SMM Evening Comments (Nov 8): Shanghai Nonferrous Metals Closed with Mixed Performance after Moving in Narrow Rangebound

SHANGHAI, Nov 8 (SMM) – Shanghai nonferrous metals closed with mixed performance as the market was generally quiet today, and the broad sector moved in narrow rangebound.

Shanghai copper advanced 0.72%, aluminium inched up 0.24%, lead lost 0.8%, zinc slid 0.46%, tin gained merely 0.15%, and nickel jumped 0.97%.

Copper: The most-traded SHFE 2112 copper closed up 0.72% or 500 yuan/mt to 70000 yuan/mt, with open interest down 4450 lots to 152708 lots.

On the macro front, US Department of Labor revealed the unemployment rate in October, which dropped 0.2 percentage point on the month to 4.6%. The non-farm payrolls added 531,000, higher than market estimate. Meanwhile, US House passed the $1.2 trillion infrastructure bill for the construction of road, bridge, public transportation and other projects, which is the largest in the past several decades, boosting the capital market. The US dollar index jumped to a record high in the past year. In China, domestic foreign trade readings maintained at a high level, and the export data outperformed market estimate.

On the fundamentals, SHFE weekly copper inventory fell again after rising in the prior week, which stood at less than 40,000 mt. Downstream consumption showed resilience on falling copper prices, which also offered support to SHFE copper.

The market shall watch China M2 currency supply in October and EU Sentix investor confidence index in November.

Aluminium: The most-traded SHFE 2112 aluminium closed up 0.24% or 45 yuan/mt to 18680 yuan/mt, with open interest down 17491 lots to 199829 lots.

The market panics triggered by continuously falling coal prices waned after coal showed signs of stabilising. More importantly, social aluminium ingot inventory welcomed its pivot and turned to downside trend today amid less impacts from power rationing, which underpinned aluminium prices.

The market keep an eye on the performance of consumer market after the power rationing loosened.

Lead: The most-traded SHFE 2112 lead closed down 0.8% or 125 yuan/mt at 15745 yuan/mt, with open interest up 412 lots to 53466 lots.

The power rationing in Henna has mostly came to an end, though it has not been reflected through the operating rates of secondary lead. The pressures of lead ingot supply do rise. In terms of Eurozone trading session, LME non-ferrous metals trended lower broadly, and LME lead also moved all the way down.

Zinc: The most-traded SHFE 2112 zinc closed down 0.46% or 105 yuan/mt at 22920 yuan/mt, with open interest down 1434 lots to 77970 lots.

On the fundamentals, the zinc concentrate supply in Inner Mongolia tightened further due to power rationing. And the time and money required to transport zinc concentrate from one province to another increased significantly on the combined influences of COVID and transportation disruptions. Hence, TCs trended lower again. While the production of smelters are unlikely to return to the peak level either amid shrinking profits.

In terms of inventory, the overall inventories have been falling as the orders that were suppressed in October are being performed recently after the energy consumption control relaxed, thus underpinning zinc prices.

Tin: The SHFE 2112 tin closed up 0.15% or 400 yuan/mt at 275710 yuan/mt, with open interest down 3843 lots to 37244 lots.

On the fundamentals, the November output is likely to drop from October as some smelters will lower their operating rates amid power rationing and tight raw materials supply. But the output in October was still higher than in September. Meanwhile, domestic inventory under warrants were still on the rise ahead of the delivery of SHFE 2111, and spot premiums still stood high. As such, short-term tin prices will remain strong due to low inventory and high spot premiums.

Nickel: The most-traded SHFE 2112 nickel closed up 0.97% or 1370 yuan/mt to 142740 yuan/mt, with open interest up 14118 lots to 110216 lots.

Nickel prices still carried support from the fundamental front, as the new energy sector kept creating demand for nickel, and nickel sulphate prices stayed congested. In terms of stainless steel, an integrated stainless steel mill in south China officially resumed production, bringing more demand for NPI. And NPI prices are unlikely to decline significantly amid rising electricity prices and tight supply and demand balance, which will also offer some support to nickel prices.