SMM Morning Comments (Aug 27): Shanghai Base Metals Generally Went Down after Fed Hawkish Statement

SHANGHAI, Aug 27 (SMM) – Shanghai base metals mostly slid down on Friday following the Fed officials’ hawkish statements and rebounding US dollar index. Meanwhile, their counterparts on LME mostly fell.

LME metals mostly fell in the trading on Thursday. Copper dropped 0.49%, lead lost 0.82, zinc fell 0l.55%, and aluminium was flat from the previous day.

SHFE metals mostly closed mixed in the overnight trading yesterday. Copper advanced 0.36%, aluminium rose 1.1%, lead gained 0.82%, zinc fell 0.86%, and nickel slid 2.05%.

Copper: Three-month LME copper dropped 0.49% on Thursday night to close at $9,299/mt, and is expected to trade between $9,250-9,340/mt today.

The most-traded SHFE 2110 copper contract advanced 0.36% to close at 68,840 yuan/mt in the overnight trading yesterday, and is expected to trade between 68,600-69,200 yuan/mt today, with spot premiums between 170,230 yuan/mt.

On the macro front, two Fed officials issued hawkish remarks last night, urging policymakers to act quickly to slow down asset purchases, causing the US dollar to rebound. SHFE copper stopped rising and fluctuated at high levels. The Fed’s annual Jackson Hole meeting has opened, and investors are waiting for the possible taper signal from the meeting. In the spot market, prices fell back after surging, and traders’ stocks were low after the deliveries for long-term orders. The inflow of imported copper slowed down, and holders held prices high. Premiums are likely to remain high.

Aluminium: LME aluminium opened at $2,620/mt on Thursday morning, with the lowest and highest prices at $2,593.5/mt and $2,639/mt, and closed at $2,620/mt.

The most-traded SHFE 2110 aluminium contract opened Thursday's night session at 20,485 yuan/mt, with the lowest and highest prices at 20,460 yuan/mt and 20,750 yuan/mt before closing at 20,640 yuan/mt, up 225 yuan/mt or 1.1%.

Changji Prefecture in Xinjiang required local aluminium plants to control production, which involves annualised operating capacity of close to 360,000 mt. This news sent aluminium prices to a new high and will continue to support aluminium prices.  Market shall continue to pay attention to consumption changes, inventory trends, and energy consumption control policies in different provinces.

Lead: Three-month LME lead lost 0.82% to close at $2,291/mt on Thursday. US dollar rebounded amid Fed officials’ hawkish statements, and lead futures fell back to test the 10-day moving average. SMM will monitor whether SHFE lead can stabilise around the 10-day moving average.

The most-active SHFE 2110 lead contract gained 0.82% to close at 15,425 yuan/mt in the overnight trading yesterday amid the fierce game between longs and shorts. Today’s focus will be whether SHFE lead can stabilise around 15,400 yuan/mt.

Zinc: Three-month LME zinc fell 0.55% to $2,998/mt, with open interest increasing 1,739 lots to 250,000 lots. Zinc stocks across LME-listed warehouses rose 125 mt to 239,650 mt overnight. The Fed’s hawkish officials urged to start reducing debt purchases as soon as possible, which boosted bearish sentiment. LME zinc is expected to fluctuate between $2,960-3,010/mt today.

The most-liquid SHFE zinc contract slid 0.86% to settle at 22,395 yuan/mt in the overnight trading, with open interest up 221 lots to 93,657 lots. Zinc price trend has been subject to macro fronts. The Fed’s hawkish remarks have also suppressed market sentiment and SHFE zinc centre trended lower. The most-traded SHFE 2110 contract is expected to move between 22,000-22,500 yuan/mt today, while spot premiums for domestic #0 Shuangyan will be seen at 150-170 yuan/mt against the September contract.

Nickel: SHFE 2109 nickel contract fell 2.05% to end at 141,280 yuan/mt last night.

Although there is no obvious change in fundamentals, nickel prices are unlikely to run against the trend amid a subdued macroeconomic sentiment. The impact of the macro sentiment on nickel prices today would be still greater than that of fundamentals. Price volatility is expected to be noticeable.

Tin: SHFE tin moved within a narrow range of 241,500-243,500 yuan/mt during Thursday's night session. Smelters held offers firm due to low inventories. LME and SHFE tin warrants continued to decline. Tight supply is unlikely to to ease in the near term. However, downstream solder companies are unwilling to purchase at current high tin prices. SHFE tin is expected to meet resistance at 245,000 yuan/mt on Friday and find support at 240,000 yuan/mt, with more investors likely to withdraw.