SMM Evening Comments (Jul 28): Shanghai Nonferrous Metals Mostly Closed in Negative Range

SHANGHAI, Jul 28 (SMM) – Shanghai nonferrous metals market closed the day with broad losses ahead the Fed’s interest rate meeting.

Shanghai nonferrous metals of copper (-0.22%), aluminium (-1.30%), lead (-1.49%), zinc (-1.31%), tin (-1.13%) all closed with losses to some degree, with nickel gaining 1.26%.

Copper: SHFE copper closed down 0.22% or 160 yuan/mt to 71850 yuan/mt, with open interest up 954 lots to 138400 lots.

From the macro perspective, data showed that US durable goods orders climbed 0.8% in June, lower than the market expectation of 2.1%. Copper broke its previous congestion range amid rising market sentiment, added long positions and fluctuated US indexes. While investors held a more cautious attitude ahead Fed’s interest rate meeting, waiting for further guidance regarding monetary policy bias.

Tonight’s focus will be the resolution of Fed’s interest rate meeting (2:00 am, July 29). Market expects a dovish stance from the Fed’s meeting following the dovish rhetoric from European Central Bank’s interest rate meeting and worsened COVID in the US, leading to weakened USD index. In this case, copper futures may trend up and break the 70500 yuan/mt resistance, testing the recent new highs.

Aluminium: The most-traded SHFE 2109 aluminium closed down 1.30% or 255 yuan/mt to 19370 yuan/mt, with open interest down 24677 lots to 261995 lots.

Spot deal in Gongyi further went up with higher purchasing intention, while some traders reported interrupted transportation on Longhai railway, with some aluminium ingot stuck halfway. Attention shall be paid to transportation situation in Henan as well as the product arrivals at central and east China. Also, the macro and capital flow may affect price dynamics, which requires attention.

Zinc: SHFE zinc closed down 1.31% or 295 yuan/mt to 22240 yuan/mt, with open interest down 2853 lots to 100943 lots.

From the macro perspective, there were few key economic data from the Europe and US, with the only focus on Fed’s interest rate meeting. The Fed’s view on soars in inflation will somehow affect market sentiment. From the fundamentals, futures prices declined and failed to shore up the market. Premiums stayed comparatively high against low social inventory. In face of the great disagreement on prices between the buying and selling sides, deals were hardly done, thus pushing down premiums.

Lead: The most-traded SHFE 2109 lead closed down 1.49% or 245 yuan/mt to 15870 yuan/mt, with open interest up 176 lots to 76185 lots.

In spot market, primary lead sustained premiums, lead prices saw limited decrease, waste battery stayed high, secondary refined lead companies were unwilling to sell with heightened cost pressures, while downstream product delivery was still not active. The long and short capital both held wait-and-see attitude ahead the Fed’s interest rate meeting.

Tin: The most-traded SHFE 2109 tin closed down 1.13% at 231310 yuan/mt, with open interest down 631 lots. The long and short capital were both conservative in face of increasingly intensified conflicts in fundamentals or the Fed’s interest rate meeting, thus avoiding possible price changes that may affect open interest. The early support at 230000 yuan/mt was previously the market focus. Therefore, when the prices once again approached 230000 yuan/mt, attention shall be paid to short capital’s willingness to add positions. Investors shall also heed unexpected news or sudden breakout of conflicts to disrupt the current situation.

Nickel: The most-traded SHFE 2109 nickel closed up 1.26% or 1829 yuan/mt at 146580 yuan/mt, with open interest up 15607 lots to 156461 lots.

In the market, the rumor of additional tariff on steel cooled down, nickel inventory disclosed by LME fell again, and the market void offered support for nickel prices. In the long term, nickel prices are unlikely to trend down. Tonight’s attention shall be paid to Shanghai nickel’s trending reaction to LME and EIA oil inventory in the week ended on July 23.