SMM Evening Comments (Oct 16): Shanghai nonferrous metals ended mixed

SHANGHAI, Oct 16 (SMM) – SHFE nonferrous metals closed mixed on Friday October 16 as the uptick in coronavirus cases across Europe and the U.S. continued to dampen sentiment.

Traders are monitoring discussions over further fiscal stimulus in the U.S. The IMF’s Managing Director Kristalina Georgieva told CNBC on Thursday that she has “no doubt” the U.S. will implement a new economic stimulus package.

Nickel, the best performer, rose 1.31%, aluminium advanced 0.34% and copper climbed 0.45%, while zinc edged down 0.47%, lead weakened 0.1% and tin shed 0.08%.

Inventories of rebar across Chinese steelmakers and social warehouses stood at 10.6 million mt as of October 15, down 6.4% from a week ago and up 56.2% from a year earlier.

The ferrous complex closed mixed. Hot-rolled coil advanced 0.35%, rebar rose 0.78%, while iron ore fell 0.63%.

Copper: The most-traded SHFE 2011 copper contract finished the day 0.45% higher at 51,470 yuan/mt. On the macro level, the domestic economic fundamentals continued to warm up. The new RMB loans and social financing data were both higher than expectations in September. PPI (Producer Price Index) for September released yesterday fell 2.1% year on year and rose 0.1% month on month, flat from last month. In addition, the funds continued to be loose. The People's Bank of China (PBOC) will continue to implement the normalized monetary policy, optimistic about the domestic market. Some progress has been made in the negotiation of stimulus agreement between US House Speaker Pelosi and Treasury Secretary Mnuchin, supporting copper prices to a certain extent.

The US dollar index rose in afternoon trading, and the LME counterpart fell, leading to a slight downward shift in the focus of SHFE Copper. US retail sales and industrial production for September and preliminary University of Michigan's Consumer sentiment index for October and whether the contract could maintain its upward trend will come under scrutiny tonight.

Aluminium: The most-liquid SHFE 2011 aluminium contract climbed to an intraday high of 14,780 yuan/mt and closed up 0.34% at 14,710 yuan/mt. Open interest rose 2,275 lots to 129,298 lots.

Zinc: The most-active SHFE 2011 zinc contract rose to an intraday high of 19335 yuan/mt before repairing almost all the gains to finish the day 0.47% lower at 19,040 yuan/mt. Open interest fell 374 lots to 83,122 lots. Social inventories continued to increase, and the tepid spot transactions offset the continuous decline in TC (Treatment charges). However, the tight supply of mines still supported the contract. In addition, LME counterpart rose, and SHFE zinc contract is expected to continue to fluctuate sideways.

SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei increased 13,800 mt in the week ended October 16 to 162,800 mt, after an increase of 13,900 mt in the previous week. The stocks rose 3,800 mt from Monday October 12.

Nickel: The most-traded SHFE 2012 nickel contract ended the day 1.31% higher at 119,450 yuan/mt today. Open interest rose 10,861 lots to 128,166 lots. Inventories of refined nickel in the Shanghai bonded areas expanded slightly by 1,000 mt from last Friday October 9 to 23,800 mt as of October 16, showed SMM data.

Lead: The most-traded SHFE 2011 lead contract rose to an intraday high of 14,515 yuan/mt after opening, and finished the day 0.1% lower at 14,470 yuan/mt. Open interest fell 462 lots to 24,343 lots. The decline of the US dollar index boosted LME counterpart, and SHFE lead is likely to stop falling tonight. Whether the contract could move above 15,000 yuan/mt will come under scrutiny.

Tin: The most-liquid SHFE 2012 tin contract closed down 0.08% at 146,300 yuan/mt today. Open interest rose 511 lots to 27,940 lots. The contract fluctuated around five-day moving average and sluggish spot market dampened tin prices. Pressure below is expected to around 145,000 yuan/mt. Pressure above is expected to around 148,500 yuan/mt.