturing Purchasing Managers' Index (PMI) for August came in at 49.4, up 0.4 point MoM though still in the contraction range. On the fundamentals, zinc alloy supply is expected to rise in September, but the scale is hard to predict at the moment. The support on the fundamentals was unsolid, and zinc prices are unlikely to rise substantially in the near term.

Tin: The most-traded SHFE 2210 tin closed down 1.9% or 3,710 yuan/mt at 191,080 yuan/mt, with open interest up 1,260 lots to 35,775 lots.

In the spot market, smelters were still slightly unwilling to quote; some refrained from quoting and watched the market trend, while others were firm to the prices. According to the traders, the spot premiums were still at a high level, while the spread among different brands changed little. The number of quotes in the market dropped significantly in morning trade, and the transactions were suppressed by high premiums. The short-term demand weakened after the downstream players have been purchasing on dips for some time.

Nickel: The most-traded SHFE 2210 nickel closed up 3.53% or 5,810 yuan/mt at 170,570 yuan/mt, with open interest down 115 lots to 56,641 lots.

Nickel prices were high as a whole in August. As of today, NORNICKEL nickel was in premiums of 2,100-2,500 yuan/mt over SHFE 2209, and Jinchuan nickel in premiums of 7,500-8,500 yuan/mt over SHFE 2210. NORNICKEL nickel was still quoted against SHFE 2209 as the demand was weak, and most corresponding traders held SHFE 2209 contracts In terms of the downstream, the alloy sector diverged. The military sector, boosted by the terminals, posted robust demand for Jinchuan nickel plate though nickel prices were high, but the civil sector, with more demand for NORNICKEL nickel, was contained by high nickel prices. To sum up, the downstream still purchased on rigid demand though the downstream demand has picked up slightly, and nickel prices are still likely to fall slightly in the near term.

[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.]