SMM Evening Comments (Oct 15): Shanghai Nonferrous Metals All Closed with Big Gains amid Global Energy Crisis

SHANGHAI, Oct 15 (SMM) – Shanghai nonferrous metals all closed in the positive territory with significant increase on the back of global energy crisis that has caused the raw materials prices to surge.

Shanghai copper advanced 2.8%, aluminium rose 3.82%, lead added 1.52%, zinc gained 3.27%, tin increased 2.16%, and nickel climbed 2.6%.

Copper: The most-traded SHFE 2111 copper closed up 2.80% or 2010 yuan/mt to 73820 yuan/mt, with open interest up 1779 lots to 162564 lots.

On the macro front, the US PPI in September indicated the high inflation rate in the US still existed, but the interest rate hike will need time amid the risks of COVID-19 pandemic and the economic pressures brought by the surging gasoline prices caused by global energy crisis.

On the fundamentals, the ratio of LME cancelled warrants was as high as 74.95% in the last trading day, with the inventory falling 4,500 mt again. The domestic social inventory is also at a historical low level.

Tonight, the market shall watch the monthly growth rate of US retails sales in August (estimated at -0.2%, and finalised at 0.7% in the previous session).

Aluminium: The most-traded SHFE 2111 aluminium closed up 3.82% or 895 yuan/mt to 24355 yuan/mt, with open interest down 1130 lots to 191305 lots.

The frequent power rationing and rising costs of coal-fired electricity has strongly underpinned the aluminium prices. However, the downstream operating rates fell on the same reasons. As such, the supply and demand of domestic aluminium are both weak.

Lead: The most-traded SHFE 2111 lead closed up 1.52% or 230 yuan/mt at 15365 yuan/mt, with open interest down 6743 lots to 52722 lots.

The lead prices have been rising continuously, encouraging the smelters to actively make shipments. But the downstream purchase has been cautious for fear of possible decline in prices. According to SMM research, the primary and secondary lead smelters have all resumed some of the production, but the overall situation has been unsatisfying. The social inventory keeps falling to below 200,000 mt, underpinning short-term SHFE lead prices.

Zinc: The most-traded SHFE 2111 zinc closed up 3.27% or 815 yuan/mt at 25720 yuan/mt, with open interest down 12597 lots to 98966 lots.

The supply side of zinc has been greatly impacted by the power rationing, which is likely to be the new normal in Q4. The demand of the downstream sector, including galvanising, zinc alloy and zinc dioxide, is also sluggish due to the power rationing. The influences of power cuts are greater to the supply side than the demand. But the zinc supply is unlikely to be that tight amid the fourth batch of released national reserves.

Tin: The SHFE 2111 tin closed up 2.16% or 5930 yuan/mt at 280920 yuan/mt, with open interest down 1231 lots to 26443 lots.

On the fundamentals, the market supply and demand were still weak. The follow-up power rationing policy is likely to become the major influencing factor of the supply and demand as the winter is coming.  

Nickel: The most-traded SHFE 2111 nickel closed up 2.60% or 3730 yuan/mt to 147390 yuan/mt, with open interest down 766 lots to 93097 lots.

The demand for nickel of the stainless steel sector improved, but the production of ferronickel mills have failed to resume to the level estimated by the market. The supply remained tight. The new energy sector has demonstrated more demand though the current supply of nickel sulphate has been sufficient. The rising raw materials prices caused by a global energy crisis will benefit all non-ferrous metals.