SMM Evening Comments (Jul 15): Shanghai nonferrous metals rose for the most part with stable fundamental support, lead gained 1.89%

SHANGHAI, Jul 15 (SMM) – SHFE nonferrous metals, except for nickel, rose across the board amid Chian’s slower GDP growth and stable fundamental support.

Lead, the best performer, gained 1.89%, copper rose 0.19%, aluminium increased 0.7%, zinc won 1.17%, and tin advanced 1.13%, while nickel lost 0.08%.

Ferrous complex all rose today. Iron ore gained 1.61%, rebar increased 0.87%, and HRC went up 0.54%.

Copper: The most traded SHFE 2108 copper contract inched up 0.19% to end at 68,800 yuan/mt today, with open interest down 396 lots to 114,958 lots.

Aluminium: The most traded SHFE 2108 aluminium contract increased 0.7% to close at 19,395 yuan/mt today, with open interest down 3,982 lots to 217,609 lots.

Global liquidity remained loose. Aluminium consumption is entering the off-peak season. However, the aluminium ingot inventory stood at 832,000 mt on July 15, still not in the accumulation period. The power rationing policies in Yunnan and Henan had more impact on the supply side than on the demand. The power curtailment, inventory inflexion, and the sentiment changes of bears will need further attention.

Lead: The most traded SHFE 2108 lead contract gained 1.89% to end at 15,890 yuan/mt today, with open interest up 9,924 lots to 56,100 lots. Although the bearish sentiment was strong in the market, some buyers were still looking for the purchase chance around 15,500 yuan/mt, providing the support to the prices.

Smelters’ discounts slightly expanded today, but downstream purchase was still limited. Social inventories are expected to increase this week. Whether bears will continue to reduce positions and maintain the prices at high levels will be the focus today.

Zinc: The most traded SHFE 2108 zinc contract closed 1.17% higher at 22,130 yuan/mt today, with open interest down 6,941 lots to 77,622 lots.

Powell’s hawkish statement caused US dollar to lose recent gains, and LME zinc fell as well. At the same time, China’s Q2 GDP increased 7.9% on the year, the growth shrank significantly from the previous quarter, so China’s economic recovery may further slow down in H2 2021. At fundamentals, the released national reserves are expected to be received by downstream users next week, and the supply will increase on week. Operating rates in downstream processing plants generally declined, especially in the galvanising companies, indicating that the industry is gradually entering the off-peak season of consumption. However, the overall social inventory remained low, leading to relatively high spot premiums in Shanghai and Guangdong. Zinc prices are expected to keep fluctuating amid weak bearish expectations and strong bullish factors.

Nickel: The most traded SHFE 2108 nickel contract ended 0.08% lower at 139,080 yuan/mt today, with open interest 10,556 lots to 115,981 lots.

Nickel prices are still in an upward trend. Stainless steel prices are rising amid the expectation of production cuts and the tight supply of ferrochrome. The market demand may decline due to the higher expectation of stainless steel production cut. Therefore, nickel prices were lower than stainless steel prices, but the lower support remained strong amid the nickel supply shortage. The pressure from 140,000 yuan/mt will be the focus tonight. China’s annual GDP growth rate in Q2 and US initial unemployment claims in the week ended July 10 will be released tonight.

Tin: The most active SHFE 2108 tin contract increased 1.13% to hit a new high at 222,590 yuan/mt, with open interest up 886 lots.

The price reached a record high, but the open interest only increased 886 lots, showing that short-term bulls lack confidence in the further rapid rise and breakthrough at this level. At the same time, the bears are not enthusiastic in taking a position in the situation against the fundamentals. Tin prices have been rising for a long term under the fundamental impact. The frequent market news also strengthens the cost support to the prices. SHFE tin is expected to keep upward.