SMM Evening Comments (Sep 7): Shanghai Nonferrous Metals Closed Mostly with Losses amid Rising US Dollar

SHANGHAI, Sep 7 (SMM) – Shanghai nonferrous metals closed mostly with losses amid rising US dollar, which weighed on the non-ferrous metals. And the market players also awaited the Beige Book to be released by the US Federal Reserve.

Shanghai copper fell 0.64%, aluminium lost 0.54%, lead added 0.23%, zinc slid 1.98%, tin shed 2.67%, and nickel dropped 0.43%.

Copper: The most-traded SHFE 2210 copper closed down 0.64% or 390 yuan/mt at 60,550 yuan/mt, with open interest up 2,416 lots to 163,704 lots.

On the macro front: (1) The final value of U.S. August Markit services PMI stood at 43.7, against a previous print of 44.1 and a forecast of 44.2. (2) U.S. August ISM non-manufacturing PMI was finalised at 56.9, against of previous print of 56.7 and a forecast of 55.1.

In the spot market, mainstream standard-quality copper was in premiums of 400 yuan/mt in early trade, and the spread between good and standard-quality copper stood at 20-30 yuan/mt. The brand Guixi was mostly in premiums of 430-460 yuan/mt, while hydro-copper was short in supply. Though the overall sources were tight after active transactions earlier, premiums of 400 yuan/mt for standard-quality copper did not appeal the buyers, even when the spread between SHFE 2209 and 2210 contract was below 400 yuan/mt. In this case, the cargo holders lowered the premiums to 370-380 yuan/mt to clinch a deal. Sources quoted at premiums of 360 yuan/mt heard at around 10:00 am were quickly sold out, alluding the intention of firming the bottom.

Aluminium: The most-traded SHFE 2210 aluminium closed down 0.54% or 100 yuan/mt to 18,300 yuan/mt, with open interest down 914 lots to 161,562 lots.

The market is worried that aluminium smelters in Yunnan may be subject to power rationing. Only 5% of aluminium smelters in Yunnan reduced their power load, which will have little impact on the total market supply. Whether aluminium prices will go up further depends on the scale of output cuts in Yunnan and intensity of demand recovery.

Lead: The most-traded SHFE 2210 lead closed up 0.23% or 35 yuan/mt at 15,030 yuan/mt, with open interest down 3,487 lots to 51,701 lots.

SHFE lead dropped as the longs reduced their positions. In the spot market, COVID lockdown in Sichuan province is likely to be lifted if no new confirmed cases are reported overnight. And the local shipment will improve as well. Lead ingot supply in Henan tightened approaching the delivery of SHFE 2209. To sum up, SHFE lead is expected to consolidate around 15,000 yuan/mt.

Zinc: The most-traded SHFE 2210 zinc closed down 1.98% or 480 yuan/mt at 23,795 yuan/mt, with open interest down 1,961 lots to 115,293 lots.

Falling zinc price is still mainly attributable to rising supply. According to SMM statistics, the output of smelters is likely to reach 530,000 mt in September, up 9.2% MoM. And it is almost an established fact that the market will be oversupplied based on current downstream orders. The fundamentals were increasingly unable to support the zinc price.

Tin: The most-traded SHFE 2210 tin closed down 2.67% or 4,800 yuan/mt at 174,720 yuan/mt, with open interest up 1,302 lots to 37,799 lots.

In the spot market, several smelters did not quote in morning trade and were firm to the prices, but the overall quotes changed little from a day ago. The number of quotes from the traders dropped this morning, and the spot premiums rose to some extent. The spot market was modest, and the transactions picked up slightly after prices fell. The downstream players still purchased on rigid demand.

Nickel: The most-traded SHFE 2210 nickel closed down 0.43% or 740 yuan/mt at 172,330 yuan/mt, with open interest up 18,796 lots to 76,773 lots.

In the spot market, Jinchuan nickel was in premiums of 11,000-10,500 yuan/mt, an average of 10,250 yuan/mt, down 250 yuan/mt from the previous trading day; NORNICKEL nickel was in premiums of 3,700-4,200 yuan/mt, an average of 3,950 yuan/mt, and down 300 yuan/mt from the day before. Spot premiums dropped slightly mainly due to high futures prices, and slightly easing supply tightness was also among the causes. The spot transactions were relatively muted. In terms of the nickel briquette, the prices stood between 176,600-177,200 yuan/mt, down 750 yuan/mt on a daily basis. Currently, producing nickel sulphate with nickel briquette is already profitable, and the demand for briquette is expected to pick up with expectations that the steel mills will resume the production.

[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.]