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SMM Morning Comments (Aug 10): Base Metals Closed Mostly with Gains and Investors Await US CPI
Aug 10, 2022 10:00CST
Source:SMM
LME and SHFE base metals closed mostly with gains, and the market is still waiting for the U.S. CPI due this evening to seek more clues to follow the Fed's interest rate hike action.

SHANGHAI, Aug 10 (SMM) – LME and SHFE base metals closed mostly with gains, and the market is still waiting for the U.S. CPI due this evening to seek more clues to follow the Fed's interest rate hike action.

LME copper gained 0.1%, aluminium jumped 1.31%, lead rose 1.03%, and zinc added 2.84%.

SHFE copper gained 0.15%, aluminium jumped 0.86%, lead fell 0.16%, and zinc added 2.04%.

Copper: LME copper opened at $7,991.5/mt on Tuesday and then rose rapidly to $8,038.5/mt before dropping to a low of $7,940/mt. At last, the contract closed at $7,955/mt, up 0.1%. Trading volume was 12,000 lots, and open interest stood at 241,000 lots.

The most-traded SHFE 2209 copper opened at 61,390 yuan/mt in overnight trading, and once rose to 61,890 yuan/mt. At last, the contract closed at 61,310 yuan/mt, up 0.15%. Trading volume was 56,000 lots, and open interest stood at 159,000 lots.

On the macro front, the market is still waiting for the U.S. CPI due this evening to seek more clues to follow the Fed's interest rate hike action. The dollar index rebounded to recover the losses in the night session, and copper futures slumped after hitting a brief high.

On the fundamentals, though there is expectation for higher copper cathode output amid the commissioning of Fuye headquarters as well as the active production scheduling of smelters, potential production cuts shall stay on the radar of market players due to anode supply shortage. In addition, power rationing is already on in some places in Zhejiang province, affecting the production of some smelters. To sum up, domestic copper cathode inventory was at a low level, and the fundamentals are expected to underpin copper prices amid improving demand.

In the spot market, SHFE 2208 and 2209 spread expanded further, weighing on the spot premiums, which fell to around 100 yuan/mt. And the inflow of imported goods also contained the premiums. The market players shall keep an eye on the SHFE 2208 and 2009 spread, and its impact on the spot premiums.

Aluminium: Overnight, SHFE aluminium opened at 18,630 yuan/mt and rose to 18,800 yuan/mt following news that a smelter cut its output due to an accident. SHFE aluminium closed at 18,660 yuan/mt, an increase of 0.86%.

LME aluminium opened at $2,448/mt on Tuesday and rose to $2,507/mt before closing at $2,472/mt, an increase of 1.31%.

On the supply side, an aluminium smelter in Sichuan cut its output following an accident, which is expected to affect 200,000 mt of capacity. But the overall aluminium production is still increasing, albeit at a slower pace. On the demand side, downstream demand is weak in the traditional off-season. Some areas have begun to stagger power use, which has further reduced the operating rates of some processing enterprises. SHFE aluminium may be temporarily firm on the back of market sentiment, but will lack upward momentum amid weak demand and increasing supply. 

Lead: LME lead opened at $2,143/mt overnight and rose by 1.03% to $2,165/mt, after hitting the highest point at $2,184.5/mt. 

The most-traded SHFE 2209 lead contract opened at 15,355 yuan/mt last night, hitting the highest point at 15,380 yuan/mt, and closed at 15,320 yuan/mt, down 0.16%.

Zinc: LME zinc closed at $3,525/mt on Tuesday, up $97.5/mt or 2.84%. The open interest added 269 lots to 198,000 lots. Overnight LME inventory lost 275 mt to 73,275 mt, down 0.37%. Fermenting overseas energy crisis is of great concern.

The most traded SHFE 2209 zinc contract closed at 24,705 yuan/mt overnight, up 495 yuan/mt or 2.04%. The open interest rose 3,125 lots to 124,028 lots. SHFE zinc rose along with LME zinc amid fermenting overseas energy crisis on the background of poor consumption in China, and SHFE zinc is expected to rise to some extent, while further growth requires stronger driving forces.

Tin: SHFE tin rose after opening overnight, but fell back subsequently with the exit of both longs and shorts. SHFE tin continued to move within a narrow range amid strong wait-and-see sentiment. Domestic tin inventory under SHFE warrants continued to decrease. Although the delivery of the front-month contract is approaching, there is no obvious sign of increase in inventory under warrants. LME tin inventories did not change much. The import profit window was opened, but import profit was thin. There were limited quotations of imported tin in the spot market. Although tin of some brands are in tight supply in the domestic spot market, expectations for more ample supply brought about by the production resumption of smelters will prevent tin prices from going up. It is expected that the short-term tin prices will still move sideways under the support of rigid demand.

Nickel: On the fundamentals, pure nickel premiums kept falling, and the SHFE/LME price ratio was dropping as well. For NPI, Indonesia NPI was flowing back to China constantly, aggravating the supply surplus in China. On the demand side, stainless steel spot prices fell again yesterday, according to SMM research. And the transactions were mainly made on rigid demand, while the traders were not interest in building stocks. Currently, power rationing due to high temperature has not yet had a significant influence on stainless steel mills, while follow-up power rationing shall be observed. In terms of alloy, the downstream buyers mainly stood on the sidelines as pure nickel futures prices are quiet volatile recently. To sum up, pure nickel gained weaker support amid poor demand that has resulted in inventory accumulation.

[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.]


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