SMM Morning Comments (Sep 13): Base Metals Closed Mostly with Gains amid Falling US Dollar

SHANGHAI, Sep 13 (SMM) – LME base metals closed mostly with gains as the central banks of Europe, Japan, Germany and other countries were inclined to a hawkish rate hike, and the US dollar index dropped quickly after hitting a 20-year high last Wednesday and fell on Monday. Nonetheless, before the release of the US inflation data, the market sentiment was cautious.

LME copper rose 1.72%, aluminium closed at $2,290/mt, lead gained 0.96%, and zinc added 0.52%.

SHFE market closed for three days from September 10 to September 12 amid the Mid-Autumn Festival and opened on September 13 (Tuesday).

Copper: LME copper opened at $7,960/mt and hovered around the daily moving average. Within the range, the prices reached $8,008/mt after dropping to $7,912/mt. At last, the contract closed at $8,004/mt, up 1.72%. Trading volume was 9,800 lots, and open interest stood at 253,000 lots.

On the macro front, before the release of the US inflation data, the market sentiment was cautious, and as the central banks of Europe, Japan, Germany and other countries were inclined to a hawkish rate hike, the US dollar index dropped quickly after hitting a 20-year high last Wednesday and fell on Monday, easing its pressure on copper prices. In addition, as winter approaches and supply concerns intensify, crude oil closed higher on Monday after getting rid of the impact of weak demand expectations, which is bullish for copper prices.

The fundamentals did not change much. The current low inventory still supports copper prices. The market shall pay attention to the supply of imported copper this week and the pandemic situation in China. Overall, the focus at the macro level is still on the Fed’s meeting on interest rates. The recent fall in the US dollar has weakened the pressure on copper prices, while the tight spot supply in China and overseas will support copper prices to remain volatile with some upward potential.

Aluminium: The most-traded SHFE 2210 aluminium contract opened at 18,525 yuan/mt at last Friday’s night session before closing at its night session high of 18,965 yuan/mt, up 550 yuan/mt or 2.99%.

LME aluminium opened at $2,289/mt on Monday and closed at $2,290/mt.

On the whole, the domestic aluminium supply was disrupted by power rationing, while the macro sentiment improved. It is expected that the short-term SHFE aluminium prices will still have upside room.

Lead: LME lead opened at $1,922/mt overnight and rose due to the decline of US dollar index after hitting the lowest point at $1,921.5/mt. During European trading hours, the US dollar index further declined and LME lead increased to the highest point at $1,958.5/mt. LME lead finally closed at $1,952/mt, up 0.96%. The open interest decreased by 144 lots to 92,895 lots from the previous trading day.

Zinc: LME zinc closed at $3,209/mt on Monday, up $16.5/mt or 0.52%.

On the supply side, domestic refined zinc output stood at 462,700 mt in August, and is estimated at 525,700 mt in September, an increase of 63,000 mt MoM. The rising zinc concentrate supply will translate into climbing refined zinc output with smelters completing their maintenance. On the consumption side, the downstream restocked intensively after zinc prices slumped, and the social inventory dropped quickly. But the key issue now is whether the destocking process is sustainable.

Tin: SHFE tin continued to trade sideways at a low level at last Friday’s night session, with a small amount of capital flowing out of the market before the three-day holiday. LME tin also did not fluctuate significantly. Domestic tin social inventory accumulated last week following continuous decline. LME tin inventories climbed steadily. Overseas premiums hovered at low levels. The import profit window remained open, and more imported tin was on offer in the domestic market. Although the supply of imported tin has increased recently, there has not been a significant price difference between imported tin and domestic brands. It is expected that the short-term tin prices will still hover sideways.

Nickel: On the macro front, the US Fed Chairman Powell reaffirmed last Thursday night that the Fed's task was to nail inflation down at 2%. Besides, the current US labour market demand is still strong. Wages are rising, indicating that interest rate hikes may achieve a soft landing. Therefore, prices of nonferrous metals rose 4.24% last Friday, and SHFE nickel soared about 8% as of the afternoon close. On the fundamentals, although the stainless steel downstream sector consumed little pure nickel, the recovery of demand in September still boosted the nickel prices. The futures market currently features strong speculation, obvious bias, etc., thus the prices may deviate from the fundamentals with the help of the news front. To sum up, the nickel prices were greatly affected by the macro factors, but the prices may drop amid the poor downstream demand. At present, the LME nickel prices have not yet returned to the fundamentals, and the prices may fluctuate. When the prices return to normal, SMM will resume the price forecast of LME nickel.

[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.]