SMM Evening Comments (Oct 13): Shanghai Nonferrous Metals Closed with Mixed Performance amid Easing Power Rationing

SHANGHAI, Oct 13 (SMM) – Shanghai nonferrous metals closed with mixed performance amid the hawkish signal from the Federal Reserve and the easing power rationing in China.

Shanghai copper edged down 0.3%, aluminium advanced 0.81%, lead lost 0.64%, zinc gained 1.5%, tin fell 1.38%, and nickel slid 0.94%.

Copper: The most-traded SHFE 2111 copper closed down 0.3% or 210 yuan/mt to 70100 yuan/mt, with open interest up 613 lots to 144545 lots.

On the macro front, Fed’s Bullard says the bond purchases should be tapered quickly in case rate hikes are needed when inflation becomes a larger problem, heightening market expectations of tapering in November. The US dollar index surged to a high in the past year, pressuring overnight SHFE copper.

On the fundamentals, the imports of unwrought copper and copper products stood at 4.02 million mt in the first three quarters in 2021, according to the General Administration of Customs, down 19.5% on the year. The imports stood at 406,000 mt in September, up 3.1% month-on-month, reversing the previous downward trend, which indicated that the domestic consumption is still resilient, though less robust when compared with the previous years.

Tonight, the market shall watch the US CPI reading in a time when the inflation worries heighten.

Aluminium: The most-traded SHFE 2111 aluminium closed up 0.81% or 190 yuan/mt to 23600 yuan/mt, with open interest down 11466 lots to 208808 lots.

The energy consumption control policy continued to exert influences, and some of the aluminium capacity in Qinghai and Gansu has been shut down as a result. The supply shrank further. Meanwhile, the surging prices of thermal coal has pushed up the production costs of aluminium, offering strong support over aluminium prices, coupled with the strength of LME aluminium. Nonetheless, domestic inventory of aluminium rose slightly, constraining the upside room amid the arrivals of the fourth batch of released national reserves.

Lead: The most-traded SHFE 2111 lead closed down 0.64% or 95 yuan/mt at 14795 yuan/mt, with open interest down 896 lots to 62343 lots.

The supply kept being disrupted by the power rationing, while some research institute expressed that global lead market may see a situation of oversupply. The trading market has been active ahead of the delivery of SHFE contract, but the in-plant inventory of smelter was limited.

Zinc: The most-traded SHFE 2111 zinc closed up 1.5% or 355 yuan/mt at 24000 yuan/mt, with open interest up 2392 lots to 108486 lots.

The demand in the traditional seasonal high is likely to fall short of expectations in September and October. The goods holders kept making shipments, pushing up the supply. The traders, however, were cautious in making purchase. The overall market has been subdued.

Tin: The SHFE 2111 tin closed down 1.38% or 3860 yuan/mt at 275880 yuan/mt, with open interest up 440 lots to 28171 lots.

On the fundamentals, the goods available in the market became tight again. The supply in October will probably pick up amid ramped-up production among smelters, and the import and export windows have opened. In terms of demand, many downstream solder and electronics companies are still affected by the power rationing. As such, the supply is estimated to stay sufficient, and the power rationing remains as the focus. The future movements of the long and short capitals remain unclear.

Nickel: The most-traded SHFE 2111 nickel closed down 0.94% or 1370 yuan/mt to 143880 yuan/mt, with open interest down 3256 lots to 93506 lots.

The supply of raw materials was still tight as the inventory of nickel ore grew slowly. The domestic ferronickel plants were still under the influence of power rationing, pushing up the demand for nickel plate as an alternative for ferronickel. The output of stainless steel is expected to stabilise in October, though the production restrictions remained. The demand from the new energy sector was still robust. The downstream sector also showed greater restocking demand on dips.