SMM Evening Comments (Aug 19): Shanghai Nonferrous Metals Closed Mostly with Losses with US Fed Turning Hawkish Again

SHANGHAI, Aug 19 (SMM) – Shanghai nonferrous metals closed with losses. A number of U.S. Federal Reserve officials said Thursday that the Fed needs to continue to raise borrowing costs to control high inflation.

Shanghai copper rose 0.71%, aluminium lost 0.75%, lead slid 0.43%, zinc shed 0.12%, tin gained 0.17%, and nickel declined 0.5%.

Copper: The most-traded SHFE 2209 copper closed up 0.71% or 440 yuan/mt at 61,980 yuan/mt, with open interest down 2,190 lots to 148,840 lots.

On the macro front, U.S. initial jobless claims in the week of August 13 were 250,000, against an estimate of 265,000 and a previous reading of 262,000. A number of U.S. Federal Reserve officials said Thursday that the Fed needs to continue to raise borrowing costs to control high inflation; San Francisco Fed President Daley said that a 50 or 75 basis point rate hike in September would be a "reasonable" way to bring short-term borrowing costs to the level needed to curb inflation.

In the spot market, the premiums extended the momentum yesterday. The quotes in morning trade were in a chaos amid supply tightness, and some mainstream standard-quality copper was even in premiums of 700 yuan/mt, which, however, received poor response from the buyers. The premiums stabilised at 580-600 yuan/mt, and the spread between good and standard-quality copper stood at around 40-60 yuan/mt. However, neither the traders nor the downstream players showed interest in purchasing. Premiums of standard-quality copper then fell to 500 yuan/mt, and dropped further in the second trading session.

Aluminium: The most-traded SHFE 2209 aluminium closed down 0.75% or 140 yuan/mt to 18,425 yuan/mt, with open interest down 8,658 lots to 137,944 lots.

On the fundamentals, aluminium capacity cuts due to power rationing in Sichuan province is expected to amount to 500,000 mt. Overseas, Hydro announced to cut the production of its two smelters in Slovakia and Norway by a combined 185,000 mt. But the consumption side remained poor as well, as the power rationing also hit the downstream sectors. On the whole, the supply concerns will aggravate in the future amid production reductions in China and abroad, while the momentum will be contained by the sluggish demand and potentially receding economic. Therefore, aluminium prices are expected to remain rangebound in the near term.

Lead: The most-traded SHFE 2209 lead closed down 0.43% or 65 yuan/mt at 14,960 yuan/mt, with open interest down 4,117 lots to 43,853 lots.

SHFE lead dropped today, and the traders quoted according to the market dynamics. Power rationing is frequent in provinces like Anhui, Jiangsu and Hunan, affecting both the upstream and downstream players. The downstream purchased only on demand, and the trading market was quiet.

Zinc: The most-traded SHFE 2209 zinc closed down 0.12% or 30 yuan/mt at 24,860 yuan/mt, with open interest down 5,045 lots to 109,527 lots.

On the fundamentals, SMM zinc ingot social inventory across the seven markets in China totalled 132,200 mt, down 7,000 mt from last Friday, indicating tightening supply. There were basically no spot goods in Tianjin and Shanghai, resulting in high premiums, and some smelters shipped directly to downstream players, with few quotes from the traders. Meanwhile, extremely high temperature has greatly suppressed downstream demand. Zinc prices are likely to remain rangebound.

Tin: The most-traded SHFE 2210 tin closed up 0.17% or 340 yuan/mt at 196,940 yuan/mt, with open interest up 2,034 lots to 23,388 lots.

In the spot market, a few smelters held the prices firm while the overall quotes changed little. The number of quotes for non-deliverable brands from traders was still small, but there existed more quotes from Yunxi. Though spot premiums changed little from yesterday, the spot transactions were thin. The downstream continued to purchase on rigid demand.

Nickel: The most-traded SHFE 2209 nickel closed down 0.5% or 870 yuan/mt at 171,580 yuan/mt, with open interest down 10,312 lots to 58,191 lots.

In the spot market, Jinchuan and NORNICKEL nickel was in premiums of 5,500-6,000 yuan/mt and 2,800-3,100 yuan/mt respectively, up 250 yuan/mt and down 100 yuan/mt from yesterday. The premiums of Jinchaun nickel stabilised amid rigid downstream demand, while NORNICKEL nickel dropped. There were still currently no transactions of nickel briquette due to its poor cost efficiency.

On the news front, Yesterday Indonesian President Joko Widodo confirmed that Indonesia may impose export duties on nickel within 2022, mainly on nickel pig iron and ferronickel products.

[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.]