SMM Evening Comments (Aug 18): Shanghai Nonferrous Metals Closed with Losses amid Poor Demand despite Extending Power Rationing

SHANGHAI, Aug 18 (SMM) – Shanghai nonferrous metals closed with losses as the metals gained little support from the fundamentals when the consumption side remained poor, although extending power rationing in China has pulled down the supply expectation.

Shanghai copper fell 1.47%, aluminium lost 0.89%, lead slid 0.99%, zinc shed 3.96%, tin dropped 1.38%, and nickel declined 2.47%.

Copper: The most-traded SHFE 2209 copper closed down 1.47% or 910 yuan/mt at 61,170 yuan/mt, with open interest down 212 lots to 151,030 lots.

On the macro front, US monthly retail sales for July came out at 0%, with an estimate of 0.1% and a previous value of 1%. US Fed monetary meeting minutes revealed that the Fed may slow its rate hike speed, and the Fed officials mentioned risk of excessive policy tightening.

In the spot market, the premiums fell after opening high. Good and standard-quality copper was in premiums of 680-700 yuan/mt, but with few market transactions. Premiums of standard-quality copper then dropped to 600-610 yuan/mt in the second trading session, but the overall supply was still tight, and the premiums of good-quality copper remained firm. The spread between good and standard-quality copper expanded to 40-60 yuan/mt.

Aluminium: The most-traded SHFE 2209 aluminium closed down 0.89% or 165 yuan/mt to 18,330 yuan/mt, with open interest down 7,228 lots to 146,602 lots.

On the fundamentals, aluminium production cuts were still on in Sichuan province, involving a capacity of nearly 500,000 mt. Overseas aluminium smelter Hydro also indicated production cuts. As such, market concerns on the supply side intensified. On the consumption side, however, the downstream sector were still poor amid sporadic pandemic outbreak and power cuts. On the while, aluminium prices will remain rangebound with falling supply and sluggish demand.

Lead: The most-traded SHFE 2209 lead closed down 0.99% or 150 yuan/mt at 14,960 yuan/mt, with open interest down 1,402 lots to 47,970 lots.

SHFE lead conciliated, and the traders quoted according to market dynamics. The production of upstream and downstream producers were both affected by power rationing in Jiangsu and Hunan, and the downstream players only purchased on rigid demand.

Zinc: The most-traded SHFE 2209 zinc closed down 3.96% or 1,015 yuan/mt at 24,590 yuan/mt, with open interest down 12,546 lots to 114,572 lots.

Zinc prices gained little support from the fundamentals as the refined zinc output in August is expected to rise MoM, while the consumption side was still poor accompanied by disappointing export orders. SHFE zinc is expected to correct after market sentiment cools down.

Tin: The most-traded SHFE 2209 tin closed down 1.38% or 2,760 yuan/mt at 197,190 yuan/mt, with open interest down 6,021 lots to 35,292 lots.

In the spot market, quotes from the smelters dropped along with falling futures prices, and the smelters did not resist either. According to feedback from the traders, the supply of non-deliverable brands were still tight, and the spot premiums remained flat. Market transactions picked up slightly from a day ago.

Nickel: The most-traded SHFE 2209 nickel closed down 2.47% or 4,290 yuan/mt at 169,670 yuan/mt, with open interest up 1,534 lots to 68,503 lots.

On the supply side, premiums of pure nickel kept falling amid high futures prices and sluggish demand, while the SHFE/LME price ratio dropped, hence the customs clearance volume this week is expected to fall short. For NPI, some plants were quite bearish on NPI price outlook, hence were less firm to their prices and shipped more actively. Nonetheless, there were still those who were bullish due to the expected Indonesian export tariff, hence built up stocks and awaited future price hike. On the demand side, the social inventory of all series of stainless steel was falling, but the consumption has not yet improved significantly, hence the supply and demand are expected to remain poor in the near term. In terms of alloy, though the military-oriented alloy sector has been resilient, and civil alloy sector saw palpable decrease in demand. To sum up, as the nickel industry chain is plagued by weak demand, nickel prices will gain weaker support especially when the social inventory is on the rise.

[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.]