SMM Evening Comments (Sep 28): Shanghai Nonferrous Metals Closed Mostly with Losses amid Prolonged Macro Pressure

SHANGHAI, Sep 28 (SMM) – Shanghai nonferrous metals closed mostly with losses as the US dollar index was still high amid hawkish US Fed stances that the US needs to keep interest rates higher for a while until the inflation is kept under control.

Shanghai copper declined 0.56%, aluminium slid 1.71%, lead edged down 0.03%, zinc dropped 2.92%, tin rose 0.15%, and nickel fell 1.86%.

Copper: The most-traded SHFE 2211 copper closed down 0.56% or 340 yuan/mt at 60,020 yuan/mt, with open interest up 5,737 lots to 148,030 lots.

On the macro front, (1) U.S. September Conference Board Consumer Confidence Index stood at 108, against a previous value of 103.6 and a forecast of 140.5. (bullish ☆) (2) US API Crude Oil Inventories (million barrels) for the week ending September 23 stood at 4,150,000, against a previous value of 1,035,000 previous and a forecast of 333,000. (bearish ☆)

In the spot market, standard-quality copper with next-month invoice stood at 540-550 yuan/mt in early trade, and good-quality copper 600-630 yuan/mt. In the first trading session, premiums of standard-quality copper with next-month invoice were raised to 560-580 yuan/mt, and good-quality copper 600-630 yuan/mt. The premiums of standard-quality copper stabilised at 570-580 yuan/mt following moderate transactions in the first session as the traders refrained from quoting in light of low inventory.

Aluminium: The most-traded SHFE 2211 aluminium closed down 1.71% or 310 yuan/mt to 17,865 yuan/mt, with open interest up 16,375 lots to 181,874 lots.

On the supply side, the production reduction scale in Yunnan province was finally determined, which was in line with market expectations. On the demand side, aluminium processing companies reported better demand, but the recovery speed was slow than in previous years. The bulls were digested as the production reduction met expectations, and aluminium price is expected to move in a wide range in the near term.

Lead: The most-traded SHFE 2211 lead closed down 0.03% or 5 yuan/mt at 14,880 yuan/mt, with open interest up 6,159 lots to 53,710 lots.

SHFE lead was relatively resilient recently amid robust downstream orders and pre-National Day holiday restocking. The average inventory held by primary and secondary lead smelters dropped approaching the holiday, and the SHFE lead is likely to rise after falling to test the cost supply, in spite of the weakening spot transactions.

Zinc: The most-traded SHFE 2211 zinc closed down 2.92% or 700 yuan/mt at 23,260 yuan/mt, with open interest up 7,868 lots to 113,451 lots.

SHFE zinc price was recently pressured by the macro front and weighed on by LME zinc. However, considering the pre-holiday cycle across the downstream as well as the Nord Stream accident that led to rising European natural gas prices, SHFE zinc will be well supported.

Tin: The most-traded SHFE 2211 tin closed up 0.15% or 260 yuan/mt at 177,450 yuan/mt, with open interest up 3,441 lots to 44,950 lots.

In the spot market, a few smelters held the prices firm in early trade, but the spot premiums from mainstream smelters dropped slightly. According to feedback from the traders, the spread of spot premiums among different brands narrowed, and some traders lowered the premiums during intraday trading in order to promote the sales. The spot market was still relatively quiet, and the downstream players turned away from high prices while purchasing on rigid demand.

Nickel: The most-traded SHFE 2210 nickel closed down 1.86% or 3,450 yuan/mt at 181,900 yuan/mt, with open interest down 14,128 lots to 28,429 lots.

On the supply side, pure nickel spot prices fell recently, and Jinchuan nickel premiums also stopped falling and stabilised. Hence the market shipments improved. Pure nickel imports now turned profitable with rising SHFE/LME price ratio. NPI prices were quite firm recently with limited downward room. On the demand side, stainless steel prices in Wuxi and Foshan stabilised with downward potentials, and downstream pipe and stamping factories still carried some pre-holiday restocking demand. On the whole, the demand growth fell behind the arrival rhythm, hence the stainless steel social inventory dropped more slowly. For alloy, though the manufacturers usually do not restock for the National Day holiday, falling prices attracted some buyers.

[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.]