SMM Evening Comments (Jul 18): Shanghai Nonferrous Metals Closed All with Gains amid Subsiding Expectations on Aggressive Rate Hikes

Published: Jul 18, 2022 18:00

Save

Shanghai nonferrous metals closed all with gains as the US dollar index shed today, shoring up the non-ferrous metals market. In addition the Federal Reserve Waller voiced support for a rate hike of only 75 basis points this month, rather than 100 basis points. Once the news came out, the market expectations for the interest rate hike weakened, easing the pessimistic sentiment.

SHANGHAI, Jul 18 (SMM) – Shanghai nonferrous metals closed all with gains as the US dollar index shed today, shoring up the non-ferrous metals market. In addition the Federal Reserve Waller voiced support for a rate hike of only 75 basis points this month, rather than 100 basis points. Once the news came out, the market expectations for the interest rate hike weakened, easing the pessimistic sentiment.

Shanghai copper rose 3.28%, aluminium added 3.15%, lead climbed 3.58%, zinc gained 3.54%, tin advanced 4.63%, and nickel jumped 1.95%.

Copper: The most-traded SHFE 2208 copper closed up 3.28% or 1,790 yuan/mt at 56,390 yuan/mt, with open interest down 11,710 lots to 131,640 lots.

On the macro front, US retail sales rose at a monthly rate of 1% in June, higher than the estimate of 0.8% and the previous reading of -0.3%. U.S. initial jobless claims rose to 244,000 last week, a new high from November last year, compared to 235,000 previously and 235,000 expected. China's Q2 GDP grew 0.4% year-on-year, with an estimate of 1.1% and the previous reading of 4.8%, showing that the pandemic impact is beyond expectations.

The spot market was relatively quiet after the futures prices rebounded. Standard-quality copper was quoted in premiums of 200 yuan/mt in morning trade, and dropped quickly to 180-190 yuan/mt with pressure from the buyers. Some were traded with premiums of 170 yuan/m tin afternoon trading, but both the seller and buyers were cautious. The spread between good-quality and standard-quality copper was still around 20 yaun/mt, and the premiums of the former were 190-210 yuan/mt. Hydro-copper was in relatively tight supply with premiums of 150 yuan/mt, but downstream demand was poor, which later pulled back the premiums to 130-150 yuan/mt.

Aluminium: The most-traded SHFE 2208 aluminium closed up 3.15% or 545 yuan/mt to 17,830 yuan/mt, with open interest down 11,372 lots to 142,090 lots.

With overseas CPI readings coming out one after another, SHFE aluminium bottomed out last Friday and closed the session at 17,700 yuan/mt. The contract moved rangebound today, and regained previous losses. As the most-traded SHEF aluminium contract is about to shift from 2208 to 2209 and the shorts withdraw from the market, SMM believes that aluminium prices will continue to remain consolidated in the near term.

Lead: The most-traded SHFE 2208 lead closed up 3.58% or 520 yuan/mt at 15,040 yuan/mt, with open interest down 13,032 lots to 42,240 lots.

Goods holders were more willing to sell amid rebounding SHFE lead, but some downstream players turned wait-and-see, particularly when they had more choices after the quotes of secondary lead were back in discounts again. Sources in the trading market contracted compared with last week, and retail sales weakened.

Zinc: The most-traded SHFE 2208 zinc closed up 3.54% or 775 yuan/mt at 22,660 yuan/mt, with open interest down 6,001 lots to 99,038 lots.

On the macro front, the University of Michigan report showed that consumer inflation expectations fell in July, with the preliminary one-year inflation expectation dropping to 5.2%, the lowest since February; the market lowered the expectations for the Fed to raise interest rates by 100 basis points in July, with market sentiment stabilising.

On the fundamentals, the supply tightness lingered, and overseas and domestic smelters suffered losses of $388-555/mt and 900-1,400 yuan/mt respectively based on current electricity prices.

Tin: The most-traded SHFE 2208 tin closed up 4.63% or 8,620 yuan/mt at 194,890 yuan/mt, with open interest up 3,749 lots to 44,981 lots.

In the spot market, quotes from smelters rose along with rising futures prices in the morning, and mainstream smelters slightly lowered their offers, with some price advantage over the traders’. It is reported that the number of quotes heard from traders was flat from the last trading day, while premiums of non-deliverable brands dropped. Market transactions were relatively thin, with less inquiries. The downstream purchased on demand, and the significantly rebounding prices have contained the elastic demand.

Nickel: The most-traded SHFE 2208 nickel closed up 1.95% or 2,930 yuan/mt at 153,290 yuan/mt, with open interest down 4,739 lots to 86,448 lots.

On the supply side, domestic nickel plate production is still expected to rise, and the import window has opened. On the demand side, stainless steel production cuts and the off-season have further weighed on the demand. In the alloy sector, the military and aviation sectors showed better demand for alloys. To sum up, nickel prices are unlikely to rise substantially though the demand side recovered amid lingering bearish factors.

