SMM Evening Comments (Sep 2): Shanghai Nonferrous Metals Closed with Mixed Performance as Bearish and Bullish Factors Co-existed

SHANGHAI, Sep 2 (SMM) – Shanghai nonferrous metals market mostly closed with mixed performance as the market turned cautious in light of a mixture of bearish and bullish factors.

Shanghai copper fell 0.82%, aluminium rose 1.37%, lead slid 0.13%, zinc added 0.47%, tin climbed 1.17%, and nickel lost 0.98%.

Copper: The most-traded SHFE 2110 copper closed down 0.82% or 570 yuan/mt to 69020 yuan/mt, with open interest down 4297 lots to 126100 lots.

On the macro front, US ISM manufacturing PMI rose to 59.9 in August, and the manufacturing price index fell from 85.7 in July to 79.4, the lowest since beginning of this year. August CPI for euro zone rose 3% year-on-year, and largest gain in a decade. On the other hand, private payrolls rose by 374,000 in August according to ADP job report, fell short of the 613000 estimate. Generally speaking, China’s PMI released in last trading day triggered market worries, while overnight US PMI performed well. The market turned even more cautious amid mixture of bearish and bullish factors.

Tonight, the market shall watch the final reading of US Markit manufacturing PMI for August. A rising PMI reading will support the market and favour US dollar.

Aluminium: The most-traded SHFE 2110 aluminium closed up 1.37% or 290 yuan/mt to 21460 yuan/mt, with open interest down 375 lots to 310500 lots. SMM statistics showed that social aluminium inventories totalled 749000 mt as of September 2, down 5000 mt on the week. Decrease was mainly contributed by Shanghai, Wuxi and Gongyi. Overnight aluminium is likely to show strong performance. The market shall watch downstream consumption and cargo arrivals.

Lead: The most-traded SHFE 2110 lead closed down 0.13% or 20 yuan/mt to 14925 yuan/mt, with open interest up 34 lots to 100342 lots.

In spot market, lead prices rebounded slightly, suppressing downstream purchase by smelters. Primary smelters’ quote premiums stayed high. Mainstream quotes in trading market in Jiangsu and Zhejiang were offered at discounts of 20-0 yuan/mt over SHFE 2019 contract, and transactions were thin. In secondary lead market, mainstream quote discounts stood at 50-100 yuan/mt over SMM1# lead amid rising cost pressures of secondary lead smelters. Some consumers turned to primary lead as price spread between refined lead and lead scrap continued to narrow.

On the macro front, US economic readings weakened, adding expectations for a loose monetary policy. While China’s Caixin manufacturing PMI fell to the contraction territory for the first time in 15 months, depressing market sentiment. The market generally held a wait-and-see attitude.

Tonight, the market shall watch non-farm payrolls and initial jobless claims.

Zinc: The most-traded SHFE 2110 zinc closed up 0.47% at 22270 yuan/mt, with open interest up 551 lots. In spot market, processing fees rallied from a low level. Market circulation tightened slightly, but downstream inquires and deliveries picked up. Actual transactions were still not so good amid high premiums.

Tin: The most-traded SHFE 2110 tin closed up 1.17% at 248990 yuan/mt, with open interest up 1288 lots. On the fundamentals, market maintain a weak pattern in supply and demand. Cargos available in the market were sufficient, and some traders offered with discounts but actual transaction was disappointing. Meanwhile, LME inventories continued to fall while SHFE warrants increased gradually, resulting in contradictions.

In general, the market will keep rising as a whole but expectations for down-correction may increase.

Nickel: The most-traded SHFE 2110 nickel closed down 0.98% at 146890 yuan/mt, with open interest down 28761 lots. On the fundamentals, nickel ore prices stayed high, and traded prices of ferronickel also rose. Nickel prices gained support from tight supply and strong demand.