SMM Evening Comments (Jul 14): Shanghai Nonferrous Metals Closed All with Losses amid Historically High US Inflation

SHANGHAI, Jul 14 (SMM) – Shanghai nonferrous metals closed all with losses as the US consumer price index jumped 9.1% year-on-year in June, the biggest rise in over 40 years. The market is even weighing a rate hike by 100 basis points in July.

Shanghai copper fell 1.21%, aluminium lost 1.17%, lead slid 1.64%, zinc dropped 4.7%, tin declined 0.88%, and nickel shed 5.83%.

Copper: The most-traded SHFE 2208 copper closed down 1.21% or 680 yuan/mt at 55,450 yuan/mt, with open interest down 5,111 lots to 148,648 lots.

On the macro front, US consumer price index jumped 9.1% year-on-year in June, the biggest rise in over 40 years. The Fed officer Mester said there was no convincing evidence that inflation had peaked and CPI data suggested the Fed would raise interest rates in July by no less than the 75 basis points it did in June. In a survey by the Chicago Fed, the US economic outlook indicator fell to -60 in June, the lowest level since data became available in 2013, and the data suggested the current US economic outlook was even tougher than at the peak of the COVID pandemic.

In the spot market, market players began to quote against the SHFE 2208 contract, and the spread between SHFE 2207 and 2208 contract moved in wide range. Standard quality copper was in premiums of 200 yuan/mt over SHFE 2208 in the morning, and the traders held firm to the prices amid tight supply. The buyers were also cautious. Good-quality copper was also firmly in premiums of 220 yuan/mt over SHFE 2208, but market transactions were less cheering.

Aluminium: The most-traded SHFE 2208 aluminium closed down 1.17% or 205 yuan/mt to 17,255 yuan/mt, with open interest down 9,700 lots to 159,901 lots.

On the fundamentals, the demand side was still sluggish, which was further aggravated by the seasonal low. On the supply side, the production has been rising without news of production cuts for the moment. In addition, the aluminium ingot social inventories across China’s eight major markets totalled 697,000 mt as of July 14, down 26,000 mt from last Thursday and 136,000 mt lower than in the same period last year. A wave of downstream dip buying was seen in the middle of this week.

Lead: The most-traded SHFE 2208 lead closed down 1.64% or 245 yuan/mt at 14,655 yuan/mt, with open interest up 5,995 lots to 54,629 lots.

The traders quoted based on market situation, and began to quote against SHFE 2208 amid approaching delivery of SHFE 2208. Smelters, meanwhile, refrained from selling at lower prices amid falling lead futures prices. The downstream purchased on demand, and the retail market remained unchanged.

Zinc: The most-traded SHFE 2208 zinc closed down 4.7% or 1,085 yuan/mt at 22,020 yuan/mt, with open interest up 612 lots to 108,448 lots.

SHFE zinc was dragged down by LME zinc which dropped below $3,000/mt. On the fundamentals, the consumption side remained weak, and the market was overwhelmed by pessimism on the macro front. Hence supply tightness has been unable to underpin zinc prices.

Tin: The most-traded SHFE 2208 tin closed down 0.88% or 1,710 yuan/mt at 191,600 yuan/mt, with open interest up 8,130 lots to 49,848 lots.

In the spot market, smelters were less active in making quotes, and mainstream smelters were slightly firm to the prices. According to the traders, the premiums of brands changed little from a day ago, and market transactions were still thin; some traders made zero transactions as of noon. The downstream mainly purchased on rigid demand.

Nickel: The most-traded SHFE 2208 nickel closed down 5.83% or 9,810 yuan/mt at 158,560 yuan/mt, with open interest up 2,567 lots to 89,100 lots.

On the fundamentals, domestic pure nickel production increased, while SHFE/LME price ratio rose. On the demand side, the alloy sector picked up, but the stainless steel market was still quiet. To sum up, nickel prices are unlikely to rise significantly amid rising primary nickel 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.]