SMM Evening Comments (Nov 10): Shanghai Nonferrous Metals Closed Mixed amid PPI Readings of Major Economies

SHANGHAI, Nov 10 (SMM) – Shanghai nonferrous metals closed with mixed performances as China and US released its PPI readings for October, and awaited the US CPI for inflation guidance.

Shanghai copper lost 0.27%, aluminium shed 0.79%, lead edged down 0.32%, zinc gained 1.06%, tin was unchanged (+0.02%), and nickel fell 1.03%.

Copper: The most-traded SHFE 2112 copper closed down 0.27% or 190 yuan/mt to 70330 yuan/mt, with open interest down 1761 lots to 151805 lots.

On the macro front, MoM growth of US PPI in October rose by 0.6 percentage point, indicating that high inflation may stay for some time amid tight supply. It is expected that PPI will maintain its growth until December, 2021, which heightened the market’s worries over interest rate hike. Neel Kashkari, President and CEO of the Federal Reserve Bank of Minneapolis, said that the Fed will consider the timeline of interest rate hike after the tapering of bond purchases completes.

In China, the PPI reading for October rose 13.5% year on year, and climbed 2.5% from September, mainly due to global inflation and tight domestic supply of major energy resources and raw materials, adding downside pressures on future economy development. The broad pessimism over economic environment contained the upside momentum of copper.

Tonight, the market shall watch US CPI for October, and jobless claims in the week of November 6.

Aluminium: The most-traded SHFE 2112 aluminium closed down 0.79% or 150 yuan/mt to 18895 yuan/mt, with open interest up 1837 lots to 194232 lots.

Aluminium prices went down again amid weakening coal and ferrous products’ prices. The consumer market outlook also diverged on the back of near-term recovery in demand and estimate of sluggish demand in major producing areas next year.

Lead: The most-traded SHFE 2112 lead closed down 0.32% or 50 yuan/mt at 15570 yuan/mt, with open interest up 1054 lots to 51731 lots.

Spot lead prices edged down, while smelters’ premiums remained unchanged. The spot market was relatively active. Tonight, the market shall watch if lead could gain strong support at 15500 yuan/mt.

Zinc: The most-traded SHFE 2112 zinc closed up 1.06% or 245 yuan/mt at 23330 yuan/mt, with open interest up 670 lots to 75078 lots.

On the macro front, the National Bureau of Statistics released the national CPI and PPI readings for October, with CPI up 1.5% year-on-year and 0.7% MoM; PPI rose 13.5% YoY and 2.5% MoM due to a combination of factors such as abnormal weather, imbalance in supply and demand for some commodities, and rising costs. Prices of non-ferrous commodities were also affected by the sharp fall in ferrous commodity prices under strict policy control.

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.

Tin: The SHFE 2112 tin closed up 0.02% or 50 yuan/mt at 275690 yuan/mt, with open interest up 460 lots to 36993 lots.

On the fundamentals, domestic warrants were on the rise and spot premiums stood high. As such, near-term tin prices are likely to remain high amid low inventory and high premiums.

Nickel: The most-traded SHFE 2112 nickel closed down 1.03% or 1490 yuan/mt to 143050 yuan/mt, with open interest up 6297 lots to 111322 lots.

In terms of the fundamentals of stainless steel, the downstream sector was comparatively weak, and marginal increase of nickel sulphate reduced. While the output has been fair, thus the short-term nickel is likely to stay congested.