SMM Evening Comments (Jul 4): Shanghai Nonferrous Metals Closed Mixed amid Lingering Fears of the Future

SHANGHAI, Jul 4 (SMM) – Shanghai nonferrous metals closed mixed as market players were still worried about a potential economic recession with the release of various economic readings. US Institute for Supply Management (ISM) manufacturing index fell to a two-year low in June.

Shanghai copper fell 3.08%, aluminium inched up 0.08%, lead notched up 0.03%, zinc lost 1.34%, tin gained 0.18%, and nickel declined 2.2%.

Copper: The most-traded SHFE 2208 copper closed down 3.08% or 1,930 yuan/mt at 60,660 yuan/mt, with open interest up 2,781 lots to 154,283 lots.

On the macro front, US Institute for Supply Management (ISM) manufacturing index fell to a two-year low in June.

In the spot market, spot premiums were still around 100 yuan/mt, and the market was relatively quiet. Standard-quality copper was in premiums of 120 yuan/mt in morning trade, with few inquiries, and the buyers kept forcing down the prices. The premiums of some goods dropped to 80-90 yuan/mt in afternoon trade, while the sellers insisted on 90-100 yuan/mt. The spread between good-quality and standard-quality copper stabilised at 10-20 yuan/mt, and the overall premiums stood at around 100-140 yuan/mt. However, the imports have been impacting the market, and the downstream intended to buy at premiums of 0 yuan/mt.

Aluminium: The most-traded SHFE 2208 aluminium closed up 0.08% or 15 yuan/mt to 18,980 yuan/mt, with open interest down 597 lots to 181,523 lots.

SHFE aluminium is relatively more resilient, thanks to cost support, amid the broad declines of base metals, and it is also because short-term aluminium prices, after a steel fall in late April, have dropped around the break-even point, while the falling inventory also offered some support.

Lead: The most-traded SHFE 2208 lead closed up 0.03% or 5 yuan/mt at 15,090 yuan/mt, with open interest up 127 lots to 51,115 lots.

The spot market was still relatively quiet, and intraday discounts offered by smelters were largely flat from last Friday. Downstream orders recovered slowly, and players mainly purchased on rigid demand.

Zinc: The most-traded SHFE 2208 zinc closed down 1.34% or 310 yuan/mt at 22,780 yuan/mt, with open interest down 710 lots to 112,583 lots.

On the supply side, the SHFE/LME price ratio rose to 7.22, and the profits of imported zinc were as high as 1,137.1 yuan/mt in metal content, indicating that the import window for overseas ores has opened. However, after taking into account the shipping cycle, domestic ore supply tightness will remain. On the consumption side, the sluggish terminal consumption has pulled down the operating rates of zinc oxide. In the spot market, SMM zinc ingot social inventory across seven major markets in China stood at around 170,000 mt, down significantly from that as of last Friday.

Tin: The most-traded SHFE 2208 tin closed up 0.18% or 350 yuan/mt at 197,300 yuan/mt, with open interest down 3,091 lots to 47,788 lots.

In the spot market, less smelters offered quotes in morning trade, and the existing quotes dropped further from last Friday as sellers held less firm to the prices. The traders, on the other hand, maintained their quotes. The prices of different brands differed greatly. The downstream still purchased on rigid demand. SHFE warrants rose 14 mt to 3,819 mt, and LME tin inventory rose 60 mt to 3,560 mt on July 1.

Nickel: The most-traded SHFE 2208 nickel closed down 2.2% or 3,740 yuan/mt at 166,540 yuan/mt, with open interest down 5,906 lots to 72,948 lots.

The current market panic triggered by the UK sanctions on NORNICKEL has gradually subsided, and the macro factors and the basic supply and demand situation dominate the current nickel price trend. On the macro front, the concerns over economic development weighed on nickel prices.

On the fundamentals, pure nickel supply rose after salt factories resumed the production of refined nickel, and arrivals of imports when the SHFE/LME price ratio was favourable are expected to arrive in the following few weeks. On the demand side, the actual downstream demand will take some time before it actually recovers following the introduction of supporting policies. And demand in the alloy sector was still poor.

[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.]