SMM Evening Comments (Aug 10): Shanghai Nonferrous Metals Market Closed with Mixed Performances against A Strong US Dollar Index

SHANGHAI, Aug 10 (SMM) – Shanghai nonferrous metals market closed the day with some losses in light of a strong US dollar index.

Shanghai copper declined 0.22%, aluminium inched up 0.15%, lead inched down 0.1%, zinc edged up 0.29%, tin rose 2.71%, and nickel tumbled 1.47%.

Copper: The most-traded SHFE 09 copper contract closed down 0.22% or 150 yuan/mt to 69550 yuan/mt, with open interest up 4318 lots to 121400 lots.

On the macro front, a new wave of pandemic triggered by Delta variant was spreading in the US as both the daily new cases and hospitalized population hit new highs since February. The US Department of Defense will later mandate vaccines in the military. The recently resurgence of pandemic worried the market that it would damage economy recovery. The issue of whether to accelerate interest rate hike ahead of schedule is likely to result in lingered divergence of opinions among Fed officers. On the fundamentals, the labour union of Caserones, a copper mine in Chile, has decided to go on strike on Tuesday, which might push up copper prices in the short term.

The market shall closely watch the China M2 data to be released by 16:00 (utc+8). The market expectation was 8.7% while the previous value stood at 8.6%. A less-than-expected result may lead to lost momentum in copper prices.

Aluminium: The most-traded SHFE 2109 aluminium closed up 0.15% to 19950 yuan/mt, with open interest down 5879 lots to 245000 lots. Social inventories kept de-stocking above expectation amid a weak supply & demand pattern, offering strong support to prices.

Lead: The most-traded SHFE 2109 lead closed down 0.10% or 15 yuan/mt to 15495 yuan/mt, with open interest down 1360 lots to 82583 lots. In spot market, quotations from primary lead smelters for small orders were sluggish. Discounts of secondary lead narrowed further, with strong support to lead prices from costs. Actual transactions thinned. Downstream actual purchase was also lackluster. The continuous falling of secondary lead discounts may signal rally in SHFE lead this week. Downstream orders recovered somehow, but was still unable to offer strong support to SHFE lead.

Zinc: SHFE zinc closed up 0.29% or 65 yuan/mt to 22430 yuan/mt, with open interest down 3949 lots to 74581 lots. On the macro front, Chair of Atlanta Fed suggested the Federal Reserve shall set about tapering QE and accelerating paring back on bond purchase should the next two month’s job report were strong enough. In China, the clinical application of “booster dose” was recently approved, easing market worries over the pandemic. At the same time, the central bank of China stated in its monetary policy implementation report for Q2 that the institute will work on a smooth transition in 2021-2022. On the fundamentals, power curtailment has been influencing supply from mines with intensified policies in Hunan and Guangxi. The pandemic has also resulted in a delayed transportation and increased delivery costs, lifting operation costs among downstream businesses. In the short term, zinc prices will remain congested.

Tin: The most-traded SHFE 2109 tin closed up 2.71% at 236720 yuan/mt, with open interest up 6575 lots. In the market, the great increase in open interest has overturned the previous sluggish market sentiment, demonstrating strength of long. Tomorrow the market is likely to see active stop-profit decisions among short-term long speculations. How the market digest this part of selling will determine the future trend.

Nickel: The most-traded SHFE 2109 nickel closed down 1.47% or 2090 yuan/mt at 140120 yuan/mt, with open interest down 4969 lots to 116000 lots. From the macro front, the strength in US dollar index pressured non-ferrous prices. In China, the downward-adjusted prices of stainless steel futures by Tsingshan Stainless Steel and the falling of new energy shares both pressured on nickel prices, depressing market sentiment. While the long-term bullish signals remain due to strong demand for nickel from stainless steel and new energy sector, tightened supply, etc.

The market shall pay attention to US NFIB Small Business Optimism Index and China M2 currency supply on an annual basis in July.