SMM Evening Comments (Sep 7): Shanghai Nonferrous Metals Mostly Fell amid Sluggish Fundamentals

SHANGHAI, Sep 7 (SMM) – Shanghai nonferrous metals mostly closed in the negative territory as the market lacked key influencing factors and the fundamentals were generally sluggish.

Shanghai copper fell 0.45%, aluminium added 0.44%, lead plunged 1.13%, zinc nudged up 0.16%, tin lost 0.65%, and nickel plummeted 1.53%.

Copper: The most-traded SHFE 2110 copper closed down 0.45% or 310 yuan/mt to 69070 yuan/mt, with open interest down 966 lots to 122400 lots.

On the macro front, China released its trade data for August, higher than the previous value and estimate, maintaining its growth since April, 2020, which is basically in line with market expectation. The seasonally-adjusted economic readings for major countries in Eurozone were also in line with estimate.

On the fundamentals, the import volume of unwrought copper and copper stood at 394,017 mt in August according to the customs, down 7% from the previous month, marking the fifth consecutive month of declining. In January-August, the cumulative import volume totalled 3,613,085.0 mt, a decrease of 15.4% year on year. Market demand has been depressed in light of heightening copper prices in both domestic and foreign markets, bringing down the import volume to two-year low.

Tonight the market shall watch the seasonally-adjusted job report in the Eurozone for Q2.

Aluminium: The most-traded SHFE 2110 aluminium closed up 0.44% or 95 yuan/mt to 21730 yuan/mt, with open interest down 12145 lots to 286000 lots.

Fed is scheduled to release the Beige Book on Wednesday, and inventors will look for signals of inflation pressure and right labour market. On the other hand, the turmoil in Guinea will potentially push up alumina cost.

In China, the aluminium market remained bullish in light of strict control over energy consumption and environmental protection, as well as continuous disruptions to the supply side. Meanwhile, social inventories kept declining.

Lead: The most-traded SHFE 2110 lead closed down 1.13% or 170 yuan/mt to 14895 yuan/mt, with open interest up 3827 lots to 93165 lots.

Cost pressures on primary lead smelters intensified, narrowing discounts from the last trading day. Intraday lead ingot spot prices fell, but transactions were light as goods available in the market was insufficient.

Zinc: The most-traded SHFE 2110 zinc closed up 0.16% or 35 yuan/mt at 22505 yuan/mt, with open interest down 2417 lots to 91388 lots. In spot market, inventories in Shanghai and London both fell, and the market kept an eye on the seasonal high in September and October. Goods holders continued to make shipments, but the downstream sector mainly took a wait-and-see attitude. Overall transaction sentiment turned light.

Tin: The most-traded SHFE 2110 tin closed down 0.65% at 244070 yuan/mt, with open interest down 477 lots.

On the fundamentals, spot transactions were basically stable. Upstream output fell slightly according to SMM survey, but could potentially be offset by the reduced demand for export. Therefore, supply and demand pattern will stay balanced in the short term.

Nickel: The most-traded SHFE 2110 nickel closed down 1.53% or 2260 yuan/mt at 145120 yuan/mt, with open interest down 11594 lots to 127536 lots. Nickel inventories were basically low, while supply of ferronickel and nickel ore was still tight, supporting nickel prices. However, the demand side may experience multiple disruptions, including demand from the new energy sector which is likely to trend down amid shortage of chips. And the potential output cut on stainless steel will send the nickel prices to the bearish trajectory. The market shall closely watch the dynamics of the demand side.