SMM Evening Comments (Aug 20): Shanghai nonferrous metals ended mixed as investors weighed stimulus hopes

SHANGHAI, Aug 20 (SMM) – SHFE nonferrous metals closed mixed on Thursday August 20.

Recent data out of China showed supply-side manufacturing activity recovering in July. However, Chinese consumption continues to be anemic, with retail sales negative as recent floods likely hit demand, noted David Chao, a global market strategist for Asia Pacific ex-Japan at Invesco.

China kept its benchmark lending rate for corporate and household loans steady as expected for the fourth straight month at its August fixing on Thursday. The one-year loan prime rate (LPR) CNYLPR1Y=CFXS was kept unchanged at 3.85%, while the five-year LPR CNYLPR5Y=CFXS remained at 4.65%.

Aluminium, the best performer, rose 0.82%. Zinc advanced 0.42%, copper climbed 0.1%, while tin shed 0.52%, lead fell 0.8% and nickel slipped 0.54%.

SMM data showed that stocks of 6063 aluminium billet across the five major consumption areas – Foshan, Wuxi, Huzhou, Changzhou and Nanchang – in China fell 9,400 mt from a week ago to 60,000 mt as of Thursday August 20.

The ferrous complex fell across the board. Hot-rolled coil fell 0.2%, rebar shed 1.54%, and iron ore slipped 1.4%.

Copper: The most-traded SHFE 2009 copper contract fell to an intraday low of 51,800 yuan/mt, before recouping some gains to close 0.1% higher on the day at 52,040 yuan/mt. In the minutes from its July meeting, the Fed said “the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term.” The Fed kept rates unchanged last month, noting the economy was still in need of monetary support. The US weekly jobless claims as of August 15 and whether the contract could remain above 52,000 yuan/mt will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2009 aluminium contract finished the day 0.82% higher at 14,435 yuan/mt. Open interest fell 1,742 lots to 114,000 lots. The shift of open interests and the flow of funds will be monitored in the short term.

Zinc: The most-active SHFE 2009 contract finished the day 0.42% higher at 20,095 yuan/mt on eased macro optimism. Open interest grew 8,113 lots to 79,346 lots. The contract is expected to remain above 20,000 yuan/mt tonight.

Nickel: The most-traded SHFE 2010 nickel contract slid to an intraday low of 144,450 yuan/mt, before regaining some ground to finish the day 0.54% lower at 115,950 yuan/mt. The US weekly jobless claims and whether the contract could move above 116,000 yuan/mt will come under scrutiny tonight.

Lead: The most-active SHFE 2009 lead contract ended 0.8% weaker at 16,025 yuan/mt in choppy trading today. Open interest increased 6,604 lots to 27,475 lots. The intensification of trade disputes between China and the US led to macro market turmoil, which may suppress the upward trend of lead prices. Whether the contract could move below 16,000 yuan/mt will come under scrutiny tonight.

Tin: The most-traded SHFE 2010 tin contract close down 0.52% at 141,820 yuan/mt. The contract is expected to move above 141,000 yuan/mt in the short term.