SMM Evening Comments (Sep 26): Shanghai Nonferrous Metals Closed Mostly with Losses amid Weak Consumption

SHANGHAI, Sep 26 (SMM) – Shanghai nonferrous metals closed mostly with losses as the downstream restocking has not yet picked up significantly in the last trading week ahead of the week-long National Day holiday. And rising US dollar index intraday also suppressed the base metals prices.

Shanghai copper lost 2.93%, aluminium slid 3.52%, lead inched up 0.17%, zinc dropped 2.76%, tin declined 2.82%, and nickel fell 3.69%.

Copper: The most-traded SHFE 2210 copper closed down 2.93% or 1,830 yuan/mt at 60,700 yuan/mt, with open interest down 13,830 lots to 102,849 lots.

On the macro front, UK September manufacturing PMI stood at 48.5, against a previous print of 47.3 and a forecast of 47.5. The initial value of US September Markit manufacturing PMI was 51.8, against a previous print of 51.5 and a forecast of 51.1.

In the spot market, premiums of standard-quality copper with next-month invoice stood at 500-520 yuan/mt, and the premiums of good-quality copper also with next-month invoice were 80-100 yuan/mt higher than that of standard-quality copper amid tight supply of the former. Falling futures prices as well as low copper cathode inventory encouraged the traders to hold the prices firm, despite expanding SHFE 2210 and 2211 contract spread.

Aluminium: The most-traded SHFE 2210 aluminium closed down 3.52% or 660 yuan/mt to 18,075 yuan/mt, with open interest down 21,215 lots to 110,593 lots.

Market sentiment eased after the US Fed’s rate hike turned to be in line with market expectations. However, the demand in the seasonal high fell short, and aluminium prices showed signs of falling despite constant production cuts on the supply side. In addition, the import window opened amid falling LME aluminium, and the inflow of imported aluminium pressured the domestic market. In addition, downstream restocking behaviours were not quite active ahead of the National Day holiday as aluminium prices were high, but the shipments were moderate. And the social inventory was at historical low. Follow-up purchases on dips as well as supply cuts are worth attention.

Lead: The most-traded SHFE 2210 lead closed up 0.17% or 25 yuan/mt at 14,940 yuan/mt, with open interest down 10,804 lots to 23,201 lots.

Intraday US dollar index refreshed new high, and LME lead dropped again. In China, on the contrary, low operating rates of secondary refined lead manufactures as well as active purchases in the lead-acid battery sector brought down the lead ingot social inventory. SHFE lead was boosted by the fundamentals. Nonetheless, SHFE lead is expected to continue to outperform LME lead, resulting in rising SHFE/LME price ratio.

Zinc: The most-traded SHFE 2210 zinc closed down 2.76% or 690 yuan/mt at 24,280 yuan/mt, with open interest down 19,246 lots to 67,104 lots.

SHFE/LME price ratio rose to 8.3 with SHFE zinc outperforming LME zinc, and the import profits of zinc concentrate exceeded 2,000 yuan/mt. The pressure on the supply side aggravated with the supplement of imported cargoes. However, considering that the social inventory was still ow, SHFE zinc will remain rangebound in the near term.

Tin: The most-traded SHFE 2210 tin closed down 2.82% or 5,190 yuan/mt at 179,090 yuan/mt, with open interest down 5,500 lots to 31,927 lots.

In the spot market, several smelters showed strong willingness in holding the prices firm, and the spread among quotes from different smelters expanded compared with a week ago. According to the traders’ feedback, the supply of brand Yunxi was slightly low, and the premiums did not change much though SHFE tin dropped. And the market transactions improved palpably. Downstream players still purchased on rigid demand.

Nickel: The most-traded SHFE 2210 nickel closed down 3.69% or 7,190 yuan/mt at 187,500 yuan/mt, with open interest down 3,288 lots to 56,731 lots.

At 2: 00 a.m. on September 22 Beijing time, the US Fed announced an interest rate hike by 75 basis points, raising the range of the federal funds rate to 3.00%-3.25%, which was in line with market expectations. It is worth noting that according to statistics, the market's expected probability of a 75 basis points rate hike was 82%, while that of a 100 basis points rate hike was only 18%. Therefore, SMM expects that the rate hike will have a limited impact on the nonferrous metal market. Besides, precious metal prices may experience a short-term rebound with the support of the traditional peak season of September and October and the possible slowdown in the future rate hikes. The price trends of nonferrous metals should also be viewed in combination with the fundamentals of various varieties. Last week, the nickel industry was still in the September peak season, and the improvement in demand from stainless steel and new energy markets boosted the market. The demand for pure nickel from the alloy sector grew as well. In addition, the domestic and overseas nickel inventory were both low. Therefore, the nickel prices gained support from the above-mentioned factors.

[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.]