SMM Evening Comments (Jul 29): Shanghai Nonferrous Metals Extended Overnight Gains

SHANGHAI, Jul 29 (SMM) – Shanghai nonferrous metals all closed with gains following a winning session overnight. Though economic readings showed signs of slowing economic development and weakening consumer confidence, the dovish stance of the US Fed aroused expectations of slowing rate hikes in the future.

Shanghai copper rose 1.66%, aluminium advanced 2.24%, lead gained 0.36%, zinc added 3.97%, tin climbed 0.48%, and nickel jumped 2.04%.

Copper: The most-traded SHFE 2209 copper closed up 1.66% or 980 yuan/mt at 60,100 yuan/mt, with open interest up 1,663 lots to 157,641 lots.

On the macro front, the U.S. economy unexpectedly contracted in the second quarter, with consumer spending growing at its slowest pace in two years and corporate spending falling, increasing the risk of the economy falling into recession. Data showed that the eurozone economic climate index deteriorated far more than expected, with optimism in all sectors falling amid the war in Ukraine and rampant inflation, and the consumer confidence also hit a record low.

In the spot market, standard-quality copper was in premiums of 320-330 yuan/mt in morning trade, and the premiums rose quickly to 340-350 yuan/mt amid active purchases. However, as the intraday SHFE front-month and next-month spread moved wildly between 300-400 yuan/mt, the traders flexibly adjusted the spot premiums from 330 yuan/mt to 350 yuan/mt. The premiums of good-quality copper was relatively stable at 350-370 yuan/mt. However, the downstream stayed wait-and-see.

Aluminium: The most-traded SHFE 2209 aluminium closed up 2.24% or 410 yuan/mt to 18,750 yuan/mt, with open interest up 2,973 lots to 180,533 lots.

In the spot market, non-ferrous metals prices rose further as the market was still in the rate hike sentiment. Market transactions were weak recently as a whole. Based on SMM 20-day spot purchase index, the reading rebounded slightly since mid-July, but has remained stable in the past week.

Lead: The most-traded SHFE 2209 lead closed up 0.36% or 55 yuan/mt at 15,290 yuan/mt, with open interest up 950 lots to 59,783 lots.

SHFE lead hovered around 15,200 yuan/mt, and quotes offered by the traders changed little. The downstream players, on the other hand, were less active in purchasing around the month0end, and they favoured low-priced sources from smelters. Transactions in the trading market remained poor.

Zinc: The most-traded SHFE 2209 zinc closed up 3.97% or 915 yuan/mt at 23,975 yuan/mt, with open interest up 4,806 lots to 117,609 lots.

On the fundamentals, the consumption remained weak. Visible social inventory fell again, with SMM zinc ingot social inventory falling to a low of 136,900 mt. Overnight zinc prices are likely to inch up with strengths of LME zinc.

Tin: The most-traded SHFE 2209 tin closed up 0.48% or 930 yuan/mt at 194,000 yuan/mt, with open interest up 8,346 lots to 63,136 lots.

In the spot market, quotes from smelters were relatively flat in morning trade, with few changes compared with yesterday. The number of quotes from the traders was small, and more started to quote against SHFE 2209. The downstream mainly purchased on rigid demand. SHFE warrants rose 72 mt to 3,309 mt today, and down 31 mt on a weekly basis. SHFE inventory rose 202 mt this week to 3,960 mt.

Nickel: The most-traded SHFE 2209 nickel closed up 2.04% or 3,430 yuan/mt at 171,490 yuan/mt, with open interest up 3,155 lots to 84,268 lots.

On the fundamentals, pure nickel supply kept rising. For NPI, the production Indonesia was still rising, while some domestic plants reduced or suspended the production due to losses earlier. In the spot market, pure nickel premiums fell amid rising futures prices. The demand side was still subject to high inventory and operation losses.

[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.]