SMM Morning Comments (Sep 29): Base Metals Mostly Fell amid Weakened Demand

SHANGHAI, Sep 29 (SMM) – Shanghai base metals mostly fell after Fed’s hawkish statements and amid the weakened demand before the China’s National Day holiday. Meanwhile, their counterparts on LME basically fell as well.

LME metals mostly went down in the trading on Tuesday night. Copper dropped 1.01%, lead fell 0.46%, zinc decreased 0.79%, and aluminium rose 1.0%.

SHFE metals performed similarly overnight. Copper lost 1.04%, lead fell 0.62%, zinc dropped 0.33%, and aluminium rose 1.05%.

Copper: Three-month LME copper dropped 1.01% on Tuesday night to close at $9,256/mt, and is expected to trade between $9,230-9,320/mt today. The trading volume was 15,000 lots, and the open interest reached 261,000 lots.

The SHFE 2111 copper contract lost 1.04% to end at 68,520 yuan/mt last night, likely to trade between 72,800-73,400 yuan/mt today, with spot premiums between 100-220 yuan/mt. The trading volume was 63,400 lots, and the open interest reached 116,000 lots.

On the macro front, the Fed released a series of hawkish statements yesterday. Powell said that the macro economy has almost met the conditions for reduction of bond purchase. The US dollar index jumped to its highest point since early November last year. The strengthening of the US dollar, the uncertainty of the US debt ceiling, China’s release of national reserves, and the recent power rationing forced copper futures to fall back. In the spot market, inquire were scarce amid the risk aversion sentiments. Under the influence of power power rationing, the downstream production will be reduced during the National Day holiday, and the fourth batch of the national reserves will be released after the holiday, so downstream users halted purchase to wait and see.

Aluminium: Three-month LME aluminium rose 1.0% to end at $2,932/mt on overnight.

The SHFE aluminium contract increased 1.05% to end at 23,025 yuan/mt last night.

The aluminium prices fluctuated at high levels. The market saw active long positions; on the other hand, the power rationing has been extended to the downstream producers, coupled with the weekly accumulation of stocks. Many aluminium companies in Ningxia and Qinghai received power rationing notices yesterday, which are expected to see production cuts. Bullish positions increased overnight. The SHFE aluminium prices rebounded and continued to fluctuate at high levels amid production restrictions.

Lead: Three-month LME lead opened at $2,168/mt last night, and fluctuated around $2,166/mt affected by the SHFE lead, before boosted by US and European economic data to hit the highest point at $2,191.5/mt. However, LME lead gave up the gains under the strengthening US dollar and closed at $2,159/mt, down 0.46%. Lead stocks across the LME-listed warehouses decreased slightly, and LME lead gradually picked up amid the slower increase in the US dollar. It is expected to test $2,200/mt today.

The most traded SHFE 2111 lead contract opened at 14,500 yuan/mt last night, and fell to 14,270 yuan/mt with the increased short positions. Later, SHFE lead rebounded to close at 14,420 yuan/mt amid the increased long positions, down 0.62%. The open interest increased by 4,389 lots from the previous day to 73,425 lots.

Zinc: LME zinc fell 0.79% to end at $3,071/mt overnight, with open interest up 444 lots to 266,000 lots. Zinc stocks across LME-listed warehouses dropped by 925 mt or 0.43% to 214,325 mt. US Treasury Secretary Yellen said that Treasury is likely to exhaust its extraordinary measures if Congress has not acted to raise or suspend the debt limit by October 18. LME zinc prices are expected to move between $3,070-3,120/mt today. 

The most-liquid SHFE 2111 zinc contract lost 0.33% to settle at 22,640 yuan/mt in overnight trading, with open interest decreasing 2,791 lots to 98,707 lots. Total zinc inventories across seven Chinese markets stood at 131,300 mt as of September 27, up 2,100 mt from September 24. However, due to the frequent changes of dual control and power rationing policies, coupled with government stockpiles, bringing fluctuations of supply and demand. However, low levels of zinc stocks will support zinc prices. The most-traded SHFE 2111 zinc contract is expected to move between 22,600-23,100 yuan/mt and domestic #0 Shuangyan will be seen at flat against the November contract.

Nickel: The most traded SHFE 2110 nickel contract closed at 141,240 yuan/mt last night after reaching around 142,000 yuan/mt, with the open interest down 5,280 lots to 27,049 lots. The November contract moved closed to the low of the Bollinger Band The spot demand weakened amid the power rationing, and the market had strong wait-and-see mood before the National Day holiday. SHFE nickel is expected to fluctuate lower.

Tin: Tin prices fluctuated at higher levels last night with increasing long positions. The power rationing continues, and the impact on upstream industry is less than downstream plants. SHFE tin prices consolidated at 270,000 yuan/mt and trended higher on rising long positions. The dynamics of long positions remain as the market focus. SHFE tin is expected to meet resistance at 287000 yuan/mt and find support at 270000 yuan/mt today.