SMM Evening Comments (Sep 14): Shanghai Nonferrous Metals Closed with Losses amid Persistent US Inflation

SHANGHAI, Sep 14 (SMM) – Shanghai nonferrous metals closed with losses as the US August CPI released overnight was higher than expected. Though it indicated that the US economy has not yet contracted, the odds for an aggressive rate hike in September spiked.

Shanghai copper fell 1.39%, aluminium lost 0.88%, lead slid 0.96%, zinc dropped 0.18%, tin shed 4.63%, and nickel declined 1.6%.

Copper: The most-traded SHFE 2210 copper closed down 1.39% or 880 yuan/mt at 62,280 yuan/mt, with open interest down 2,002 lots to 157,446 lots.

On the macro front, unadjusted U.S. August CPI annual rate stood at 8.3%, with an estimate of 8.1% and the previous print of 8.50%, which is higher than the expected value by 0.2 percentage point, triggering expectations that the Federal Reserve will continue aggressive interest rate hikes. The U.S. dollar index soared on the release of US inflation with a gain of 1.52%, the largest single-day gain in two years.

In the spot market, SHFE 2209 and 2210 spread remained above 800 yuan/mt, and once rose to 850 yuan/mt in the first trading session. Premiums of standard-quality copper over SHFE 2210 were quoted at 800 yuan/mt, with no inquiries at all, and the sellers mostly quoted against SHFE 2209 amid high SHFE contract spread. The discounts of standard-quality copper stood at 10-0 yuan/mt in early trade, and expanded to 30-20 yuan/mt and even 60-50 yuan/mt amid expanding SHFE contract spread. The spread fell after the first trading session, and the discounts of standard-quality copper narrowed to around 30-40 yuan/mt. The supply of good-quality copper was tight in the spot market.

Aluminium: The most-traded SHFE 2210 aluminium closed down 0.88% or 165 yuan/mt to 18,625 yuan/mt, with open interest down 3,391 lots to 170,451 lots.

Although the downstream demand has not seen a significant recovery, it is expected that the short-term SHFE aluminium prices will still have upside room as the domestic aluminium supply was disrupted by power rationing while the macro sentiment has improved.

Lead: The most-traded SHFE 2210 lead closed down 0.96% or 145 yuan/mt at 14,995 yuan/mt, with open interest down 4,010 lots to 43,338 lots.

In the spot market, the sellers were slightly less interest in making quotes after lead prices fell, and the overall transaction were muted. Some smelters resumed the production after the maintenance, and some secondary lead smelters reopened after technical upgrade. Lead ingot supply is likely to rise. Short-term lead prices are likely to fall in the near term if the consumption recovery falls short.

Zinc: The most-traded SHFE 2210 zinc closed down 0.18% or 45 yuan/mt at 24,760 yuan/mt, with open interest up 681 lots to 119,302 lots.

In China, the supply of spot goods remained tight, and the social inventory was also low, but it failed to boost zinc prices with bears on the macro front that the US Fed may raise the interest rate by 100 basis points in September. The market players shall watch the macro sentiment as well as the consumption in China.

Tin: The most-traded SHFE 2210 tin closed down 4.63% or 8,420 yuan/mt at 173,490 yuan/mt, with open interest up 5,974 lots to 40,493 lots.

In the spot market, the quotes offered by the smelters still showed great differences, and some smelters were quite firm to their prices, while some refrained from quoting amid violent volatility in prices. The number of quotes from the traders was still small, and the spot premiums rose slightly compared with the previous trading day. The spot transactions picked up slight after prices fell, and the downstream still purchased on rigid demand. SHFE warrants fell 95 mt to 1,737 mt.

Nickel: The most-traded SHFE 2210 nickel closed down 1.6% or 3,070 yuan/mt at 189,000 yuan/mt, with open interest up 3,413 lots to 85,407 lots.

In the spot market, Jinchuan nickel was in premiums of 6,500-7,000 yuan/mt today, with an average of 6,750 yuan/mt, down 1,150 yuan/mt from the previous trading day. NORNICKEL nickel was in premiums of 3,000-3,200 yuan/mt, with an average of 3,100 yuan/mt, down 50 yuan/mt on a dialy basis. The pure nickel spot premiums kept falling today, and the futures prices also fell amid weak demand, but the absolute spot price was still high, suppressing spot transactions. Nickel briquette price stood at 191,300-192,300 yuan/mt, down 1,450 yuan/mt from a day ago.

[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.]