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SMM Evening Comments (Sep 23): Shanghai Nonferrous Metals Closed Mixed on Unexpectedly Hawkish US Fed Stance
Sep 23, 2022 18:00CST
Source:SMM
In fact, since the release of August inflation data, stubborn inflation was already verified and the market has begun to revise the expectations for interest rate hikes. But the Fed's stance is more hawkish than previously expected, putting new pressure on financial markets.

SHANGHAI, Sep 23 (SMM) – Shanghai nonferrous metals closed mixed. On the macro front, the most important event this week is the Fed's regular meeting in September. The Fed's post-meeting statement is unusually hawkish, and it is expected that by the end the year, there will have another interest rate hike by 100-125 basis points, with a targeted benchmark rate of 4.6%, 3.9% by 2023 and 2024 respectively, which means that the Fed believes that the end of the rate hike route is 4.6%, and the interest rate cuts will not begin until 2024.

In addition, the Fed has also lowered the economic growth rate guidance for the next three years, expecting the GDP growth rate to be 0.2% and 1.2% in 2022 and 2023 respectively, and the unemployment rate 3.8% and 4.4% respectively. The expectation implies that the Fed acknowledges a possible recession.

In fact, since the release of August inflation data, stubborn inflation was already verified and the market has begun to revise the expectations for interest rate hikes. But the Fed's stance is more hawkish than previously expected, putting new pressure on financial markets.

Shanghai copper lost 0.34%, aluminium gained 0.11%, lead fell 0.7%, zinc advanced 0.32%, tin was flat, and nickel fell 1.83%.

Copper: The most-traded SHFE 2210 copper closed down 0.34% or 210 yuan/mt at 62,180 yuan/mt, with open interest down 6,914 lots to 116,679 lots.

In the spot market, standard-quality copper was in premiums of 530-550 yuan/mt in early trade, and the spread between good and standard-quality copper expanded to 40-50 yuan/mt amid supply tightness of the former. The market transactions were moderate. In addition, the expanding SHFE 2210 and 2211 contract spread did not contain the premiums. According to SMM statistics, the social inventory in Shanghai dropped nearly 10,000 mt this week, and the traders were increasingly less willing to lower the prices in light of low inventory, while instead, the market regained expectations for higher premiums ahead of the National Day holiday.

Aluminium: The most-traded SHFE 2210 aluminium closed up 0.11% or 20 yuan/mt to 18,630 yuan/mt, with open interest down 7,304 lots to 131,757 lots.

In the spot market, spots were in premiums of 50 yuan/mt over SHFE 2210 in east China, and in discounts of 90 yuan/mt over SMM A00 aluminium price in Gongyi. The market transactions were relatively active with the engagement of several large buyers. Some downstream players purchased on rigid demand for the upcoming weekend, but the amount was small. The overall transactions were acceptable.

Lead: The most-traded SHFE 2210 lead closed down 0.7% or 105 yuan/mt at 14,885 yuan/mt, with open interest up 1,025 lots to 34,005 lots.

The lead concentrate import expectation gradually paid off with rising SHFE/LME price ratio. The prices of lead-acid battery scrap dropped gradually after the replacement market picked up. The supply tightness eased to some extent. Nonetheless, the downstream lead-acid battery manufacturers actively restocked ahead of the National Day holiday, and domestic lead ingot social inventory dropped slightly. On the whole, SHFE lead is expected to hover around 15,000 yuan/mt with the mixture of longs and shorts.

Zinc: The most-traded SHFE 2210 zinc closed up 0.32% or 80 yuan/mt at 24,760 yuan/mt, with open interest down 5,094 lots to 86,350 lots.

SMM zinc social inventory recorded 92,700 mt as of September 23, and the low inventory offered momentum to zinc prices. SHFE/LME zinc price ratio rose to a high of 7.8, and SHFE zinc continued to outperform LME zinc. The import window of zinc concentrate opened theoretically. The restrictions on explosives use will have limited impact on the mine supply end.

Tin: The most-traded SHFE 2210 tin closed flat at 183,100 yuan/mt, with open interest up 9,385 lots to 37,427 lots.

In the spot market, the smelters retained their interest in making quotes in morning trade, and a few smelters held firm to the prices. According to the traders, the spot premiums changed little, with some lowering the quotes to promote the sales. The transactions in the spot market picked up slightly, while the downstream players still purchased on rigid demand.

Nickel: The most-traded SHFE 2210 nickel closed down 1.83% or 3,580 yuan/mt at 192,570 yuan/mt, with open interest down 13,622 lots to 60,019 lots.

In the spot market, Jinchuan nickel was in premiums of 3,000-3,500 yuan/mt, with an average of 3,250 yuan/mt, flat from the previous trading day. NORNICKEL nickel was in premiums of 1,500-1,800 yuan/mt, with an average of 1,650 yuan/mt, down 300 yuan/mt compared with yesterday. The futures price kept falling in morning trade, and the spot premiums fell as well. Spot prices fell as much as 5,000 yuan/mt today, but the transactions were still poor. For nickel briquette, the prices stood between 194,700-195,700 yuan/mt, down 5,250 yuan/mt on a daily basis. But the cost efficiency of briquette was still poor with almost zero transactions.

[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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