SMM Evening Comments (Sep 28): Shanghai Nonferrous Metals All Closed with Losses amid Rising US Dollar Index

SHANGHAI, Sep 28 (SMM) – Shanghai nonferrous metals closed all in the negative territory as the US dollar index pulled back amid unresolved US debt issue, and the news of the fourth batch of national reserves to be released have also pressured the market.

Shanghai copper lost 0.14%, aluminium fell 1.22%, lead edged down 0.17%, zinc dropped 1.37%, tin plummeted 4.36%, and nickel slid 3.07%.

Copper: The most-traded SHFE 2111 copper closed down 0.14% or 100 yuan/mt to 69230 yuan/mt, with open interest up 3762 lots to 118000 lots.

On the macro front, Fed Chair Powell expressed that the employment market was still ideal and the goods prices have been on the rise due to supply difficulties, sending out dovish signals. US dollar pulled back and SHFE copper rallied in the day. However, the market still expected an early tapering in November, which pushed up US dollar index and pressured overnight SHFE copper.

In China, the market transaction became cautious due to power rationing, and risk appetite shrank amid worries over the pre-holiday restocking demand.

Tonight, the market shall watch the Richmond Fed manufacturing index for September.

Aluminium: The most-traded SHFE 2111 aluminium closed down 1.22% or 280 yuan/mt to 22680 yuan/mt, with open interest down 4088 lots to 277,000 lots.

The social inventory of aluminium trended up again due to suppressed downstream demand on the back of power rationing in Jiangsu, Guangdong and Shandong. The fourth batch of government reserves to be released has been officially announced, correcting back the aluminium prices to some extent.

Lead: The most-traded SHFE 2110 lead closed down 0.17% or 25 yuan/mt at 14470 yuan/mt, with open interest down 13984 lots to 24287 lots.

In spot market, the inventory in Shanghai and London continued to fall. Goods holders were active in making shipments, while the downstream restocked on demand. The market transactions warmed up amid slightly falling prices, but real transactions seem to be unchanged.

Zinc: The most-traded SHFE 2111 zinc closed down 1.37% or 315 yuan/mt at 22715 yuan/mt, with open interest down 12093 lots to 101498 lots.

On the macro front, the energy crisis in Eurozone intensified, which is likely to extend to countries all over the world but with varying degrees. On the fundamentals, the fourth batch of national reserves to be released has been determined. However, it will be more difficult to estimate the influences on social inventory in light of power rationing.

Tin: The SHFE 2110 tin closed down 4.36% at 269800 yuan/mt, with open interest down 1030 lots. The most-traded SHFE tin has changed to 2111 contract, with relative quiet daily chart.  

On the fundamentals, spots available in the market were relatively tight mainly due to concentrated pre-holiday purchase on the dip. The sellers were also active in making shipments in consideration of risks of holding goods during the one-week holiday. Since there are only two trading days before the National Day holiday, the capitals are unlikely to pour into the market should there be no significant changes on the fundamental front.

Nickel: The most-traded SHFE 2110 nickel closed down 3.07% or 4470 yuan/mt to 141060 yuan/mt, with open interest down 10747 lots to 32329 lots. The nickel prices fell due to concerns over falling demand of nickel from the stainless steel sector which has been required to cut the output. Intraday SS2110 contract weakened, bringing down the nickel prices amid shrinking demand. Meanwhile, demand from the new energy sector was also negatively influenced as the production of nickel sulphate and precursor has been affected by power rationing. Since the market lacks strong bullish factors, nickel prices are expected to stay weak in the near term.