SMM Evening Comments (Jul 30): Shanghai Nonferrous Metals Closed with Mixed Performances as the Second Release of National Reserves Confirmed

SHANGHAI, Jul 30 (SMM) – Shanghai nonferrous metals market closed the day with mixed performances as the second release of national reserves finished bidding.

Shanghai copper edged up 0.43%, aluminium up 2.06%, lead decreased 0.38%, zinc went up 0.94%, tin climbed 1.22%.

Copper: The most-traded SHFE 09 copper closed up 0.43% or 310 yuan/mt to 71820 yuan/mt, with open interest down 535 lots to 136000 lots.

From the macro front, US GDP increased at an annual rate of 6.5% in Q2, lower than expected. While the first claims of unemployment benefits last week also fell short of estimation. On the other hand, the Fed was not expecting a quick QE policy.

In China, the bidding prices of the second release of national reserves were in line with market expectation. Number of participants seemed to be great, but impact on prices was neutral. Market data showed strength from the long side, with 71,000 yuan/mt being the major support. Tonight’s focus will be the June unemployment rate in Eurozone. As the COVID repeated, employment was uncertain, which may affect the copper market.

Aluminium: The most-traded SHFE 2109 aluminium closed up 2.06% or 405 yuan/mt to 20085 yuan/mt, with open interest up 28700 lots to 289000 lots.

From the macro front, USD index fell below 92 against the dovish stance of Fed and lower-than-expected GDP result, strongly supporting LME aluminium. From the fundamentals, word of power restriction in Yunnan further spread, suppressing aluminium ingot arrivals at consumption places amid transport interruption in Henan.  Aluminium prices will still fluctuate at high amid de-stocking in off-season.   

Zinc: SHFE zinc closed up 0.94% or 210 yuan/mt to 22495 yuan/mt, with open interest up 6227 lots to 105241 lots.

From the macro front, the initial yoy and mom growth rate of GDP in Q2 in Eurozone was higher than expected, while June unemployment rate fell short of expectation. July core-harmonized CPI was in line with expectation, indicating steady economic recovery in Eurozone. From the fundamentals, the 30,000 mt of released government reserves entered downstream market according to SMM, and this week saw slight de-stocking compared with last Friday July 23. The second release was still greatly welcomed by downstream bidders, therefore the consumption might not be so light in the off-season.

Lead: The most-traded SHFE 2109 lead closed down 0.38% or 60 yuan/mt to 15860 yuan/mt, with open interest up 2479 lots to 79029 lots.

In spot market, transactions were basically flat from yesterday, with willingness to deliver primary lead so-so. Lead prices fell within the week, narrowing premiums of secondary lead. General transactions did not improve greatly coupled with slightly increased re-stocking demand. In the short term, power restriction in Henan and Jiangxi will have limited impact on production. High season expectation in August may support lead prices, narrowing downward spaces.

Tin: The most-traded SHFE 2109 tin closed up 1.22% at 233550 yuan/mt, with open interest down 965 lots. Long and short capital exited the market at 236000 – 230000 yuan/mt, indicating dubious expectation on future trending from both sides. The key to break price balance will be the specific market signal to alter the supply and demand balance logic on fundamentals, restoring capital willingness to enter the market.