SMM Evening Comments (Jul 26): Nonferrous Metals Rose Broadly with Shanghai Nickel Hitting Five-Month High

SHANGHAI, Jul 26 (SMM) – The nonferrous metals market continued its uptrend today following the shares market.

Copper edged up 1.7%, aluminium rose 1.14%, zinc added 0.88%, tin increased 0.24%, nickel soared 2.98%, iron ore also saw an increase of 0.89%. While lead recorded a loss of 1.23%.

Copper: The most-traded SHFE 09 copper contract closed at 70770 yuan/mt, up 1190 yuan/mt or 1.71%. From the macro aspect, US Manufacturing PMI in July reached historical high, while the Services PMI fell to its lowest in five months unexpectedly, according to Markit. The Covid-19 pandemic worsened in the UK and Japan, and China had occasional case reports across the country. Doctor Fauci also warned that the death toll in the US may increase in the coming winter. These data all showed that the global economic recovery was unbalanced with increased uncertainty in terms of economic outlook. The market concerns for accelerated capital contraction eased, pulling up copper prices in the short term. Tonight’s focus will be the new house sales data in the US, and whether the result is better than expected will ultimately affect the price trending of SHFE copper.

Aluminium: The most-traded SHFE 2109 aluminium closed up 1.14% or 220 yuan/mt at 19550 yuan/mt. From the fundamentals, market signaled weakened aluminium consumption. De-stocking continued this week, as social aluminium inventories shrank 47000 mt to 782000 mt. The second release of government reserves stood at 90000 mt, lower than market expectation and pulling up again aluminium prices as a result of market sentiments. Attention shall be paid to the influence of power restrictions to supply and demand, flood in Henan, inventory pivot as well as changes in preferences for short. SMM believes that the aluminium prices will trade at high levels in 2H 2021 supported by possible low inventory throughout the year.

Lead: The most-traded SHFE 2109 lead closed the day with a loss of 1.23% or 200 yuan/mt to 16065 yuan/mt. Today’s spot prices decline was limited, and also coincided with the monthly order settlement and new order signing date. Since the monthly average price was much lower than the recent spot price, order book was the leading transaction. Downstream market saw rigid demand, part of which was shifted to secondary lead with higher discounts. The typhoon that hit Jiangsu, Zhejiang and Shanghai regions did not have a significant impact on market trading and transportation, and the overall market exchange was light and the wait-and-see sentiment dominated. However, attention shall be paid to SHFE lead’s high correction risk, as well as test the price of 61000 yuan/mt overnight.

Zinc: SHFE zinc closed up 0.88% at 22335 yuan/mt. And the recent typhoon may influence the production mainly in Zhejiang with suspended operation.

Tin: The most-traded SHFE 2109 tin closed up 0.24% at 231100 yuan/mt. From the fundamentals, the supply and demand was still unbalanced, downstream demand entered traditional off season and purchasing was also suppressed by high prices. More traders exit the market by lowering premiums, adding difficulties in sustaining uptrend in the short term. Attention shall be paid to long capitals entering the market.

Nickel: The most-traded SHFE 2108 nickel closed up 2.98% or 4220 yuan/mt at 145720 yuan/mt. Generally speaking, nickel prices were still strongly supported. The pandemic in Indonesia may increase worries for tightened supply of ferronickel, while luckily the production was yet unaffected by the pandemic. However, the new capacity installation may slow down as a result.