SMM Evening Comments (Sep 24): Shanghai nonferrous metals fell across the board as mounting coronavirus cases continued to weigh on sentiment

SHANGHAI, Sep 24 (SMM) — SHFE nonferrous metals broadly fell on Thursday September 24 as tech stocks tumbled once again, with investors also spooked by uncertainty around the resurgence in coronavirus cases and prospects of further federal stimulus measures.

Europe is now grappling with a second wave of coronavirus infections that could once again wreak significant damage on the region’s economy.

The euro zone, the area that shares the single currency, saw its economy tank by 11.8% in the second quarter of 2020, hit by strict lockdown measures used to contain the spread of the virus.

Aluminium led the losses and slumped 3.66%, copper slipped 1.8%, zinc eased 2.14%, lead lost 0.17%, tin went down 2.99% and nickel decreased 0.67%.

SMM data showed that aluminium billet stocks across the five major consumption areas — Foshan, Wuxi, Huzhou, Changzhou and Nanchang — in China built up 3,900 mt from a week ago to 71,500 mt as of Thursday September 24.

The ferrous complex rose across the board. Iron ore increased 0.33%, rebar rose 0.59%, and hot-rolled coil gained 0.46%.

Copper: The most-traded SHFE 2011 copper contract slid to an intraday low of 50,480 yuan/mt after the opening bell, before finishing the day 1.8% lower at 50,640 yuan/mt. US Manufacturing PMI (Sep) Prelim stood at 53.5, which was in line with market expectations and slightly increased from the previous month, reaching a new high in the past 20 months. It indicated that the operating conditions of US manufacturing industry continued to improve. Compared with European economies constrained by the the resurgence in coronavirus cases and Brexit, investors prefer to hold US dollars. The US dollar index fluctuated today at 94.4, the highest level in the past two months, and the upward room of copper prices was limited.

US weekly claims for jobless benefits as of September 19 and the trend of the dollar will come under scrutiny tonight. The contact will test support from 50,500 yuan/mt.

Aluminium: The most-liquid SHFE 2010 aluminium contract closed down 3.66% at 13,940 yuan/mt today. Open interest fell 7,297 lots to 97,000 lots. Aluminum prices dropped sharply and the basis rebounded with the demand weaker than expectations. The systemic risk intensified, and the capital flowed in greatly. The disturbance of the macro side to aluminum prices will be monitored tonight. Social inventories of primary aluminium ingots across eight consumption areas in China, including SHFE warrants, decreased 24,000 mt from a week ago to 716,000 mt as of Thursday September 24.

Zinc: The most-active SHFE 2011 zinc contract ended 2.14% weaker at 18,985 yuan/mt, Open interest rose 9,152 lots to 93,595 lots.

Nickel: The most-traded SHFE 2011 nickel contract generated a V-shaped movement in morning trading and finished the day 0.67% lower at 112,000 yuan/mt in choppy trading. Open interest fell 11,067 lots to 80,626 lots.

Lead: The most-traded SHFE 2011 lead contract fell to an intraday low of 14,970 yuan/mt after opening, and ended 0.17% weaker at 15,100 yuan/mt today. Open interest rose 546 lots to 21,316 lots. Fundamental downstream transactions rebounded from the previous period with the demand for restocking at low prices. The shortage of battery scrap prompted secondary lead cost to remain high. It is still necessary to pay attention to the adverse effects of overseas market turmoil and US-China tensions.

Tin: The most-liquid SHFE 2011 tin contract fell rapidly to a session low of 141,140 yuan/mt after the opening bell and ended 2.99% lower at 141,270 yuan/mt today. Open interest fell 3,539 lots to 15,551 lots. Pressure below is expected to around 140,000 yuan/mt. The trend of the dollar and macroeconomic will come under scrutiny.