SMM Evening Comments (Aug 5): Shanghai Nonferrous Metals Closed All with Gains amid Warming Market Sentiment

SHANGHAI, Aug 5 (SMM) – Shanghai nonferrous metals closed all with gains after overnight US dollar index dropped ahead of the release of US non-farm payrolls, despite hawkish voices from the US Fed earlier.

Shanghai copper gained 1.5%, aluminium rose 1.76%, lead added 0.5%, zinc jumped 4.06%, tin advanced 2.17%, and nickel climbed 2.45%.

Copper: The most-traded SHFE 2209 copper closed up 1.5% or 890 yuan/mt at 60,310 yuan/mt, with open interest up 3,361 lots to 164,183 lots.

On the macro front, the Bank of England raised the interest rates by 50 basis points on Thursday, the largest increase in 27 years, and at the same time warned that a long-term recession was coming. The US dollar index ended its short-term rebound and closed down by 0.55% yesterday. The upcoming non-farm data is of utmost concern.

In the spot market, the trading market improved, and the premiums rebounded as well. Standard-quality copper was firstly in premiums of 210-220 yuan/mt, and market transactions were active. The premiums then rebounded to 230-240 yuan/mt, and some were quoted at 250 yuan/mt in the second trading session. The spread between good and standard-quality was around 10-20 yuan/mt.

Aluminium: The most-traded SHFE 2209 aluminium closed up 1.76% or 320 yuan/mt to 18,515 yuan/mt, with open interest up 8,050 lots to 175,531 lots.

LME aluminium was dragged on by the pessimism aroused by expected zinc production cuts due to high energy prices. In China, SHFE aluminium warrants dropped to a low level, underpinning aluminium prices, and a potential short squeeze is possible amid the low inventory. But the supply pressure still exists as there were currently no extensive production cuts.

Lead: The most-traded SHFE 2209 lead closed up 0.5% or 75 yuan/mt at 15,225 yuan/mt, with open interest up 2,691 lots to 57,385 lots.

In the spot market, as of August 5, the social inventory of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin was 61,800 mt, down 10,300 mt from last Friday (July 29) and down 6,200 mt from Monday (Aug 1).

The traders quoted according to the market dynamics today, and sources from the smelters were mostly in wide discounts amid abundant supply; secondary lead was also mostly in large discounts. The downstream mainly purchased on demand, and the trading market was quiet with the lack of price advantage.

Zinc: The most-traded SHFE 2209 zinc closed up 4.06% or 960 yuan/mt at 24,600 yuan/mt, with open interest up 7,300 lots to 125,823 lots.
Overnight, Glencore warned against potential production suspension amid aggravating energy crisis, fuelling bullish sentiment in the market. The contract slowed down its growth after the bullish factor priced in overnight, but the longs were still strong amid a tight market balance. Nonetheless, investors are advised to stay cautious concerning the longs amid low downstream operating rates.

Tin: The most-traded SHFE 2209 tin closed up 2.17% or 4,200 yuan/mt at 197,500 yuan/mt, with open interest up 1,933 lots to 54,137 lots.

In the spot market, quotes from the smelters rose as a whole in morning trade, but the spread between different smelters narrowed. The number of quotes from the traders were still at a low level, and the spread of premiums among different brands narrowed amid rising premiums of non-deliverable brands. The market transactions weakened amid rising prices, and the downstream players purchased mainly on rigid demand.

Nickel: The most-traded SHFE 2209 nickel closed up 2.45% or 4,240 yuan/mt at 177,260 yuan/mt, with open interest up 14,245 lots to 93,752 lots.

The fundamentals of nickel changed little recently, and the price moves were mainly guided by the macro sentiment. In addition, low inventory and high premiums offered some support to nickel prices, which, however, are likely to be suppressed by rising supply with the recent opening of import window.

[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.]