SMM Evening Comments (Sep 2): Shanghai Nonferrous Metals Closed Mostly with Losses amid Extending Impact of Surging US Dollar

Published: Sep 02, 2022 18:00 (GMT+8)

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Shanghai nonferrous metals closed mostly with losses as metals prices were pressured by the US dollar index, which rose to a 20-year high. Meanwhile, after the central banks of Europe and the United States expressed their firmness in reining high inflation, the commodity asset prices remained under pressure with an extensive correction.

SHANGHAI, Sep 2 (SMM) – Shanghai nonferrous metals closed mostly with losses as metals prices were pressured by the US dollar index, which rose to a 20-year high. Meanwhile, after the central banks of Europe and the United States expressed their firmness in reining high inflation, the commodity asset prices remained under pressure with an extensive correction.

Shanghai copper fell 2.27%, aluminium lost 0.33%, lead added 0.24%, zinc shed 3.66%, tin declined 6.35%, and nickel dropped 3.84%.

Copper: The most-traded SHFE 2210 copper closed down 2.27% or 1,380 yuan/mt at 59,540 yuan/mt, with open interest up 5,604 lots to 167,757 lots.

In the spot market, mainstream standard and good-quality copper was quoted in premiums of 330-350 yuan/mt and 360 yuan/mt respectively. The SHFE 2209 and 2210 contract spread remained above 500 yuan/mt in morning trade, but it did not weigh on the spot premiums due to constantly falling copper cathode prices which attract market inquiries. The premiums of standard-quality copper rose to 360-370 yuan/mt around the end of the first trading session, with some even quoted at 400 yuan/mt around 11:00 Beijing time.

Aluminium: The most-traded SHFE 2210 aluminium closed down 0.33% or 60 yuan/mt to 18,110 yuan/mt, with open interest down 1,319 lots to 171,672 lots.

On the news front, recently the market rumoured potential hydropower shortage in Yunnan province, worrying the market players about aluminium production in the region. But based on the current SMM research, the smelters in the region have not reduced or controlled the production due to power rationing, and basically maintained normal production. But the power supply remained as an issue disturbing the market. And local smelters also carried out drills on possible power outrage.

Nonetheless, the demand side has shown signs of improving, with the average operating rate of large downstream fabricators adding 0.7 percentage point to 66.1% on a weekly basis.

Lead: The most-traded SHFE 2210 lead closed up 0.24% or 35 yuan/mt at 14,885 yuan/mt, with open interest down 3,853 lots to 62,106 lots.

SHFE lead prices stopped falling, and the traders quoted based on the market dynamics. The prices of primary and secondary lead changed little, while the traders lowered the discounts. The downstream purchased on demand, while the retail transactions were relatively acceptable.

Zinc: The most-traded SHFE 2210 zinc closed down 3.66% or 900 yuan/mt at 23,715 yuan/mt, with open interest down 6,783 lots to 125,785 lots.

According to SMM data, the zinc ingot inventories across seven major markets in China totalled 121,700 mt as of September 2, down 1,600 mt from Monday and 1,800 mt from the previous week.

According to SMM research, due to factors such as power restrictions and maintenance in August, domestic refined zinc production is expected to be 471,000 mt, which is lower than the estimate given at the beginning of the month. The output is likely to recover to 530,000 mt with the recovery of power supply and growth in ore supply.

In terms of consumption, the overall performance of the die-casting and zinc oxide sectors was relatively poor, expect for galvanising that posted higher operating rates. The consumption sector has not yet shown signs of obvious improvement though zinc prices have dropped. However, the market is still looking forward to the issuance of special bonds and launching of projects in September. In the context of the end of the hot and rainy weather and the abundant liquidity, the actual improvement of consumption shall be observed.

Tin: The most-traded SHFE 2210 tin closed down 6.35% or 11,630 yuan/mt at 171,600 yuan/mt, with open interest up 1,367 lots to 44,196 lots.

In the spot market, the smelters were obviously not interest in making quotes, but some were quite active in selling with modest premiums over SHFE front-month. The spot premiums from the traders rose palpably in morning trade, and the SHFE front-month and next-month spread expanded. The overall shipments contracted with tight spot supply in the market, while the downstream players purchased on rigid demand, and some buyers stood on the sidelines after tin prices dropped steeply. SHFE warrants fell 42 mt to 1,478 mt, and LME tin inventory dropped 25 mt to 4,495 mt.

Nickel: The most-traded SHFE 2210 nickel closed down 3.84% or 6,450 yuan/mt at 161,610 yuan/mt, with open interest down 1,175 lots to 50,373 lots.

On the supply side, imports of spot pure nickel maintained a small profit, and the customs clearance volume of nickel briquette picked up. The premiums of Jinchuan and NORNICKEL nickel continued to decline affected by the weak demand. In terms of NPI, the market could still see a supply surplus in China because of the growing in-plant inventory and the continuous inflow of Indonesian NPI, and the prices were under pressure. On the demand side, according to SMM research, steel mills may continue to control the rhythm of supplying goods to the market. The mills made a small restock of cold-rolled and hot-rolled stainless steel, and the overall trading was sluggish compared with last week. The transaction of nickel briquette has recently picked up slightly affected by the expected production resumption of steel mills and the release of demand from salt plants. In terms of alloys, the current demand for high-temperature alloys still exists, and the demand for Jinchuan nickel plates remains unchanged.

[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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