SMM Evening Comments (Sep 23): Shanghai nonferrous metals declined for the most part, tin advanced 0.68%

SHANGHAI, Sep 23 (SMM) — SHFE nonferrous metals broadly fell on Wednesday September 23 as as investors monitored economic data and further testimony from Federal Reserve Chairman Jerome Powell.

The wealthy in the U.S. have started preparing for tax increases that are likely to come in the coming years as government deficits at both state and federal levels rose due to the Covid-19 pandemic. Governments have increased spending to manage the health and economic crises, which at the same time caused their revenue to fall.

A study published last year by the Organisation for Economic Co-operation and Development found that the U.S. lost more tax revenue than any other developed country in 2018, largely due to U.S. President Donald Trump’s tax cuts.

Shanghai nonferrous metals, except for lead and tin, traded lower on Wednesday September 23. Aluminium dropped 1.68% to lead the losses, nickel weakened 0.39%, copper declined 0.56%, and zinc fell 1.56%, while lead climbed 0.17%, and tin advanced 0.68%.

The US dollar index continued its upward trend, hitting an eight-week high of 94.19, due to good US economic data and concerns about the second wave of pandemics in Europe and Britain. The US dollar may continue to rise in the near term due to the pandemic in Europe, but the uncertainty of this year's US presidential election indicated that the US dollar may tend to fluctuate more violently.

The ferrous complex closed mixed. Hot-rolled coil advanced 0.44%, rebar rose 0.17%, while iron ore fell 0.65%.

Copper: The most-traded SHFE 2011 copper contract slid to an intraday low of 50,960 yuan/mt, before finishing the day 0.56% lower at 51,460 yuan/mt. The contract extended its overnight decline and fluctuated downward, mainly due to macro risk, which continued to dampen investor sentiment. Federal Reserve Chairman Powell said that although the economy of the US has improved since the outbreak of the pandemic, the measures to restore the economy in the next step were still unclear. In addition, the rebound of the pandemic in Europe and the prospect of Brexit were pessimistic, and the risk aversion demand drove the flow of funds to the US dollar. Recently, the US dollar broke over 94, reaching the highest level of 96.3, strongly suppressing copper prices. US Manufacturing PMI (Sep) Prelim and whether contract could remain above 51,000 yuan/mt will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2010 aluminium contract closed down 1.68% weaker at 14,345 yuan/mt today. Open interest fell 5,120 lots to 104,000 lots. Secondary aluminium prices were stable. The supply of aluminum scrap narrowed the price difference between refined aluminium and aluminum scrap.

Zinc: The most-active SHFE 2011 zinc contract ended 1.56% weaker at 19,250 yuan/mt, Open interest rose 4,890 lots to 84,443 lots. Treatment charges of domestic zinc concentrate stood at 5,300 yuan/metal mt as of September 18, 200 yuan/mt lower than that of September 11.

Nickel: The most-traded SHFE 2011 nickel contract finished the day 0.39% lower at 112,770 yuan/mt in choppy trading. Open interest fell 9,676 lots to 91,693 lots. Open interests of the SHFE December contract rose 5,128 lots to 85,693 lots. It is expected that the November contract will finish its last trading day in the near term. The US dollar rose sharply and broke over the 60-day moving average. The contract will test support from 111,000 yuan/mt tonight. It will stop falling and rebound when the macro sentiment stabilises.

Lead: The most-traded SHFE 2011 lead contract fell to an intraday low of 15,000 yuan/mt this afternoon, and ended 0.17% higher at 15,060 yuan/mt today. Open interest rose 112 lots to 20,770 lots. The downstream consumption of fundamentals was sluggish while the increase in battery scrap prices moved up the support average of secondary lead cost. The contract is expected to trade sideways in the near term.

Tin: The most-liquid SHFE 2011 tin contract climbed to a session high of 146,700 yuan/mt and ended 0.68% higher at 144,880 yuan/mt today. Open interest rose 63 lots to 19,090 lots. Pressure above is expected to around 146,000 yuan/mt. The trend of the dollar will come under scrutiny.