SMM Evening Comments (Jul 20): Shanghai Nonferrous Metals Closed Mixed with Metals Correcting

SHANGHAI, Jul 20 (SMM) – Shanghai nonferrous metals closed mixed as base metals prices corrected amid easing sentiment after Fed officials said a 100bps rate hike is not the first choice.

Shanghai copper rose 0.62%, aluminium fell 0.69%, lead dropped 0.13%, zinc added 0.99%, tin lost 1.21%, and nickel jumped 5.6s%.

Copper: The most-traded SHFE 2208 copper closed up 0.62% or 350 yuan/mt at 56,840 yuan/mt, with open interest down 6,898 lots to 116,095 lots.

On the macro front, European Central Bank (ECB) policymakers are considering a 50 basis point rate hike at Thursday's meeting, which is great than expected. Rebounding euro weighed on the US dollar.

In the spot market, quotes in the morning changed little with yesterday. Standard-quality copper was quoted with premiums of 170-180 yuan/mt, which was quite popular when the premium stood at 170 yuan/mt; and good-quality copper was in premiums of 180-190 yuan/mt, while sources priced with premiums of 200 yuan/mt could hardly find a buyer. In the afternoon trading, SHFE 2208 and 2209 contract spread narrowed from 170 yuan/mt in the morning to 130-150 yuan/mt amid rising futures prices, and stood at around 100 yuan/mt approaching the closing of the session, which attracted some buyers.

Aluminium: The most-traded SHFE 2208 aluminium closed down 0.69% or 125 yuan/mt to 17,905 yuan/mt, with open interest down 12,733 lots to 115,269 lots.

SHFE aluminium remained rangebound as the most-traded SHFE aluminium contract is about to shift, with obvious resistance at around 18,000 yuan/mt.

Lead: The most-traded SHFE 2208 lead closed down 0.13% or 20 yuan/mt at 15,125 yuan/mt, with open interest down 4,951 lots to 33,512 lots.

Quotes form goods holders diverged amid less sources circulating in the market, and some were still quoted with high premiums. The discounts of secondary refined lead expanded gradually. The downstream mainly picked up goods through long-term orders, and favoured secondary lead. The retail sales were still muted.

Zinc: The most-traded SHFE 2208 zinc closed up 0.99% or 225 yuan/mt at 22,840 yuan/mt, with open interest down 4,929 lots to 89,401 lots.

On the fundamentals, zinc concentrate imports in June rebounded, but smelters that suspended or reduced the production before have not yet resumed, hence the overall ore supply tightness eased only slightly. On the consumption side, low prices failed to stimulate the consumption significantly. The number of short positions was still outstanding, alluding downward risks.

Tin: The most-traded SHFE 2208 tin closed down 1.21% or 2,320 yuan/mt at 189,820 yuan/mt, with open interest up 1,241 lots to 38,530 lots.

In the spot market, quotes from smelters were relatively stable in the morning, while some lowered their offers. Traders quoted some non-deliverable brands with discounts, and the spread between brands expanded slightly. Downstream inquires dropped when futures prices rose above 190,000 yuan/mt. SHFE warrants dropped 173 mt to 3,396 mt, and LME tin inventory fell 85 mt to 3,440 mt as of July 19.

Nickel: The most-traded SHFE 2208 nickel closed up 5.6% or 8,790 yuan/mt at 165,820 yuan/mt, with open interest up 5,558 lots to 81,839 lots.

On the supply side, sources of Jinchuan nickel were scarce amid high premiums. On the demand side, stainless steel sector was quiet, and the alloy sector showed weaker demand based on the procurement cycle and high spot premiums. SHFE nickel prices are likely to fall amid weak fundamentals.

[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.]