SMM Evening Comments (Aug 16): Shanghai Nonferrous Metals Closed with Losses on Less-than-Expected Industrial Readings

SHANGHAI, Aug 16 (SMM) – Shanghai nonferrous metals market closed in the negative territory except for aluminium as the Chinese economic performance in July fell short of expectations.

Shanghai copper fell 0.3%, lead slid 0.1%, zinc was basically flat (-0.02%), tin lost 0.05%, nickel dropped 0.4% and aluminium gained 0.62%.

Copper: The most-traded SHFE 09 copper contract closed down 0.30% or 210 yuan/mt to 69660 yuan/mt, with open interest up 2125 lots to 120200 lots.

On the macro front, the 7-day moving average of new deaths in the US peaked again from May, pushing down US consumer confidence index in early August to its lowest in a decade, risking economy outlook. Market expectations on a tapering QE weakened subsequently. On the other hand, orders of overnight reverse repurchase facility hit new highs again. Copper prices lack clear uptrend motivations amid a mixture of bullish and bearish factors.

In China, the added value of industries above designated scale in July rose 6.4% year-on-year, total retail sales of consumer goods added 8.5%, and domestic fixed-asset investments (excluding rural households) in January-July climbed 10.3%, all lower than expected or previous data, weighing on non-ferrous metals markets slightly.

Tonight, the market shall watch the New York Fed manufacturing industry index in August. If the real data outperformed expectation, US dollar index would rise and pressured on copper prices.

Lead: The most-traded SHFE 2109 lead closed down 0.10% or 15 yuan/mt to 15410 yuan/mt, with open interest up 9 lots to 82791 lots. Spot prices were flat today. Smelters maintained quotation with premiums, while downstream sector held a wait-and-see stance. Monthly spread between SHFE lead August – September contract winded, creating arbitrage opportunities in the trading market, and transactions were comparatively vigorous. Lead prices are unlikely to rebound in light of a tight supply & demand pattern and sustained re-stocking. Tonight the market may watch whether the prices could stabilise around 15400 yuan/mt.

Zinc: SHFE zinc closed down 0.02% or 5 yuan/mt to 22400 yuan/mt, with open interest down 2540 lots to 63133 lots.

On the macro front, China economic indexes released today were mostly below expectations, triggering market concerns over the recovery process. Meanwhile, the resurgence of COVID-19 pandemic since end of July will bring more uncertainties to Chinese economy, and keep disrupting the consumption market.

On the fundamentals, the de-stocking of social zinc inventories will extend into this week and the near future according to SMM, thus underpin zinc prices.

Tin: The most-traded SHFE 2109 tin closed down 0.05% at 237670 yuan/mt, with open interest down 1805 lots. Prices are likely to fluctuate at highs according to the long and short capitals’ lack of interest to enter the market.

Nickel: The most-traded SHFE 2109 nickel closed down 0.4% or 590 yuan/mt at 146220 yuan/mt, with open interest up 672 lots to 126174 lots. Intraday LME nickel prices fluctuated at around $19600/mt. Nickel prices are expected to conject at highs in the short term, and are unlikely to break previous highs amid a lack of clear uptrend motivations.