SMM Evening Comments (Oct 11): Shanghai Nonferrous Metals Closed with Gains on the Back of Global Energy Crisis

SHANGHAI, Oct 11 (SMM) – Shanghai nonferrous metals closed all in the positive territory as the energy crisis has overwhelmed the globe.

Shanghai copper gained 1.43%, aluminium advanced 0.79%, lead rose 1.2%, zinc added 1.66%, tin climbed 1.95%, and nickel soared 2.57%.

Copper: The most-traded SHFE 2111 copper closed up 1.43% or 990 yuan/mt to 70260 yuan/mt, with open interest up 20233 lots to 139746 lots.

On the macro front, US non-farm payrolls for September added 194,000, which was way belwo the market estimated and recorded the slowest gain since the beginning of this year. The good news that the unemployment rate has been declining steadily. The market is still uncertain as for the Fed’s tapering decisions.

On the fundamentals, the ration of cancelled warrants of LME copper still stood at an extremely high level, while the registered warrants remained low. LME copper inventory kept falling. In China, the SHFE copper inventory and SMM social inventory both advanced slightly from a low level after the National Day holiday. The post-holiday power rationing policy has still been intensive, constraining the increase in supply.

Tonight, the market shall watch the year-on-year growth rate of M2 currency supply in China for September (estimated at 8.1% and finalised at 8.2% in the previous session). The rising supply indicates more future expenditures, which will facilitate the development of China economy, which might benefit Australia dollar as Australia is China’s largest trading partner.

Aluminium: The most-traded SHFE 2111 aluminium closed up 0.79% or 180 yuan/mt to 23105 yuan/mt, with open interest down 7115 lots to 228799 lots.

The production costs of aluminium continue to rise amid supply disruptions, rising prices of alumina and climbing power tariffs. As such, the prices of SHFE aluminium are expected to stay high in the short term.

Lead: The most-traded SHFE 2111 lead closed up 1.2% or 175 yuan/mt at 14765 yuan/mt, with open interest down 1594 lots to 66894 lots.

The power rationing polices began to ease before the National Day holiday, but the smelters have resumed the production to varying degrees. The trading market has been active, but the in-plant inventory of smelters was low. The quotes were offered with premiums in some regions, and the downstream sector was cautious in purchasing.

In terms of the inventory, Zhejiang and Jiangsu will see continuous declines in the inventory, while Shanghai and Guangdong have experienced slight increase.

Zinc: The most-traded SHFE 2111 zinc closed up 1.66% or 380 yuan/mt at 23240 yuan/mt, with open interest up 9513 lots to 97794 lots.

On the fundamentals, the social inventory of zinc across the seven major markets in China rose after the National Day holiday but was still at a low level, underpinning zinc prices. The power rationing policy will remain as the near-term market focus.

Tin: The SHFE 2111 tin closed up 1.95% or 5440 yuan/mt at 283769 yuan/mt, with open interest up 6996 lots to 32450 lots.

On the fundamentals, the goods available in the market has still been tight. According to initial research, the output of refined tin in September declined slightly, but is expected to pick up in October. Generally speaking, the output of smelters fell slightly in September, but the impact from the power rationing has been minimal. The performance of the long capitals was strong, likely to pulling up the SHFE tin prices.

Nickel: The most-traded SHFE 2111 nickel closed up 2.57% or 3650 yuan/mt to 145950 yuan/mt, with open interest up 6118 lots to 100629 lots.

On the fundamentals, domestic nickel ore inventory has been rose slowly, and the supply of raw materials remained tight. Meanwhile, the ferronickel plants were also affected by the power rationing. The tight supply of ferronickel have boosted the demand for nickel plate as an alternative. The output in October is likely to stay stable though the downstream production has been dragged down by production reduction policies. The demand from the new energy sector was still robust. In the downstream sector, the restocking demand on dips was strong, and the domestic and foreign inventories have both declined. Thus, the nickel prices rallied.