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SMM Morning Comments (Aug 19): Shanghai Base Metals Trending Lower amid Fed’s Hawkish Statement
iconAug 19, 2021 10:00
Shanghai base metals generally went down on Thursday morning after Fed’s hawkish statement. Meanwhile, their counterparts on LME trended mixed.

SHANGHAI, Aug 19 (SMM) – Shanghai base metals generally went down on Thursday morning after Fed’s hawkish statement. Meanwhile, their counterparts on LME trended mixed.

LME metals mostly went down on Wednesday night. Copper plunged 1.83%, aluminium edged down 0.5%, lead gained 0.17%, and zinc dipped 0.58%.

SHFE metals performed fell across the board in the overnight trading. Copper shed 2.03%, aluminium dropped 1.11%, lead decreased 0.36%, zinc slid 0.51%, and nickel fell 2.09%.

Copper: Three-month LME copper plunged 1.83% on Wednesday night to close at $9,055.5/mt, and is expected to trade between $9,010-9,100/mt today.

The most-traded SHFE 2109 copper contract shed 2.03% last night to close at 67,510 yuan/mt, and is expected to trade between 67,300-67,900 yuan/mt today, with spot premiums between 230-310 yuan/mt.

On the macro level, the minutes of Fed’s July policy meeting showed that most officials believed that inflation had reached the target and they should taper the bond purchase this year. Copper futures fell under pressure. Due to the spread of Delta virus, crude oil prices fell for the fifth consecutive day, and US oil fell more than 3%, refreshing its lowest point since May 24, which also dragged down copper prices to a certain extent.

Spot prices pulled back nearly 1,000 yuan, but the downstream users generally purchased in Wuxi and Changzhou, and the purchases in Shanghai were scarce. The high premiums were also hard to attract the buyers. Buyers and sells had large differences in prices. SHFE/LME price ratio increased significantly yesterday, opening the import window, and importers delivered goods actively. The intensive shipments of high-quality copper and some low-quality hydro-copper suppressed the spot premiums as well as the rising prices of standard-grade copper delivered for long-term orders. If social inventories continued to increase, the high premiums will be under pressure.

Aluminium: Three-month LME aluminium edged down 0.50% to close at $2,563/mt on Wednesday, with open interest losing 15,874 lots to 653,000 lots.

The most active SHFE 2110 aluminium contract dropped 1.11% to end at 19,975 yuan/mt, with short open interest up 8,472 lots to 226,000 lots.

Despite the strong fundamental support, SHFE aluminium fell for the second consecutive day due to the sluggish macro sentiment. The minutes of the Fed’s July meeting clearly discussed the issue of reducing bond purchases, suggesting that tapering will be launched this year. The hawkish statements drove up US dollar and suppressed commodity prices. SHFE aluminium is expected to trade between 19,800-20,100 yuan/mt, with spot premiums between the discount of 20 yuan/mt and premium of 20 yuan/mt.

Lead: Three-month LME lead gained 0.17% to end at $2,297/mt in the overnight trading on Wednesday. The stock decrease in the LME-listed warehouses slowed down, and the prices may fluctuate between $2,300/mt.

The most-liquid SHFE 2109 lead contract decreased 0.36% to settle at 15,270 yuan/mt last night, with open interest down 1,474 lots to 81,310 lots. SHFE lead is mainly supported by the cost of secondary lead, and the price decline is expected to slow down today.

Zinc: Three-month LME zinc dipped 0.58% to settle at $2,985.5/mt on Wednesday night, with open interest down 4,767 lots to 248,000 lots. Fed hinted that it might tighten monetary policy this year, which triggered pessimistic sentiments in the market. LME zinc is expected to fluctuate between $2,970-3,020/mt today.

The most-liquid SHFE 2109 zinc contract slid 0.51% to settle at 22,525 yuan/mt in the overnight trading, with open interest down 3,416 lots to 66,000 lots. Guangxi, Yunnan and other places are still under pressure to reduce energy consumption, which may continue to affect the production of local smelters. In addition, the possible delay in the release of national reserves also intensified the market concerns about tight supply. The SHFE 2109 contract is expected to move between 22,300-22,800 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 170-200 yuan/mt against the September contract.

Nickel: The most traded SHFE 2109 nickel contract fell 2.09% to close at 141,210 yuan/mt in the overnight trading yesterday.

Strengthened US dollar suppressed non-ferrous metals. The support from 140,000 yuan/mt is worth attention.

Tin: The most traded SHFE 2109 tin contract hit 239,270 yuan/mt and then rebounded quickly after opening last night. The prices fluctuated around 240,000 yuan/mt for the most time in the overnight trading.

The recent low warehouse receipts in SHFE and LME formed a dynamic balance with the expectation of hier supply amid the gradual work resumption in domestic ore plants, which slightly cooled the surging prices of tin contracts. Both long and short funds are hesitant at the prices around 240,000 yuan/mt, and the short term price trend is unclear.

Today’s focus will be the support from 240,000 yuan/mt, and the September contracts are expected to trade between 240,000-243,500 yuan/mt.

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