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SMM Evening Comments (Jun 28): Shanghai Nonferrous Metals Closed All with Gains as Market Confidence Booms
Jun 28, 2022 18:00CST
Source:SMM
Shanghai nonferrous metals closed all with gains as the macro sentiment has been boosted by a series of bullish news. The National Development and Reform Commission (NDRC) said that the country is capable of dealing with changes beyond expectations in the face of the 5.5% GDP growth target.

SHANGHAI, Jun 28 (SMM) – Shanghai nonferrous metals closed all with gains as the macro sentiment has been boosted by a series of bullish news. The National Development and Reform Commission (NDRC) said that the country is capable of dealing with changes beyond expectations in the face of the 5.5% GDP growth target.

Shanghai copper added 2.29%, aluminium rose 2.34%, lead gained 1.53%, zinc jumped 3.52%, tin advanced 8.5%, and nickel increased 4.73%.

Copper: The most-traded SHFE 2208 copper closed up 2.29% or 1,450 yuan/mt at 64,890 yuan/mt, with open interest down 11,487 lots to 135,020 lots.

On the macro front, despite the recent intensification of concerns over economic recession in the market, the US core durable goods orders grew by 0.5% in May, adding credibility to Fed Chairman Powell's assertion that the economy is strong enough to withstand interest rate hikes to curb the impact of inflation, which is at multi-decade highs, and will not fall into recession. As such, the market sentiment has picked up.

In the spot market, goods holders sold off amid financial pressure around mid-year settlement, but the downstream was sluggish in purchasing, hence the spot premiums halved. The constant inflow of imported copper into China as well as the realisation of supply estimate will together suppress the spot premiums in the near term. The market shall watch the SHFE front-month and next-month spread as well as the restocking demand from the downstream.

Aluminium: The most-traded SHFE 2208 aluminium closed up 2.34% or 445 yuan/mt to 19,445 yuan/mt, with open interest down 4,585 lots to 194,577 lots.

In the spot market, aluminium ingot transactions were relatively poor as the downstream was still sluggish, and most players held a bearish outlook. According to SMM spot strength index, the spot buying index created a new low. In the near term, the downstream is still bearish on aluminium prices, and the shipments were hindered. The social inventory may rise after the centralised arrival of aluminium ingot later, pressuring local premiums.

Lead: The most-traded SHFE 2208 lead closed up 1.53% or 230 yuan/mt at 15,245 yuan/mt, with open interest down 2,087 lots to 49,364 lots.

Goods holders generally sold with discounts approaching the month-end amid high SHFE lead prices. The discounts of secondary lead expanded to around 300 yuan/mt over SMM 1# lead. The downstream, however, was still wait-and-see in light of high prices, resulting in few successful transactions.

Zinc: The most-traded SHFE 2208 zinc closed up 3.52% or 825 yuan/mt at 24,250 yuan/mt, with open interest down 4,286 lots to 109,328 lots.

On the macro front, the National Health Commission said that the quarantine period for COVID-related close contacts and inbound persons will be adjusted from "14 days of medical observation + 7 days of home health monitoring" to "7 days + 3 days ". The National Development and Reform Commission (NDRC) said that the country is capable of dealing with changes beyond expectations in the face of the 5.5% GDP growth target. The metals market was boosted by these bullish news. And SHFE zinc was further supported by lingering supply tightness.

Tin: The most-traded SHFE 2207 tin closed up 8.5% or 17,390 yuan/mt at 221,860 yuan/mt, with open interest down 12,415 lots to 19,025 lots.

Quotes from smelters were largely unchanged from that on June 27 in morning trade, and most goods holders still held firm to the prices. Market shipments were muted, and some traders had to lower the premiums in order to clinch a deal.

On the fundamentals, domestic warrants and LME tin inventory were both flat, and the import window has opened again. Imports were sold in discounts, a clear price advantage over domestic tin.

SMM believes that the buyers have turned away from such price hikes as the trading market was quiet. Speculative demand will be high recently.

Nickel: The most-traded SHFE 2207 nickel closed up 4.73% or 8,210 yuan/mt at 181,620 yuan/mt, with open interest down 20,672 lots to 25,179 lots.

On the fundamentals, pure nickel imports became loss-making after SHFE nickel dropped last Friday. For nickel sulphate, the rising supply of high-grade and nickel matte and MHP has squeezed the demand for nickel briquette, and some nickel sulphate production lines have switched to produce refined nickel, potentially raising the supply of pure nickel. On the demand side, transactions of stainless steel in Wuxi weakened. For alloy, the trading market was also quiet due to factors like the procurement cycle. To sum up, pure nickel is expected to stay rangebound amid warming macro environment and rising supply.

[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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