SMM Evening Comments (Aug 11): Shanghai Nonferrous Metals Market Closed with Broad Gains on Positive Fundamentals

SHANGHAI, Aug 11 (SMM) – Shanghai nonferrous metals market closed the day with broad gains amid positive market fundamentals.

Shanghai copper added 0.72%, aluminium rose 1.26%, lead inched down 0.13%, zinc climbed 0.94%, tin gained 2.38%, and nickel grew 0.18%.

Copper: The most-traded SHFE 09 copper contract closed up 0.72% or 500 yuan/mt to 69770 yuan/mt, with open interest down 1150 lots to 120300 lots. On the macro front, the US Senate approved the $1 trillion bipartisan infrastructure bill, and oil prices closed with largest gains in over two weeks, both pushing up copper prices.

On the fundamentals, BHP Billiton and Escondida are expected to reach a consensus on salaries. Therefore the strike is unlikely to significantly influence the copper prices in the short term.

Tonight the market shall pay attention to US seasonally-adjusted CPI on an annual basis by end of July, and look for uptrend engines for SHFE copper.

Aluminium: The most-traded SHFE 2109 aluminium closed up 1.26% to 20110 yuan/mt, with open interest down 133 lots to 264000 lots. On the fundamentals, intensified power restrictions have tightened further the aluminium supply. While the disrupted transportation due to flood and pandemic have brought continued de-stocking of social inventories, offering strong support to aluminium prices. The market shall also pay attention to the influences of imports and released government reserves.

Lead: The most-traded SHFE 2109 lead closed down 0.13% or 20 yuan/mt to 15400 yuan/mt, with open interest up 1746 lots to 84329 lots. In spot market, spot prices rallied slightly. However, products available in the market were in small amount, while quotations for secondary and primary lead were both sluggish, holding discounts at a comparatively low level. A few smelters quoted with premiums but without actual transactions. Costs of lead ingot smelting started to support the SHFE lead prices from falling. The market shall pay attention to the 15400 yuan/mt support.

Zinc: SHFE zinc closed up 0.94% or 210 yuan/mt to 22520 yuan/mt, with open interest up 1468 lots to 76049 lots. On the macro front, US Senate passed the $3.5 trillion budget plan. China newly added social financing in July stood at 1.06 trillion yuan, and M2 rose 8.3% year on year, leading to an expanding M2-M1 scissors difference for three months in a row. Tonight, the market shall closely watch the speech of Mester, Chair of Cleveland Fed, on the subject of inflation risks.

On the fundamentals, the zinc ingot output may fall below expectations according to SMM. And the supply in August is unlikely to fulfill the overall demand in light of the high season. Zinc prices may remain high supported by low social inventories.  

Tin: The most-traded SHFE 2109 tin closed up 2.38% at 238400 yuan/mt, with open interest down 108 lots. In terms of capitals, the market trended down before closing the day as long capitals exit the market by reducing open interest, indicating that long speculations have paid off. On the fundamentals, social inventories and godown warrants were both low, offering some support to prices.

Nickel: The most-traded SHFE 2109 nickel closed up 0.18% or 250 yuan/mt at 140370 yuan/mt, with open interest down 5301 lots to 110530 lots. On the fundamentals, output reduction plan in stainless steel was carried out accordingly, but the production schedule was still hectic. The strong demand of nickel from the new energy sector supported nickel prices. Tonight the market shall pay attention to EIA crude inventories in the week ended August 6 and China total power consumption on an annual basis in July.