Home / Metal News / SMM Morning Comments (Sep 28): Base Metals Closed Mostly with Losses with Pressure from US Dollar

SMM Morning Comments (Sep 28): Base Metals Closed Mostly with Losses with Pressure from US Dollar

iconSep 28, 2022 10:00
Source:SMM
LME and SHFE base metals closed mostly with losses. Fed officials continued to express their stance on raising interest rates, and the US dollar index remained firm, suppressing the prices of risky assets.

SHANGHAI, Sep 28 (SMM) – LME and SHFE base metals closed mostly with losses. Fed officials continued to express their stance on raising interest rates, and the US dollar index remained firm, suppressing the prices of risky assets.

LME copper edged down 0.01%, aluminium lost 1.5%, lead gained 0.31%, and zinc dropped 1.86%.

SHFE copper fell 0.41%, aluminium lost 0.44%, lead slid 0.3%, and zinc dropped 1.36%.

Copper: LME copper opened at $7,410/mt yesterday. At the beginning of the session, it fluctuated higher and hit $7,431.5/mt. Then it fluctuated downward, reaching a low of $7,266/mt at the end of the session and closing at $7,291/mt, down 0.01%. Trading volume was 14,000 lots, and open interest stood at 247,000 lots.

SHFE 2211 copper contract opened at 60,700 yuan/mt in overnight trading, and once reached the highest and lowest price of 60,770 yuan/mt and 59,970 yuan/mt respectively. At last, the contract closed at 60,110 yuan/mt, down 0.41%. Trading volume was 38,000 lots, and open interest stood at 145,000 lots.

On the macro front, Fed officials continued to express their stance on raising interest rates, and the US dollar index remained firm, suppressing the prices of risky assets. And copper futures prices moved down again amid the rising US dollar index overnight.

In terms of spot, domestic premiums stayed stable amid the expansion of the spread between the front-month and next-month contracts, which shows that the market is worried about the current tight spot supply. At the same time, the fall in copper prices boosted the downstream purchases, which further enabled the cargo holders to hold firm prices. However, it should be noted that the pre-holiday position cut may further expand the spread between the front-month and next-month contracts amid the critically low inventory, and the spot premiums are unlikely to fall sharply. As the macro pressure has not been lifted, SMM still holds the view that the absolute price of copper may remain rangebound with some downward potential.

Aluminium: The most-traded SHFE 2211 aluminium contract opened at 18,100 yuan/mt overnight and rose to 18,260 yuan/mt before closing at 18,085 yuan/mt, down 80 yuan/mt or 0.44%.

LME aluminium opened at $2,136/mt on Tuesday and closed at $2,102/mt, down $32/mt or 1.5%.

On the supply side, the production reduction scale in Yunnan province was finally determined, which was in line with market expectations. On the demand side, aluminium processing companies reported better demand, but the recovery speed was slow than in previous years. The bulls were digested as the production reduction met expectations, and aluminium price is expected to move in a wide range in the near term.

Lead: LME lead opened at $1,757/mt overnight, and rose amid Asia trade and hit a brief high of $1,769/mt. The contract hovered around the daily moving average in Europe trade, and then fell with pressure from rising US dollar index to $1,746/mt. It finally closed at $1,757.5/mt, up $5.5/mt, up 0.31%.

The most-traded SHFE lead contract shifted to 2211, which opened at 14,865 yuan/mt overnight and then dropped to the low of 14,830 yuan/mt before hovering around the daily moving average. The contract finally closed at 14,845 yuan/mt after hitting a moderate high of 14,885 yuan/mt, down 45 yuan/mt or 0.3%.

Zinc: LME zinc closed at $2,850/mt on Tuesday, down $54/mt or 1.86%. The open interest fell 1,435 lots 195,000 lots. Overnight LME inventory fell 5,050 mt to 54,450 mt. The inventory at Klang warehouse dropped constantly, but considering the current LME cash-3M spread, the possibility of a short squeeze is low.

The most traded SHFE 2211 zinc contract closed at 23,635 yuan/mt last overnight, down 325 yuan/mt or 1.36%. The open interest rose 6,114 lots to 112,000 lots.

Overnight, new capital orders in the US rose faster than expected in August, suggesting that companies are still keen to invest in equipment despite rising interest rates, which could keep the economy growing at a moderate pace. Chinese Premier Li Keqiang presided over an executive meeting of the State Council and decided to suspend the payment of some administrative fees and deposits to help market players reduce their burden, with the total amount reduced will be around 116 billion yuan.

Tin: On the fundamentals, domestic warrants inventory kept falling, and spot transactions were contained by rising prices. LME inventory fell slightly but was still high. Overseas premiums remained low, and the import window remained open. Some imported goods due in October have been quoted with discounts. In terms of the futures market, SHFE tin fell after hitting high overnight, and closed the session below 180,000 yuan/mt. Both longs and shorts left the market during the session. To sum up, risk aversion sentiment aggravated ahead of the National Day holiday, and the downstream restocking was limited. SHFE tin is expected to remain low in the near term.

Nickel: On the supply side, prices of spot pure nickel fell recently. Premiums of Jinchuan nickel stopped falling and stabilised, thus improving the traders’ shipping sentiment. The recovered SHFE/LME nickel price ratio enabled the imports of overseas pure nickel to gain profits. NPI plants held firm prices, so the prices are unlikely to drop in the short term. On the demand side, the SMM research showed that the intraday spot stainless steel prices in Wuxi and Foshan markets stabilised with occasional drops, and downstream tube factories and stamping plants may restock before the National Day holiday. On the whole, the increase in demand could not keep up with the rhythm of arrivals, so the inventory decreased slowly. SMM believes that the spot prices will remain rangebound with some downward potential in the short term. Alloy manufacturers’ purchases grew amid the falling spot prices even though they usually do not restock before festivals.

[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.]

Market

For queries, please contact Michael Jiang at michaeljiang@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn

Related news

SMM Events & Webinars

All