SMM Evening Comments (Aug 10): Shanghai nonferrous metals fell across the board

SHFE nonferrous metals fell across the board on Monday, as continued tensions between the US and China dampened market sentiment, and the better-than-expected US non-farm payrolls and jobless claims released last Friday boosted US dollar.

On the SHFE, nickel dropped 1.72%, zinc fell 1%, lead weakened 1.61%, tin shed 1.42%, copper plunged 2.33%, and aluminum declined 0.93%.

Domestic zinc ingot output is likely to return to high levels as surging zinc prices and rebounding zinc treatment charges encouraged smelters to produce. But optimism on consumption will support SHFE zinc.

Optimistic outlook on lead-acid battery consumption may bolster lead prices. Operating rates at lead-acid battery makers stood at 72.1% in the week ended August 7, gaining 2.47 percentage points on the week, an SMM survey showed, and are expected to rise further in August, giving support to lead prices.  

SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei shrank 9,400 mt from last Friday August 7 to 182,700 mt as of Monday August 10. The stocks were down 19,200 mt from last Monday August 3.

Copper: The most-traded SHFE 2009 copper contract climbed to an intraday high of 50,390 yuan/mt this afternoon as investors added their long positions and finished the day 2.33% lower at 50,230 yuan/mt. Continued tensions between the US and China dampened market sentiment, posting a strong pressure on copper prices. The uncertainty of a new round of US economic stimulus package kept investors cautious about the economic situation, buoying US dollar index and weighing on copper prices. Whether the contract could remain above 50,000 yuan/mt will be monitored tonight.

Aluminium: The most-liquid SHFE 2009 aluminium contract fell rapidly to a session low of 14,275 yuan/mt after opening, before recouping some gains and fluctuating between 14,330-14,420 yuan/mt. The contract finished the day 0.93% lower at 14,355 yuan/mt, falling nearly 500 yuan/mt from the peak on last Tuesday August 4. Social inventories of aluminium ingots rose slightly today as shipments from social warehouses weakened.

Zinc: The most-active SHFE 2009 contract fell to an intraday low of 19,145 yuan/mt before rallying in the afternoon, and closed 1% lower at 19,220 yuan/mt. Zinc supply that rose at a slow pace and optimistic outlook on consumption will support zinc prices in the short term. The contract is likely to move above the 5-day moving average tonight.

Nickel: The most-traded SHFE 2010 nickel contract plummeted to 112,400 yuan/mt after the opening bell, before recouping some gains to close 1.72% lower on the day at 113,180 yuan/mt. The October contract dropped sharply today as the better-than-expected US non-farm payrolls and jobless claims released last Friday boosted US dollar. The new round of US stimulus package negotiations were in a deadlock, but investors still expect inflations of dollar-priced commodities. Whether the contract could rebound tonight will come under scrutiny.

Lead: The most-active SHFE 2009 lead contract fell to an intraday low of 16,150 yuan/mt before rallying in the afternoon as prices of gold and silver rose, and closed 1.61% lower at 16,195 yuan/mt with stable support from the five-day moving average. The contract is likely to fall below the five-day moving average tonight.

Tin: The most-liquid SHFE 2010 tin contract slid to an intraday low of 144,450 yuan/mt, before regaining some ground to finish the day 1.42% lower at 144,860 yuan/mt. It is expected to move above the 20-day moving average of 144,000 yuan/mt tonight.