SMM Morning Comments (Aug 16): Shanghai Base Metals Basically Rose Stimulated by Plumping US Import Price Index

Published: Aug 16, 2021 09:44 (GMT+8)

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Shanghai base metals mostly went up on Monday morning after the plumping US import price index increased market concern of economic recovery. Meanwhile, their counterparts on LME all moved lower.

SHANGHAI, Aug 16 (SMM) – Shanghai base metals mostly went up on Monday morning after the plumping US import price index increased market concern of economic recovery. Meanwhile, their counterparts on LME all moved lower.

LME metals all cruised higher last Friday. Copper rose 0.58%, aluminium increased 1.40%, lead went up 1.26%, and zinc went up 0.75%.

SHFE metals also rose across the board last Friday night. Copper gained 0.92%, aluminium went up 0.87%, lead increased 0.58%, and zinc settled 0.76% higher.

Copper: Three-month LME copper rose 0.58% to end at $9,520/mt on Friday night, and is expected to trade between $9,450-9,530/mt today.

The most-traded SHFE 2109 copper contract gained 0.92% last Friday night to close at 70,510 yuan/mt, and is expected to trade between 70,000-70,600 yuan/mt today, with spot premiums between 120-180 yuan/mt.

From the macro perspective, the July US import price index released on Friday was far below previous values and fell short of expectations, strengthening the view that inflation may peak. US consumer confidence fell to its lowest level in the past decade, making investors more concerned of the economic recovery. US dollar registered a largest decline in more than three months, which drove up copper prices. The August contract will be settled this week, which may suppress the spot transactions. However, spot premiums are expected to be firmer based on domestic inventories of copper cathode and the market supply.

Aluminium: Three-month LME aluminium rose 1.40% to close at $2,577.5/mt in the overnight trading of last Friday, and is expected to trade between $2,540-2,620/mt today.

The most-liquid SHFE 2109 aluminium contract went up 0.87% to settle at 20305 yuan/mt in the overnight trading last Friday, with open interest up 9,139 lots to 255,000 lots. SHFE aluminium is expected to trade between 20,100-20,500 yuan/mt today, and aluminium spot is likely to trade at discounts between 50-10 yuan/mt in east China.

The July US import price index fell short of expectations, and US consumer confidence fell to its lowest level in the past decade, making investors more concerned of the economic recovery. US dollar fell significantly, and commodity prices were boosted higher.

Lead: Three-month LME lead fluctuated 1.26% higher to end at $2,332/mt last Friday night, with open interest up 162 lots to 124,530 lots.

The market is cautious about Fed interest rate meeting this week after the officials' hawkish remarks on interest hikes. LME lead is expected to move around the middle Boll track in the short term.

The most active SHFE 2109 lead contract increased 0.58% to close at 15,500 yuan/mt last Friday, with open interest down 3,407 lots to 79,375 lots. Domestic inventories of lead ingot continued to increase, while the supply and demand weakened due to the power curtailment, pandemic, and environmental inspections, and secondary lead prices fell to near the cost. SHFE lead bottomed out, and the august contract will be settled today. The prices may fluctuate within a narrow range around 15,500 yuan/mt.

Zinc: Three-month LME zinc edged up 0.75% to end at $3,025/mt last Friday, with open interest up 1,891 lots to 254,300 lots.

Zinc stocks across LME-listed warehouses dropped by 3,025 mt or 1.25% to 239,700 mt. US July import price index was 0.3%, far below the expectations, but export price index rebounded, which relieved the market concerns about the expanding trade deficit and to some extent supported the view that the US inflation was temporary. This week’s focus will be the US industrial output in July, the July CPI in the euro zone, and the annualised US total newly started space floor in July. LME zinc is expected to fluctuate between $2,960-3,060/mt today.

The most traded SHFE 2109 zinc contract settled 0.76% higher at 22,575 yuan/mt last Friday night, with open interest up 3,204 lots to 146,000 lots. The power curtailment in many regions in China has been relieved recently, and the output at smelters starts to recover. The second batch of the released zinc ingot reserves have been gradually picked up, so the market supply loosened, which will suppress the prices. Zinc price may slid in the short term. The SHFE 2109 contract is expected to surge before the fall back and move between 22,200-22,700 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 160~170 yuan/mt against the September contract.

Tin: The most traded SHFE 2109 tin contract fluctuated within a narrow range between 237,500-239,000 yuan/mt last Friday night.

At fundamentals, the spot inventories and warehouse receipts remained low, but the tight ore supply was to some extent alleviated after Yinman Mining resumed production.

The significant drop in open interest last Friday indicated that the sharp rise in the short term had basically ended, and the volatility of the prices in the overnight trading also showed the falling market popularity.

The focus will be whether the tight supply can further loosen and when the market enthusiasm will recover. SHFE tin prices are expected to remain volatile at high levels before the funds re-enter the market, and the September contract is likely to trade between 235,000-240,000 yuan/mt today.

Nickel: The most traded SHFE 2109 nickel contract rose to 147,160 yuan/mt in the overnight trading last Friday.

The strong economic data in US caused the wide fluctuations in commodity prices, and nickel prices maintained an upward trend. The pressure from 150,000 yuan/mt is worth attention.

Fundamentally, the production cut of downstream stainless steel is limited, and the demand for nickel sulphate is steadily rising. Nickel price is likely to rise further.

Social inventories and warehouse receipts at SHFE of nickel plate declined to a record low, and the prices may continue to strengthen in the structure.

SHFE nickel is expected to move between 140,000-149,000 yuan/mt today.

SMM comments Copper Aluminium Lead Nickel Zinc Tin

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