SMM Morning Comments (Aug 13): Shanghai Base Metals Fell across the Board after Surging US PPI

SHANGHAI, Aug 13 (SMM) – Shanghai base metals basically moved downward on Friday morning after the US PPI registered a largest increase in a decade. Meanwhile, their counterparts on LME trended mixed.

LME metals basically fell on Thursday night. Copper dropped 0.73%, lead fell 0.65%, and zinc decreased 1.46%, while aluminium increased 0.21%.

SHFE metals fell across the board in the overnight trading. Copper fell 0.77%, aluminium lost 0.5%, lead dropped 0.61%, and zinc decreased 1.63%.

Copper: Three-month LME copper dropped 0.73% on Thursday night to close at $9,465.5/mt, and is expected to trade between $9,440-9,530/mt today.

The most-traded SHFE 2109 copper contract edged down 0.77% last night to close at 69,710 yuan/mt, and is expected to trade between 69,600-70,200 yuan/mt today, with spot premiums between 150-200 yuan.

The US July producer price index (PPI) registered a largest increase in more than a decade, indicating that inflationary pressure remained high, and it boosted US dollar index. US government is expected to postpone the tightening of liquidity, and the $1 trillion infrastructure bill has been approved. Copper futures lost the previous gains under pressure in the overnight trading. In the spot market, traders and downstream users had no intention to enter the market, while holders kept prices high. The trade is hard to improve amid the stalemate.

Aluminium: Three-month LME aluminium increased 0.21% to end at $2,580.5/mt on Thursday.

The most liquid SHFE 2109 aluminium contract lost 0.5% to close at 20,010 yuan/mt last night.

The inventories of aluminium ingot increased slightly amid the intensive arrivals after the transportation was improved, which will temporarily suppress the price increase. The current focus will be the power curtailment, pandemic, released reserves, and the aluminium ingot imports. SHFE aluminium is expected to fluctuate between 19,800-20,100 yuan/mt today.

Lead: Three-month LME lead rose and hit $2,343/mt after opening in the overnight trading on Thursday, and then fluctuated down to close 0.65% lower at $2,303/mt. US PPI data recorded the largest increase since 2010 and boosted US dollar. Today’s focus will be the support from the 5-day moving average.

The most active SHFE 2109 lead contract was dragged down by LME lead and dropped 0.61% to end at 15,405 yuan/mt last night. Whether the prices can break through the 5-day moving average will be monitored today.

Zinc: Three-month LME zinc decreased 1.46% to settle at $3,002.5/mt on Thursday night, with open interest up 3,448 lots to 252,000 lots. Zinc stocks across LME-listed warehouses dropped by 3,800 mt or 1.54% to 242,725 mt. US PPI registered a largest gain since 2010, showing that the inflationary pressure remained high. Meanwhile, the weekly jobless claims in US fell for the third consecutive week, and the market worried about the earlier tightening of monetary policy. Today’s focus will be the initial value of the consumer confidence index by University of Michigan, the US import price index in July, and the balance of trade after seasonal adjustment in the Eurozone. LME zinc prices are expected to stand at $2,970-3,020/mt in the short term.

The most liquid SHFE 2109 zinc contract slid 1.63% to settle at 22,330 yuan/mt in the overnight trading, with open interest down 16,791 lots to 153,000 lots. The market heard the rumours that the export tariffs of 10%-20% will be imposed on cold and hot rolled pipe and plate. The export tariffs have been cancelled for two times for some steel products this year, which have exerted a significant impact on the galvanised product consumption in the long term, and the impact will be deepened if the tariffs are increased. The SHFE 2109 contract is expected to move between 22,100-22,600 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 150-160 yuan/mt against the September contract.

Tin: The most active SHFE 2109 tin contract kept falling as a large amount of funds left the market last night, and the drop slowed down around 237,000 yuan/mt, then the prices fluctuated in a narrow range until the close.

At fundamentals, the spot inventories and warehouse receipts remained low, and the ore supply was tight. The active leaving of long funds led to lower prices, indicating that some funds recognised the profits brought by the recent rapid rise in prices. The intensively reduced positions by both bulls and bears showed that the difference in the outlooks of the two sides were narrowing. The price drop is and adjustment after the rapid increase, and the future price trend will be affected by the changes in the open interest. SHFE tin is expected to move with the support at 235,000 yuan/mt, and the pressure from around 240,000 yuan/mt.