SMM Evening Comments (Aug 10): Shanghai Nonferrous Metals Quiet ahead of US Inflation Report

Published: Aug 10, 2022 18:00

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Shanghai nonferrous metals closed mixed without major fluctuations ahead of the US inflation report due soon.

SHANGHAI, Aug 10 (SMM) – Shanghai nonferrous metals closed mixed without major fluctuations ahead of the US inflation report due soon.

Shanghai copper fell 0.26%, aluminium rose 1%, lead lost 0.78%, zinc gained 2.75%, tin added 0.8%, and nickel shed 0.94%.

Copper: The most-traded SHFE 2209 copper closed down 0.26% or 160 yuan/mt at 61,040 yuan/mt, with open interest down 467 lots to 160,500 lots.

On the macro front, the three major U.S. stock indexes collectively closed lower, with the Nasdaq down 1.19%, the S&P 500 down 0.42% and the Dow down 0.18%. U.S. President Joe Biden signed a bill on Tuesday with milestone importance to provide $52.7 billion in subsidies for U.S. semiconductor production and research.

In the spot market, the spot premiums slumped again today, on the verge to the negative territory. Standard-quality copper was first in premiums of 70 yuan/mt in morning trade, and then fell quickly to 50 yuan/mt amid poor sales. The SHFE 2208 and 2209 spread remained at around 400 yuan/mt in backwardation, prompting the traders to adjust the premiums further. The market transactions did not pick up until the premiums fell to 10-30 yuan/mt. The spread between good and standard-quality copper was still maintained at around 10-20 yuan/mt.

Aluminium: The most-traded SHFE 2209 aluminium closed up 1% or 185 yuan/mt to 18,685 yuan/mt, with open interest up 2,805 lots to 175,689 lots.

Aluminium prices are underpinned by European energy crisis and low social inventory. And the accident happened to an aluminium smelter in Sichuan province further pushed up aluminium prices. And SHFE aluminium is expected to remain rangebound with the weakening of bearish sentiment.

Lead: The most-traded SHFE 2209 lead closed down 0.78% or 120 yuan/mt at 15,225 yuan/mt, with open interest down 5,667 lots to 58,815 lots.

SHFE lead dropped after touching a high, and the cargo holders were not that active in making quotes. However, some traders actively inquired, and some smelters turned wait-and-see. The discounts of secondary lead offered by some smelters narrowed. The downstream purchased mainly on rigid demand.

Zinc: The most-traded SHFE 2209 zinc closed up 2.75% or 665 yuan/mt at 24,875 yuan/mt, with open interest up 10,583 lots to 131,486 lots.

On the macro front, energy crisis has become increasingly prominent in the context of geopolitics. The eurozone countries have signed the order with an attempt to reduce the use of natural gas. But since the expectation of rising smelting cost based on surging electricity prices still exists, zinc prices will gain some support in the near term. The market sentiment will gradually cools down before the actual production suspension or substantial consumption recovery materialises.

Tin: The most-traded SHFE 2209 tin closed up 0.18% or 350 yuan/mt at 194,220 yuan/mt, with open interest down 7,380 lots to 47,856 lots.

In the spot market, quotes from smelters rose along with the futures market in the morning, and a few smelters were firm to the prices. The number of quotes by traders for non-deliverable brands was low, and the spread among different deliverable brands was quiet narrow. The market transactions picked up slightly after the prices fell, but the downstream demand was still insufficient.

Nickel: The most-traded SHFE 2209 nickel closed down 0.94% or 1,580 yuan/mt at 166,060 yuan/mt, with open interest down 3,478 lots to 80,348 lots.

On the supply side, premiums of pure nickel kept falling this week, and the SHFE/LME price dropped as well. For NPI, Indonesia NPI flowed back to China constantly, leading to serious oversupply in China. On the demand side, stainless steel spot prices dropped again yesterday, and transactions were mainly made on rigid demand, and the traders were not very interest in building stocks. Stainless steel mills have not yet been significantly affected by the high temperature, and follow-up power rationing is of concern. For alloy, the downstream players stood mainly on the sidelines amid uncertain pure nickel prices. To sum up, nickel prices had less support amid poor demand.

[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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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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