SMM Evening Comments (Jun 27): Shanghai Nonferrous Metals Closed Mixed with Digestion of Bears

SHANGHAI, Jun 27 (SMM) – Shanghai nonferrous metals closed mixed today as the market pessimism, triggered by aggressive rate hikes in Europe and the US as well as less-than-expected economic readings, has been digested to some extent.  

Shanghai copper slid 1.06%, aluminium fell 0.23%, lead gained 1.47%, zinc declined 3.4%, tin inched up 0.07%, and nickel lost 0.64%.

Copper: The most-traded SHFE 2208 copper closed down 1.06% or 680 yuan/mt at 63,750 yuan/mt, with open interest up 3,168 lots to 146,507 lots.

On the macro front, copper recorded the largest single-week decline this year last week, down more than 6.5%. The initial value of U.S. Markit manufacturing PMI in June stood at 52.4, a 23-month low, and significantly lower than the estimate of 56. As a result, the global pessimistic over economic development led to the sustained weakness in copper prices. After the macro pessimism was digested, market sentiment gradually began to stabilise. Important economic data in China was released this morning, with real profits of enterprises above national scale increasing by 1% year-on-year from January to May. Overseas due to the rising downturn pressure on the economy, there has been rhetoric that the Fed will stop raising interest rates next year or even cut interest rates. Overall, copper prices stabilised after the market pessimism eased marginally.

In the spot market, spot premiums rose slightly compared with last week as June is coming to an end. The customs clearance volume of copper rose as the SHFE/LME price ratio rose steadily, and sources available in the market are expected to rise afterwards. The narrowing SHFE front-month and next-month contract also benefited the goods holders. The sustainability and steadiness of spot premiums will be subject to the futures market dynamics and SHFE front-month and next-month spread. If the shorts slightly restrained their aggressiveness, players with abundance funds could restock on dips.

Aluminium: The most-traded SHFE 2208 aluminium closed down 0.23% or 45 yuan/mt to 19,135 yuan/mt, with open interest up 5,185 lots to 199,162 lots.

According to SMM statistics, aluminium ingot inventory dropped 5,000 mt from last Thursday to 746,000 mt with less arrivals last week. The aluminium billet inventory also dropped amid less arrivals and centralised restocking across the downstream. To sum up, aluminium prices are likely to fall amid slowing de-stocking process of aluminium inventory and muted purchases around the month-end.

Lead: The most-traded SHFE 2208 lead closed up 1.47% or 220 yuan/mt at 15,185 yuan/mt, with open interest down 4,842 lots to 51,451 lots.

According to SMM statistics, lead ingot social inventory across five major markets in China totalled 81,800 mt as of Monday June 27, down 3,100 mt from last Friday and down 12,500 mt from a week ago.

Lead prices rose today amid falling supply, and the quotes in Zhejiang and Jiangsu were relatively firm amid great regional differences in terms of supply. But the downstream was generally cautious, and purchased mainly with long-term orders.

Zinc: The most-traded SHFE 2208 zinc closed down 3.4% or 835 yuan/mt at 23,690 yuan/mt, with open interest up 4,620 lots to 113,614 lots.

On the supply side, TCs for domestic zinc rose 50-100 yuan/mt in metal content, while that for imported zinc fell to $180/dmt. The rise in TCs for domestic zinc was the result of short-term rally of zinc prices as well as the lingering ore supply shortage. On the demand side, some players restocked on dips as zinc prices dropped, but the consumption market remained sluggish as the terminal end has not yet fully recovered. Spot market transactions improved after zinc prices slumped.

Tin: The most-traded SHFE 2207 tin closed up 0.07% or 160 yuan/mt at 214,630 yuan/mt, with open interest down 1,738 lots to 31,440 lots.

In the spot market, spot premiums offered by the traders were relatively flat from last week in morning trade, which were less affected by rising futures prices, while the smelters were firm to their prices. Generally speaking the market shipments were poor, and some sellers failed to clinch a deal by noon. SHFE warrants inventory dropped 16 mt to 3,151 mt, and LME tin inventory rose 180 mt to 3,435 mt as of June 24.

Nickel: The most-traded SHFE 2207 nickel closed down 0.64% or 1,160 yuan/mt at 179,480 yuan/mt, with open interest down 5,591 lots to 45,851 lots.

The fundamentals of nickel changed little recently. Pure nickel production rose slightly, and the imports remained profitable, hence the supply tightness will ease slightly. On the demand side, though the transactions of stainless steel spots improved, it failed to shore up nickel prices as the application of pure nickel in the production of stainless steel is still low. In the alloy sector, the overall transaction was less satisfying. As such, the overall supply of pure nickel was relatively sufficient against the sluggish demand, and the prices are likely to fall in the long run. 

[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.]