[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.]

Market

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

For any inquiries or for more information, please contact: lemonzhao@smm.cn

For more information on how to access our research reports, please contact:service.en@smm.cn

Related News

4 hours ago

Alchemy Resources Starts Drilling Copper-Gold Targets at Yellow Mountain

Alchemy Resources announced on September 11 that reverse-circulation drilling has commenced across its Yellow Mountain and Overflow projects in New South Wales, Australia, with up to 15 holes planned during the latest exploration campaign. At the 80%-owned Yellow Mountain project, drilling will test extensions to previously identified copper-gold and polymetallic mineralisation, as well as two previously undrilled geophysical targets. Previous drilling at Yellow Mountain returned an intersection of 113 metres grading 1.17% copper equivalent, comprising 0.33% copper, 0.37 g/t gold, 24.3 g/t silver, 0.86% lead and 1.23% zinc. The latest drilling campaign is designed to test whether the known mineralised system extends into newly identified target areas. The program will also include drilling at the Overflow project, where Alchemy is targeting extensions to existing mineralisation along strike and at depth. Overflow currently hosts an inferred mineral resource of approximately 342,000 ounces of gold equivalent and contains gold, silver, copper, lead and zinc mineralisation. The commencement of drilling provides a near-term test of the scale and continuity of mineralisation at Yellow Mountain. The previously reported broad copper-gold-polymetallic intersection indicates potential for a sizeable mineralised system, while the newly defined geophysical targets provide additional exploration upside. Drilling results will be important in determining whether the mineralised footprint can be materially expanded.

4 hours ago

Freeport CEO Signals Likely Go-Ahead for $4.5 Billion Bagdad Copper Expansion

Freeport-McMoRan Chief Executive Officer Kathleen Quirk has indicated that the company expects to move forward with the proposed expansion of its Bagdad copper mine in Arizona, marking a stronger commitment to the project ahead of a formal investment decision. Speaking at the Jefferies Global Industrials Conference on September 10, Quirk said the project still requires input from Freeport's board but that she expects the company will proceed. She described the expansion as a roughly three-year construction project and noted that no major permitting hurdles are expected. Freeport's latest project estimates put capital expenditure for the Bagdad expansion at approximately US$4.5 billion, around 30% above the previous US$3.5 billion estimate, reflecting cost escalation, scope changes and additional engineering. The project would more than double concentrator capacity at Bagdad and is expected to add approximately 200–250 million lb, or around 91,000–113,000 tonnes, of copper production annually, alongside an additional 10–12 million lb of molybdenum. Bagdad currently has a reserve life exceeding 80 years. Freeport's Q2 2026 regulatory filing had described the project as being prepared for a potential investment decision during the second half of 2026. The latest comments therefore represent a more positive signal from management on the likelihood of development, although formal board approval has not yet been announced. A decision to proceed with Bagdad would represent one of Freeport's most significant near-term copper growth investments in the US. The potential addition of more than 90,000 tonnes per year of copper would materially increase Freeport's US output, although first production would remain several years away given the expected construction period. Attention will now turn to formal board approval and a final investment decision.

4 hours ago

5 hours ago

Chile July Copper Output Falls 9.4% YoY; Escondida Slumps 22.1%

According to foreign media reports citing data from the Chilean Copper Commission (Cochilco), Chile's copper production fell 9.4% year on year in July 2026, as output declined sharply at several major operations in the world's largest copper-producing country. Copper production at state-owned Codelco fell 5% year on year to 112,800 tonnes in July, extending a period of weaker output for the company amid operational challenges at key mines. Production at BHP-controlled Escondida, the world's largest copper mine, dropped more sharply, falling 22.1% year on year to 89,400 tonnes. In contrast, output at Collahuasi, jointly owned by Anglo American and Glencore, increased 12.3% year on year to 38,400 tonnes. Chile's National Statistics Institute (INE) separately reported mine copper production of 403,424 tonnes in July. The country's Mining Production Index fell 7.2% year on year, while metallic mining activity declined 10.7%, mainly due to lower copper extraction and processing. Foreign media reports also cited severe weather in northern Chile and maintenance at major operations as factors weighing on July production. Cochilco currently forecasts Chilean copper production at approximately 5.27 million tonnes in 2026, down 2.6% year on year, before recovering 5.2% to around 5.55 million tonnes in 2027. The sharp July decline highlights continued pressure on Chilean mine supply. The 22.1% year-on-year drop at Escondida is particularly significant given the mine's scale, while lower Codelco production further weighs on national output. Although Collahuasi recorded higher production, the increase was insufficient to offset weakness elsewhere. A recovery in major operations during the remainder of the year will be important if Chile is to limit the full-year decline projected by Cochilco.

5 hours ago