SMM Evening Comments (Jul 23): Shanghai nonferrous metals rose the board amid unexpected high US jobless claims

SHANGHAI, Jul 23 (SMM) – SHFE nonferrous metals all went up today, amid the dovish statement by the European Central Bank president, the high US jobless claims, and the high July PMI in Eurozone.

Tin surged 4.27%, copper rose 1.62%, aluminium increased 1.31%, lead gained 2.48%, zinc advanced 0.29%, and nickel rose 3.22%.

Ferrous complex basically increased. Rebar rose 2.20%, HRC increased 1.65%, while iron ore fell 2.01%.

Copper: The most traded SHFE 2109 copper gained 1.62% to end at 69,760 yuan/mt today, with open interest down 7,406 lots to 80,300 lots.

The European Central Bank maintained its benchmark interest rate and the scale of asset purchases, but revised its forward guidance to link policy adjustments more closely to the new 2% inflation target. Bank President Lagarde made dovish statement that the monetary policy would not be tightened too early. The initial jobless claims in US for rose last week rose unexpectedly, making the largest increase since late March, highlighting the turbulent situation in the job market, and market concerns eased. Whether the initial PMI values of European and American countries can provide directional guidance for copper prices will be the focus tonight.

Aluminium: The most liquid SHFE 2109 aluminium contract advanced 1.31% to close at 19,360 yuan/mt today, with open interest up 21,650 lots to 253,583 lots.

Lead: The most active SHFE 2109 lead contract rose 2.48% to close at 16,345 yuan/mt today, with open interest up 16,471 lots to 79,031 lots.

Spot prices kept rising today, while small order trade remained sluggish, and the transactions at high levels were scarce. Downstream users were more wait-and-see and mainly signed long-term orders although they accepted the price increase of raw materials.

Discounts of refined lead stood stable today. The dispatch problems of some vehicles may remain until next week. The discounts of secondary lead expanded to 500-550 yuan/mt (ex-factory) over SMM 1# lead.

The increment in lead ingot inventories shrank as expected this week, likely to support lead prices at high levels in the short term. Lead prices have the risks of falling back after the surge. Whether SHFE lead can stabilise around 16,000 yuan/mt and test 164,000 yuan/mt is worth attention tonight.

Zinc: The most traded SHFE 2109 zinc contract edged up 0.29% to end at 22,210 yuan/mt today, with open interest up 7,110 lots to 74,072 lots.

The initial manufacturing PMI for July in Eurozone was higher than expected. The German manufacturing PMI in July was also higher than expected, which to some extent alleviated the market's worries about the negative impact of mutated COVID-19 virus on economic recovery, leading to a slight increase in LME zinc. Social inventories of lead ingots remained downward this week, which kept the spot premiums high. Zinc prices may continue to fluctuate in the short term, as the social inventories are difficult to reach a high level.

Nickel: The most active SHFE 2109 nickel contract rose 3.22% to end the day at 143,120 yuan/mt today, with open interest up 27,833 lots to 110,000 lots.

US dollar further weakened overnight, and commodity prices rebounded overall. Downstream consumption of stainless steel and new energy improved, while the nickel supply was short, which supported nickel prices. The pressure form the boll line at 144,000 yuan/mt is worth attention.

The initial value of US July Markit manufacturing and service industry PMI will be the focus tonight.

Tin: The most traded SHFE 2108 tin contract surged 4.27% to end at 235,400 yuan/mt today, with open interest down 1,483 lots to 23,064 lots.       

Tin prices rose all the way to break through the previous high today, after falling for several days. Long funds rapidly pulled up the prices, which is likely to force the short funds to close the positions at high prices. Therefore, whether the positions will smoothly decrease after the breakthrough will be the focus in the near future. At fundamentals, upstream supply is tight, midstream companies are under high capital pressures, and the end demand is expected to remain strong in the long term. The market is likely to fluctuate higher.