SMM Evening Comments (Aug 23): Shanghai Nonferrous Metals Closed with Major Gains

SHANGHAI, Aug 23 (SMM) – Shanghai nonferrous metals market mostly closed in the postive territory amid support from the fundamentals.

Shanghai copper gained 1.55%, aluminium surged 2.08%, lead went up 1.91%, zinc slid 0.56%, tin added 0.88%, and nickel climbed 1.13%.

Copper: The most-traded SHFE 10 copper contract closed up 1.55% or 1030 yuan/mt to 67620 yuan/mt, with open interest up 156 lots to 129200 lots. It seems that long capitals have been flowing to near-month contracts, and long and short capitals were both cautious.

On the macro front, investors feared that the economic recovery will be disrupted by the raging delta variant, lowing their expectations for an early tightening of liquidity by the Fed. Market sentiment improved slightly and copper futures rallied. The German initial PMI for August disclosed in the afternoon fell short of expectations, firstly weighing on LME and then SHFE 10 contract which fell slightly approaching end of trading day with comparatively strong support.

Tonight, the market shall pay attention to initial data of Markit manufacturing PMI for August (estimated at 62.3, and finalised at 63.4 in the previous session) and Markit services PMI for August (estimated at 59.2, and finalised at 59.9 in the previous session) in the US.

Aluminium: The most-traded SHFE 2110 aluminium closed up 2.08% or 145 yuan/mt to 20390 yuan/mt, and long open interest up 47154 lots. On the fundamentals, aluminium output is expected to shrink further in Q3 in view of short supply of power and intensified control over energy consumption and pollution. Meanwhile, commissioning of expansion projects will also be postponed. Cargos available in the market in Gongyi will maintain amid disrupted transportation. Aluminium prices are likely to trend higher due to favourable supply and demand pattern.

Lead: The most-traded SHFE 2109 lead closed up 1.91% or 290 yuan/mt to 15420 yuan/mt, and long open interest down 4100 lots to 45387 lots. In spot market, primary lead transactions were mainly for long-term orders, while cargos available for small orders were limited. And downstream purchase was driven by rigid demand. Lead prices were testing 15500 yuan/mt, increasing shipments by secondary lead smelters. Mainstream quotations were offered at discounts of 200-300 yuan/mt against SMM1# lead. Transactions thinned as downstream sector was cautious about purchasing at high. Social lead inventories climbed to 200,000 mt. Downstream consumptions still possess uptrend potential amid mild recovery in battery sector for electrical bicycle and vehicles.

Zinc: The most-traded SHFE zinc closed down 0.56%, with open interest down 7125 lots. SMM data showed that domestic zinc inventories added 7500 mt on the week. And the prices remained bearish.

Tin: The most-traded SHFE 2109 tin closed up 0.88% at 233280 yuan/mt, with open interest down 1138 lots. In terms of daily chart, the prices fluctuated within a narrow rangebound after great falls in the past few trading days, and current trending has not been able to challenge key support. Market activity kept weakening as both long and short capitals chose not to build positions at current level. On the fundamentals, cargos available in the market were comparatively tight according to traders, and some brands have even been sold out in regional market. Spot premiums fell but remained at a high level, suppressing actual transactions. SHFE tin is expected to fluctuate mildly before capitals regain interests in entering the market.

Nickel: The most-traded SHFE 2109 nickel closed up 1.13% or 1580 yuan/mt at 141590 yuan/mt, with open interest down 8567 lots to 85462 lots. Non-ferrous metals rallied today as intraday US dollar index pulled back, pushing up LME futures. SHFE nickel rebounded amid support from fundamentals and demand from stainless steel and new energy sector. However, stainless steel was weakening, potentially forming resistance for nickel.