SMM Evening Comments (Sep 1): Shanghai Nonferrous Metals Closed in Negative Territory with Market Still Overshadowed by Rate Hike Expectations

SHANGHAI, Sep 1 (SMM) – Shanghai nonferrous metals closed with losses in the first trading day of September as the market was still overshadowed by the expected rate hike as well as the less-than-expected US ADP employment data.

Shanghai copper fell 2.03%, aluminium lost 2.43%, lead slid 0.74%, zinc shed 2.47%, tin declined 7.13%, and nickel dropped 2.95%.

Copper: The most-traded SHFE 2210 copper closed down 2.03% or 1,260 yuan/mt at 60,680 yuan/mt, with open interest up 2,212 lots to 162,153 lots.

The spot premiums of standard-quality copper was around 320-340 yuan/mt after opening, flat from the level a day ago. The spread between good and standard-quality copper was 10-20 yuan/mt, but the actual transactions were disappointing, prompting some traders the lower the premiums in order to clinch a deal. As such, the premiums of standard-quality copper were lowered to 320 yuan/mt. The spread between SHFE 2209 and 2210 was 450-500 yuan/mt in morning trade, which also impacted the quotes of spot premiums.

Aluminium: The most-traded SHFE 2210 aluminium closed down 2.43% or 445 yuan/mt to 17,900 yuan/mt, with open interest up 7,301 lots to 172,991 lots.

On the fundamentals, the aluminium ingot social inventories across China’s eight major markets totalled 683,000 mt as of September 1, up 4,000 mt from a week ago, but 66,000 mt lower than in the same period last year. As the production of aluminium smelters in Sichuan is unlikely to recover to level seen prior to the power rationing in September, any further accumulation of the social inventory should be small.

The domestic aluminium billet social inventories decreased by 500 mt on a weekly basis as of September 1.

Lead: The most-traded SHFE 2210 lead closed down 0.74% or 110 yuan/mt at 14,800 yuan/mt, with open interest up 6,298 lots to 65,959 lots.

In the spot market, the spread between primary and secondary refined lead was still almost zero, hence the buyers favoured primary lead with more inquiries from the downstream. The most-traded SHFE lead again challenged the cost of secondary refined lead, and the smelters were slightly less interest in making shipments. The market players shall watch the support at 14,800 yuan/mt tonight.

Zinc: The most-traded SHFE 2210 zinc closed down 2.47% or 615 yuan/mt at 24,260 yuan/mt, with open interest down 1,923 lots to 132,568 lots.

On the fundamentals, energy tensions abruptly eased with Germany's recent 26.8% fall in baseload electricity prices to €428/MWh. LME zinc slumped amid alleviated supply shortage expectation. In China, the futures contract was also less supported due to the lack of consumer confidence.

Tin: The most-traded SHFE 2210 tin closed down 7.13% or 13,740 yuan/mt at 178,840 yuan/mt, with open interest up 7,054 lots to 42,829 lots.

In the spot market, the smelters were still less interest in making quotes; some smelters stood wait-and-see, while some held the prices firm. The spot premiums offered by the traders were high in morning trade, and the spread between different brands changed little. The downstream demand was poor as the buyers have been purchasing on dips for quite some time, and high premiums also contained the buying interest. SHFE warrants fell 90 mt to 1,520 mt, a collective drop of 614 mt this week. LME tin inventory added 110 mt to 4,520 mt, refreshing the high recorded in November 2020.

Nickel: The most-traded SHFE 2210 nickel closed down 2.95% or 5,010 yuan/mt at 165,020 yuan/mt, with open interest down 5,093 lots to 51,548 lots.

On the supply side, the premiums of spot pure nickel trended toward different directions. Yesterday, the premiums of Jinchuan nickel stabilised and rebounded supported by downstream rigid demand, but the premiums of NORNICKEL nickel maintained a downward trend due to the weak demand. For NPI, the situation of oversupply kept containing NPI prices as a result of high inventory and constantly inflow of Indonesia NPI. On the demand side, the prices of spot stainless steel in Wuxi and Foshan were basically stable yesterday, while the overall transactions were thin. It is expected that the spot prices will remain rangebound with some falls in the near term. In terms of alloys, although SHFE nickel prices are still at a high level, the demand for Jinchuan nickel plates from the sector of military superalloys is still unabated due to robust terminal demand. However, the demand for NORNICKEL nickel applying to civilian alloys has been greatly affected by high nickel prices, and has remained low for quite some time. To sum up, although the downstream demand for pure nickel has picked up slightly recently, nickel prices may still drop to some extent. 

[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.]