SMM Evening Comments (Oct 8): Shanghai Nonferrous Metals Closed with Gains amid Mitigated US Debt Risks

SHANGHAI, Oct 8 (SMM) – Shanghai nonferrous metals closed all in the positive territory as the US debt risks have been contemporarily mitigated.

Shanghai copper gained 0.98%, aluminium advanced 0.24%, lead rose 2.06%, zinc added 1.73%, tin surged 3.26%, and nickel soared 3.2%.

Copper: The most-traded SHFE 2111 copper closed up 0.98% or 670 yuan/mt to 68840 yuan/mt, with open interest down 38 lots to 119500 lots.

On the macro front, the Senate voted to extend US debt limit to US$480 billion through early December after Democrats and Republicans reached a deal to avert economic disaster. The US stocks and the three major indexed rose by more than 1%, while US dollar index fell slightly.

On the fundamentals, the copper inventory in major markets in China rose 20,900 mt to 111,000 mt as of October 8 from September 30. The power rationing policies continued in many places during the National Day holiday, affecting both the smelters and processing companies.

Tonight, the market shall watch the non-farm payrolls due on Friday, which is expected to see an increase of 500,000 according to experts, paving the way for tapering bond purchases in November.

Aluminium: The most-traded SHFE 2111 aluminium closed up 0.24% or 55 yuan/mt to 22755 yuan/mt, with open interest down 6161 lots to 235914 lots.

According to SMM, the social inventory of aluminium ingot added 47,000 mt to 862,000 mt from the pre-holiday level. And some aluminium ingots were still on the road due to reduced transportation efficiency during the National Day holiday and blockage of roads amid flood in Shanxi. On the fundamentals, the aluminium supply and demand were both weak, with estimate of supply to shrink further. The impact of power rationing in Zhejiang, Jiangsu and Guangdong will maintain in the near term.

Lead: The most-traded SHFE 2111 lead closed up 2.06% or 295 yuan/mt at 14610 yuan/mt, with open interest down 4300 lots to 68488 lots.

In the spot market, primary lead delivery was mainly for long-term contracts, and the inventory has been insufficient. Smelter quoted with premiums of 50 – 200 yuan/mt over SMM 1# lead, and traders’ quotes maintained pre-holiday level of discounts of 30 – 0 yuan/mt over SHFE 2110 contract. For secondary lead, the mainstream quotes of secondary refined lead was flat over SMM 1# lead, and transaction have been thin. The consumers have turned to primary lead due to rising prices of secondary lead.

The overall market was wait-and-see amid rising lead prices. However, the ADP data and ISM manufacturing employment reading has been positive, boosting market sentiment. SHFE lead bottomed out amid power rationing against secondary lead and the factor of profit.

However, the lead prices lack uptrend momentum after the National Day holiday as the battery companies maintained comparatively sufficient inventory of raw materials, and the power rationing has begun to impact the demand side.

Zinc: The most-traded SHFE 2111 zinc closed up 1.73% or 390 yuan/mt at 22945 yuan/mt, with open interest up 4773 lots to 88281 lots.

In spot market, the demand during the seasonal high in September and October was sluggish. Downstream participants were unwilling to enter the market. The delivery was mainly for long-term contracts.

Tin: The SHFE 2111 tin closed up 3.26% at 279680 yuan/mt, with open interest up 2123 lots.

On the fundamentals, the market has been cautious in the first trading day after the National Day holiday. The market supply was unexpectedly tight, which was on the contrary to previous estimate. The smelting sector has been less affected by the power rationing, and the market shall watch the impacts to electronics and photovoltaic sectors. The performance of the next week is expected to return to normal.

Nickel: The most-traded SHFE 2111 nickel closed up 3.2% or 4410 yuan/mt to 142230 yuan/mt, with open interest up 1957 lots to 94511 lots.

On the fundamentals, the demand for nickel recovered amid easing power rationing policies, resumption of production in Jiangsu, and resumed production of new energy companies, pushing up nickel prices.