SMM Evening Comments (Aug 25): Shanghai Nonferrous Metals Closed Mostly with Gains with Investors Awaiting Jackson Hole Speech

SHANGHAI, Aug 25 (SMM) – Shanghai nonferrous metals closed mostly with gains. The US API and EIA crude oil inventory in the week of August 19 both fell more than expected. And the market players also await the Jackson Hole speech delivered by Powell for guidance for future rate hike path.

Shanghai copper fell 0.25%, aluminium edged up 0.03%, lead added 0.76%, zinc jumped 1.48%, tin climbed 0.17%, and nickel rose 2.85%.

Copper: The most-traded SHFE 2210 copper closed down 0.25% or 160 yuan/mt at 62,780 yuan/mt, with open interest up 12,439 lots to 149,094 lots.

On the macro front: (1) U.S. API crude oil inventories in the week of August 19 fell 5.632 million barrels, with the estimate of a fall of 448,000 barrels and a previous reading of an increase of 1.5 million barrels. (bullish ☆) (2) U.S. EIA crude oil inventories in the week of August 19 reported a draw of 3.282 million barrels, with the previous value of a drop of 7.056 million barrels and a forecast of a fall of 933,000 barrels. (bullish ☆)

In the spot market, spot premiums were offered at the lower-end of the price range set yesterday. Standard-quality copper was in premiums of 460-470 yuan/mt in morning trade, and good-quality copper was flat with standard-quality copper. Before the end of the first trading session, some mainstream standard-quality copper was quoted with premiums of less than 400 yuan/mt, alluding market sentiment of forcing down the prices; but these sources were quickly sold out. The premiums rose to and stabilised at 430-440 yuan/mt in the second trading session.

Aluminium: The most-traded SHFE 2209 aluminium closed up 0.03% or 5 yuan/mt to 18,910 yuan/mt, with open interest down 15,649 lots to 123,497 lots.

The shorts reduced their positions today, and SHFE 2209 contract closed flat over the closing price during the night session on August 24. On the news front, the strike in Europe was solved, and Hydro aluminium smelter resumed the production, with SHFE aluminium falling after opening today. Meanwhile, slightly falling domestic aluminium inventory fuelled the contract, which finally closed flat as the de-stocking was very mild.

Lead: The most-traded SHFE 2209 lead closed up 0.76% or 115 yuan/mt at 15,160 yuan/mt, with open interest down 2,878 lots to 32,598 lots.

The recent power rationing had a greater impact on the supply side than on the demand side, hence domestic lead prices, unlike LME lead, have been relatively resilient recently. According to SMM research, the power rationing in Anhui province has eased slightly, with the supply expected to recover next week. Lead prices will see weaker support by then.

Zinc: The most-traded SHFE 2209 zinc closed up 1.48% or 375 yuan/mt at 25,645 yuan/mt, with open interest down 10,093 lots to 84,037 lots.

European energy crisis intensified with natural gas futures prices rose to a record high, and the supply tightness of zinc ingot extended. The TCs for zinc concentrate in China were low, also alluding tight supply amid ongoing power rationing in Sichuan. In terms of demand, the operating rates of galvanising plants fell slightly, while that of die-casing plants rose.

Tin: The most-traded SHFE 2210 tin closed up 0.17% or 340 yuan/mt at 200,120 yuan/mt, with open interest up 1,640 lots to 33,685 lots.

In the spot market, the quotes offered by the smelters fell along with falling futures prices in morning trade, with a few lowering the quotes more significantly. The spot premiums from the traders changed little in morning trade, and the sources of non-deliverable brands were relatively tight. The premiums of brand Yunxi fell slightly. The spot market was modest today, with the downstream players purchasing on rigid demand.

Nickel: The most-traded SHFE 2210 nickel closed up 2.85% or 4,870 yuan/mt at 175,640 yuan/mt, with open interest up 11,830 lots to 58,228 lots.

On the supply side, SHFE/LME price ration fell again, hence the import profits were quite meagre. For NPI, the production has been cut amid poor downstream demand and high inventory. On the demand side, stainless steel futures prices rebounded slowly, and the spot prices were stable. The transactions have not yet improved, but the mood of rate hikes has been strong. In terms of alloy, the orders were normal despite high nickel prices. To sum up, nickel prices are expected to drop in the near term with weaker support as a result of poor demand and falling pure nickel premiums.

[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.]