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SMM Evening Comments (Aug 6): Shanghai Nonferrous Metals Market Closed with Gains amid Improved Sentiment
Aug 6, 2021 19:00CST
Shanghai nonferrous metals market closed the day in positive territory as the market sentiment recovered.

SHANGHAI, Aug 6 (SMM) – Shanghai nonferrous metals market closed the day in positive territory as the market sentiment recovered.

Shanghai copper edged up 1.11%, aluminium inched up 1.07%, lead increased 0.03%, zinc went up 2.29%, nickel climbed 1.63%, and tin up 0.15%.

Copper: The most-traded SHFE 09 copper closed up 1.11% or 770 yuan/mt to70300 yuan/mt, with open interest down 254 lots to 120500 lots.

On the macro front, the seasonally-adjusted first claims of unemployment benefits in the US shrank 14000 to 385000, falling for two weeks in a row. The labour market was recovering steadily, but the spreading Delta variant would risk the repair process. Some manufacturing PMI from the euro zone fell short of expectation, weakening market forecast of cut-back on debt purchasing. On the other hand, a comparatively strong US equity market helped to stabilise copper prices. While the uptrend potential was brought by the ready-to-come strike by Escondida labour union announced on Thursday if negotiation failed. 

Tonight’s focus will be the US July unemployment rate and July seasonally-adjusted nonfarm payroll data. Theoretically, an inspiring job report will drive up interest rate, enhancing attractions of US Dollar to foreign investors, and vice versa. The nonfarm payroll data shall offer some guidance over the copper prices trend.

Aluminium: The most-traded SHFE 2109 aluminium closed up 1.07% or 210 yuan/mt to 19925 yuan/mt, with open interest up 7705 lots to 253000 lots. Yesterday, power and productions restrictions were extended to more aluminium companies in Guangxi, further tightening supply. And the market was confident about the prolonged de-stocking of aluminium ingot. Liquidity on the macro front was sufficient, and USD index corrected down slightly. Decline of SHEF and LME aluminium would be recovered within the week in light of bullish fundamental and macro front. Follow-up focus will be the influences of pandemic on transportation and production in central and east China.

Lead: The most-traded SHFE 2109 lead closed up 0.03% or 5 yuan/mt to 15785 yuan/mt, with open interest up 1655 lots to 79076 lots. For primary lead, smelters were reluctant to deliver in view of falling lead prices, impacts of pandemic, disrupted transportation, widened power restrictions in Henan and Guangxi. Spot transactions were so-so as a combined result of added inquiries from downstream and tightened supply. For secondary lead, supply of battery scrap fell again, and so was the profits at smelters. Discounts of spots narrowed further, and stood at 300 – 400 yuan/mt against SMM 1# lead. Lead futures may rebound next week amid improved consumption, lowering operating rates across secondary lead smelters, and shrank supply of spot. However, the uptrend spaces will be limited due to new highs recorded by social lead ingot inventories (183500 mt).

Zinc: SHFE zinc closed up 2.29% or 505 yuan/mt to 22580 yuan/mt, with open interest down 2424 lots to 85662 lots. On the macro front, Fed governor Waller was quite positive about the economy outlook, and he anticipated an earlier end to QE. However, Minneapolis Fed president pointed out that an increase in unemployment population from 7 million to 9 million indicated a troubled labour market. From the fundamentals, re-stocking of social inventory in China is unlikely to change the overall low inventory as a result of power restrictions.

Tin: The most-traded SHFE 2109 tin closed up 0.15% at 229120 yuan/mt, with open interest down 340 lots.

Nickel: The most-traded SHFE 2109 nickel closed up 1.63% or 2610 yuan/mt at 145190 yuan/mt, with open interest up 3825 lots to 126000 lots. Tightened supply sustained, and stainless steel maintained a hectic production schedule. In the short term, nickel prices congestion is expected to end, and later fluctuate uptrend.

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