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SMM Evening Comments (Jun 13): Shanghai Nonferrous Metals All Closed with Losses on High Inflationary Pressure
Jun 13, 2022 19:00CST
Source:SMM
Shanghai nonferrous metals closed all in losses as rising US dollar index pressured the non-ferrous market on the US CPI that still stood on a 40-year high in May.

SHANGHAI, Jun 13 (SMM) – Shanghai nonferrous metals closed all in losses as rising US dollar index pressured the non-ferrous market on the US CPI that still stood on a 40-year high in May.

Shanghai copper shed 1.12%, aluminium fell 2.82%, lead lost 0.5%, zinc slid 1.24%, tin dropped 3.67%, and nickel declined 4.8%.

Copper: The most-traded SHFE 2207 copper closed down 1.12% or 810 yuan/mt at 71,720 yuan/mt, with open interest down 8,982 lots to 144,037 lots.

On the macro front, U.S. CPI in May recorded the largest annual increase in nearly 40 years and a half, and the market expects the Federal Reserve may carry a 50 basis point rate hike into September to combat inflation. The US dollar index continued to rise to 104.66, once approaching its previous high this year, with non-ferrous metals basically running under pressure.

In the spot market, there is only two trading days before the delivery of SHFE 2206, and the spot premiums changed quickly along with the spread of SHFE front-month and next-month contracts, which expanded to 230-270 yuan/mt in backwardation, and the spot premiums also dropped. Import losses narrowed to 100 yuan/mt today with the improvement of SHFE/LME price ration. And the LME inventory is Asia is likely to flow into China. As such, spot premiums are unlikely to rise with the absence of spotlight in real estate and infrastructure.

Aluminium: The most-traded SHFE 2207 aluminium closed down 2.82% or 580 yuan/mt to 19,995 yuan/mt, with open interest up 6,424 lots to 168,761 lots.

Domestic supply continued to pick up, but the improving demand needs to be further verified, hence the pressure on the fundamentals still existed. Aluminium prices are likely to fall in the mid to long term with multiple bearish factors. Overseas aluminium social inventory, however, remained low, which will underpin aluminium prices, which are unlikely to fall greatly in the near term.

Lead: The most-traded SHFE 2207 lead closed down 0.5% or 75 yuan/mt at 14,955 yuan/mt, with open interest up 2,996 lots to 54,342 lots.

Traders quoted based on the market situation, and some refused to expand the discounts with the approaching delivery of SFHE 2206. Downstream players purchased on rigid demand, and transactions with small orders were just so-so.

Zinc: The most-traded SHFE 2207 zinc closed down 1.24% or 325 yuan/mt at 25,835 yuan/mt, with open interest down 488 lots to 106,151 lots.

The market was pressured by high US inflation, while domestic consumption has not yet improved. SMM zinc ingot social inventory rose slightly to 232,600 mt, up 800 mt from last Friday. And there is risk that zinc prices would fall. Tonight market players shall watch the support at the 20-day moving average.
 

Tin: The most-traded SHFE 2207 tin closed down 3.67% or 9,680 yuan/mt at 254,100 yuan/mt, with open interest up 2,027 lots to 35,569 lots.

In the spot market, upstream quotes were 252,750 yuan/mt on average in morning trade, down 7,750 yuan/mt from the last trading day. Most sellers appropriately lowered the prices with falling futures prices, and market sources were sufficient. Some sellers reported better transactions than last week, and the downstream demand picked up on falling prices. SHFE warrants added 248 mt to 3,793 mt today.

Chifeng Dajingzi Tin Co. decided to suspend the production for maintenance for a month starting from June 16, 2022 due to increasing difficulties in operation after tin prices slumped recently, another non-ferrous metal company in Guangdong will overhaul from June 15 to July 14. Tin output loss from maintenance is estimated at 550 mt/month.

Nickel: The most-traded SHFE 2207 nickel closed down 4.8% or 10,380 yuan/mt at 205,650 yuan/mt, with open interest up 729 lots to 62,772 lots.

For pure nickel, refined nickel output in May rose 10.59% MoM as some salt factories resumed the production of refined nickel amid squeezed profits of nickel sulphate, and the output is expected to rise further in June. Downstream demand picked up slightly, but actual consumption was still less than expected. To sum up, the supply was relatively sufficient in light of rising supply and poor demand, and near-term nickel prices will drop from high.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]

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