SHANGHAI, Sep 19 (SMM) – LME and SHFE base metals closed mixed last Friday. US August CPI announced last week was higher than market expectations, and then the US dollar index soared. But the market participants are eying the upcoming US rate decision.
LME copper added 1.27%, aluminium slid 1.38%, lead fell 1.52%, and zinc lost 0.55%.
SHFE copper added 1.29%, aluminium rose 1.12%, lead fell 0.73%, and zinc gained 0.75%.
Copper: LME copper opened at $7,643/mt last Friday, and fluctuated upward, once reaching $7,831.5/mt. At last, the contract closed at $7,809.5/mt, up 1.27%. Trading volume was 15,000 lots, and open interest stood at 249,000 lots.
SHFE 2210 copper contract opened at 62,110 yuan/mt last Friday night and fell to the daily moving average after hitting 62,790 yuan/mt. Then it fluctuated upward again and climbed to 62,830 yuan/mt. At last, the contract closed at 62,810 yuan/mt, up 1.29%. Trading volume was 49,000 lots, and open interest stood at 144,000 lots.
On the macro front, the US August CPI announced last week was higher than market expectations, and then the US dollar index soared. After that, the news of Japan's implementation of exchange rate checks suppressed the dollar's moves. Last Friday, the US dollar index dropped, and copper futures rebounded. On the fundamentals, the proportion of LME copper cancelled warrants has dropped from the previous high of nearly 50% to 12.62%, and the inventory decline was relatively slow. The risk of a continuous short squeeze of LME copper was temporarily lifted. In China, the tight spot supply remained still.
In the spot market, the social inventory across China was relatively low. The consumption did not boom in the peak season of September and October, and it was also damaged by the high spot premiums. According to SMM investigation, new orders of copper processing companies decreased last week, and the weekly average operating rate of the copper cathode rod producers also declined. Whether the tight supply can last depends not only on the realisation of supply growth expectations but also on the continuous improvement of consumption. The changes in terminal consumption and copper scrap supply are yet to be examined. Fed’s meeting this week is worth attention. It is expected that copper prices will fluctuate with some downward potential under macro pressure.
Aluminium: The most-traded SHFE 2210 aluminium contract opened at 18,790 yuan/mt at last Friday’s night session and rose to 19,020 yuan/mt before closing at 18,945 yuan/mt, up 210 yuan/mt or 1.12%.
LME aluminium opened at $2,312.5/mt on Friday and closed at $2,283/mt, down $21/mt or 1.38%.
Many aluminium smelters in Yunnan have reduced their production by 10%, and it is worried that the output reduction may expand in the future. Some smelters in Sichuan have restarted their electrolytic cells, but the production resumption is relatively slow. On the demand side, the operating rates of some downstream enterprises picked up only slightly in the peak season. In the short term, aluminium prices will find support from the supply and cost side, and may rise if the demand improves. The market shall be alert to macro risks brought about by potential overseas interest rate hikes.
Lead: LME lead opened at $1,914/mt last Friday and fell after opening. As the US dollar index increased, LME lead fell by 1.52% under pressure and closed at $1,885/mt after hitting the lowest point at $1,882.5/mt.
The most traded SHFE 2211 lead contract opened at 14,920 yuan/mt overnight and fell to 14,845 yuan/mt at the early stage. SHFE lead finally closed at 14,875 yuan/mt, down 0.73%, with the open interest up 5,510 lots to 48,611 lots.
Zinc: LME zinc closed at $3,154.5/mt last Friday, down $17.5/mt or 0.55%. The open interest rose 203 lots 194,000 lots. Overnight LME inventory fell 400 mt to 75,700 mt, a drop of 0.53%. Surging US dollar index last Friday pressured LME zinc, which, coupled with high inflation overseas nailed by recently released overseas economic readings, is expected to put LME zinc on the downward trend.
The most traded SHFE 2210 zinc contract closed at 24,755 yuan/mt last Friday night, up 185 yuan/mt or 0.75%. The open interest fell 476 lots to 108,000 lots. On the supply side, SHFE/LME price ratio rose to 7.93, and the import profit of zinc concentrate added up to 1,200 yuan/mt, easing the supply tightness. On the consumption side, a series of supporting policies were recently introduced, and the market shall watch the performing of these policies that if they could bring material consumption. SHFE zinc is expected to remain rangebound in the near term.
Tin: SHFE tin rose above 180,000 yuan/mt at last Friday’s night session, but then fell back and moved sideways. Both longs and shorts were cautious. The domestic tin social inventory fell again, and the supply of goods in the spot market was tight, keeping spot premiums at highs. LME tin inventory rose slightly, with continuous growth in Asia. Overseas premiums remained low. The import profit window remains open. With little disturbance to the supply and demand side, SHFE tin is expected to hover sideways.
Nickel: On the macro front, the US CPI in August rose by 8.3% on the year, higher than market expectations of 8.1%. Affected by this news, the expectation of a sharp interest rate hike by the Federal Reserve strengthened. In this scenario, the US dollar index increased, and the prices of nonferrous metals were under pressure. In terms of the fundamentals, as the SHFE/LME price ratio dropped and the prices of pure nickel in the bonded area were high, the import of spot pure nickel was in a state of loss. The arrival of imported pure nickel will be less than expected this week. In terms of NPI, NPI plants shipped actively with the recovery of the stainless steel market. On the demand side, according to SMM survey, the spot prices of stainless steel in Wuxi and Foshan declined slightly, hence the spot market inquiries were relatively active. However, the downstream purchased as needed, and the terminal enterprises were less willing to restock. In terms of alloys, the spot prices of pure nickel were still high, hence enterprises were reluctant to purchase. To sum up, the demand for pure nickel was weak currently, but the decline in nickel prices may slow down this week amid the traditional peak season.
[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.]