SMM Evening Comments (Sep 10): Shanghai Nonferrous Metals Closed with Broad Gains amid Falling US Dollar Index

SHANGHAI, Sep 10 (SMM) – Shanghai nonferrous metals all finished in the positive territory as the US dollar index continued to fall and the fundamentals also offered some support.

Shanghai copper rose 1.89%, aluminium surged 1.93%, lead added 0.44%, zinc advanced 0.55%, tin soared 2.82%, and nickel climbed 2.70%.

Copper: The most-traded SHFE 2110 copper closed up 1.89% or 1,300 yuan/mt to 70080 yuan/mt, with open interest up 4404 lots to 127535 lots.

On the macro front, US jobless claims last week recorded a new low since the breakout of COVID-19, indicating steady recovery in job market. Meanwhile, European Central Bank has confirmed on tapering, pressuring US dollar index.

On the fundamentals, upstream imports of copper ore remained high, and TCs of domestic spot copper concentrate continued to climb. On the other hand, copper imports in August fell again on the month, indicating sluggish demand. However, output of copper cathode grew at a slower pace amid maintenance among smelters. Supply of copper scrap is likely to tighten further as copper cathode and copper scrap spread continued to narrow, and Malaysia heightened its standard for copper scrap imports. Demand for copper cathode as a substation for copper scrap increased. Social inventories fell further, supporting copper prices.

Aluminium: The most-traded SHFE 2110 aluminium closed up 1.93% or 430 yuan/mt to 22670 yuan/mt, with open interest down 20339 lots to 271924 lots. Disruptions to the supply side, including energy consumption control in Guangxi and Guizhou, has pushed up aluminium prices. SMM data showed that social aluminium inventory stood at 751,000 mt on Thursday, up 2,000 mt over the previous week.

Lead: The most-traded SHFE 2110 lead closed up 0.43% or 65 yuan/mt to 15070 yuan/mt, with open interest down 5796 lots to 81090 lots. China PPI for August grew at a faster pace, sending non-ferrous metals to the bullish zone. Deliveries from smelters picked up, and transactions were also comparatively busy. Downstream sector purchased on demand, while influences from high prices weakened.

Zinc: The most-traded SHFE 2110 zinc closed up 0.55% or 125 yuan/mt at 22940 yuan/mt, with open interest down 3191 lots to 113017 lots. On the macro front, China PPI index was better than expected due to rising commodity prices and right raw material supply. On the fundamentals, zinc output in September is likely to add 11,800 mt from the previous month. Supply was sufficient, and is likely to surpass demand, when taking into consideration the 50,000 mt of released national reserves. However, the pricing of zinc has deviated from the fundamentals framework due to influences from coal prices.

Tin: The most-traded SHFE 2110 tin closed up 2.82% at 254770 yuan/mt, with open interest up 1690 lots. On the fundamentals, market supply is expected to pick up as smelters’ production activity was stable and the import market was vigorous. The key of price hike lies in the demand side and stability of mines amid political turmoil in Myanmar.

Nickel: The most-traded SHFE 2110 nickel closed up 2.7% or 4020 yuan/mt at 153000 yuan/mt, with open interest down 256 lots to 151085 lots. Intraday non-ferrous metals rose broadly, pushing up nickel prices. LME inventory kept falling, and touched a low not seen in two years. SHFE nickel warrants rallied slightly but remained low. Tight supply of nickel has offered support to nickel prices.

On the fundamentals, nickel sulphate rose beyond expectation, and demand from the new energy sector was also strong. The only major bearish factor came from the output cut policy across stainless steel sector.