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SMM Evening Comments (Aug 4): Shanghai Nonferrous Metals Market Mostly Fell over Spreading of Pandemic
Aug 4,2021 19:00CST
SMM Comments
Shanghai nonferrous metals market closed the day with major losses as the COVID was not yet brought under control.

SHANGHAI, Aug 4 (SMM) – Shanghai nonferrous metals market closed the day with major losses as the COVID was not yet brought under control.

Shanghai copper edged down 1.11%, aluminium down 0.3%, lead increased 0.59%, zinc went down 1.28%, nickel climbed 0.87%, and tin shrank 1.06%.

Copper: The most-traded SHFE 09 copper closed down 1.11% or 790 yuan/mt to 70120 yuan/mt, with open interest down 4419 lots to 122700 lots.

From the macro front, the rapid spreading of Delta variant across the globe has peaked the recent US 7-day average of daily confirmed cases from last summer, while more cases were also reported in China. The spread of COVID has pushed down market risk preference, and US oil prices once moved down below 70 USD, a new low in the last two weeks. Copper prices later plunged over pessimism. Tonight’s focus will be US ADP employment data, which might fall below expectation as a result of slowing recovery and pandemic spreading. In the short term, the US labour market will still see turbulences though under recovery, unlikely to clarify the copper price trend.

Aluminium: The most-traded SHFE 2109 aluminium closed down 0.3% or 60 yuan/mt to 19780 yuan/mt, with open interest down 5733 lots to 252000 lots. Short-term capital was slightly negatively affected by a possibly prolonged off-season due to the spread of COVID. From the fundamentals, domestic social inventory of aluminium kept de-stocking, underpin prices. Shanghai aluminium was comparatively resilient.

Zinc: SHFE zinc closed down 1.28% or 285 yuan/mt to 22050 yuan/mt, with open interest down 3655 lots to 89357 lots.

On the macro front, data released by the euro zone including PMI was largely positive. And the market shall closely watch the pandemic situation. China National Health Commission said that there were altogether 144 regions with medium to high risks of infections, weighing on market concerns. Transport services of intercity buses, taxes will also suspend in these regions.

On the fundamentals, market worried that downstream demand might be limited due to the pandemic, thus pushing down zinc prices. In the short term, zinc prices will experience some decline. While in the long term, July zinc ingot inventories added only 515200 mt as a result of escalated power restriction. What’s worse, the further limited power supply in Guangxi is expected to reduce August output by 18000 mt from July, potentially leading to less-than-expected added supply of zinc ingot. However, more consumption demand will be released once the pandemic is under control.

Lead: The most-traded SHFE 2109 lead closed up 0.59% or 95 yuan/mt to 15895 yuan/mt, with open interest down 3528 lots to 71871 lots. In spot market, primary lead smelts sustained premiums amid low inventories and thinned transactions. Lead prices fell. Secondary lead smelters had difficulties in delivery, and some even started to lose against rising costs. Discounts at secondary lead smelters narrowed, and stood at 300 – 500 yuan/mt over SMM 1# lead. August will see steady recovery in consumption.

Tin: The most-traded SHFE 2109 tin closed down 1.06% at 229580 yuan/mt, with open interest down 1149 lots.

From the fundamentals, smelters and downstream processing companies were both limited by high prices, creating a dynamic balance due to decreased production, which supported the recent high. And the current balance at high is unlikely to be broken unless the long and short capital get motivated again.

Nickel: The most-traded SHFE 2109 nickel closed up 0.87% or 1240 yuan/mt at 143510 yuan/mt, with open interest down 3526 lots to 124464 lots. Follow-up focus will be market sentiment and 20-day average support. Currently, there is no obvious signs indicating bearish nickel prices. Attention of tonight shall be paid to EIA crude inventory of the week and US July ADP employment data.

evening comments

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