SMM Evening Comments (Jul 22): Shanghai Nonferrous Metals Closed Mixed following ECB Rate Hike

SHANGHAI, Jul 22 (SMM) – Shanghai nonferrous metals closed mixed as ECB raised interest rate by 50 basis points, higher than market expectations. The pressure from the macro front is still heavy amid spreading recession fears.

Shanghai copper rose 0.78%, aluminium inched down 0.06%, lead lost 0.69%, zinc notched down 0.04%, tin fell 0.66%, and nickel jumped 0.97%.

Copper: The most-traded SHFE 2208 copper closed up 0.78% or 440 yuan/mt at 56,930 yuan/mt, with open interest down 4,354 lots to 107,507 lots.

On the macro front, Nord Stream 1 resumed gas supply to the Europe, easing energy crisis slightly. ECB raised interest rate by 50 basis points, higher than the expected 25 bps rate hike, pressuring the base metals market. On the other hand, US Fed officials’ voices recently have lowered market expectation of a 100 bps rate hike, while high inflation still dragged on the real estate and labour market.

In the spot market, premiums rose again with tight supply. Premiums of standard-quality copper stood at 250 yuan/mt in morning trade, and some sources were traded at 240 yuan/mt. However, premiums gradually rose to 270-280 yuan/mt afterwards due to few sources available in the market. The spread between good and standard-quality copper remained at 20 yuan/mt, and premiums of imported sources were 250-300 yuan/mt amid supply tightness.

Aluminium: The most-traded SHFE 2208 aluminium closed down 0.06% or 10 yuan/mt to 17,995 yuan/mt, with open interest down 3,827 lots to 104,631 lots.

The fundamentals of aluminium changed little recently, featuring strong supply and poor demand, while falling social inventory offered some support.

Lead: The most-traded SHFE 2208 lead closed down 0.69% or 105 yuan/mt at 15,160 yuan/mt, with open interest down 5,725 lots to 23,883 lots.

SHFE lead dropped after touching high today, and the traders quoted based on the market dynamics. However, as sources circulating in the market were scarce, most quotes were made with premiums, pressuring downstream demand. The retails sales were muted.

Zinc: The most-traded SHFE 2208 zinc closed down 0.04% or 10 yuan/mt at 22,760 yuan/mt, with open interest down 1,684 lots to 83,579 lots.

Electricity prices in Europe dropped briefly after Nord Stream 1 resumed gas transmission, but the overall prices were still high, keeping smelting cost at a high level. In China, ore supply tightness lingered, but the import window narrowly opened. But downstream operating rates remained low.

Tin: The most-traded SHFE 2208 tin closed down 0.66% or 1,280 yuan/mt at 191,850 yuan/mt, with open interest up 723 lots to 34,144 lots.

In the spot market, smelters were less firm to their prices in morning trade, and some deliverable brands already quoted flat. The number of quotes from traders were steady with abundance sources in the market, and spot premiums were flat from yesterday. Market transactions remained poor, and rebounding prices weighed on downstream demand.

Nickel: The most-traded SHFE 2208 nickel closed up 0.97% or 1,610 yuan/mt at 168,200 yuan/mt, with open interest down 377 lots to 74,950 lots.

The European Central Bank announced an interest rate hike of 50 basis points, slightly higher than market expectations. Overnight dollar index dropped slightly, triggering market fears for the recession. In this case, SHFE nickel posted narrow growth today compared with the past few days.

On the supply side, spot premiums of domestic pure nickel dropped slightly amid rising SHFE nickel, which aroused market purchasing interest. Pure nickel imports were lacklustre amid narrow profits and sluggish demand. On the demand side, purchases in the alloy sector contracted suppressed by rebounding SHFE nickel prices and high pure nickel prices.

[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.]