SMM Evening Comments (Sep 30): Shanghai Nonferrous Metals Closed Mostly with Gains amid Better-than-Expected China Manufacturing PMI

SHANGHAI, Sep 30 (SMM) – Shanghai nonferrous metals closed mostly with gains on the last trading day ahead of the National Day holiday. The higher-than-expected Chinese manufacturing data boosted the demand outlook for the world's largest metal consumer, while the London Metal Exchange (LME) may remove more brands of metal produced by Russian companies from the exchange's deliverable list, also a bullish call.

Shanghai copper jumped 0.89%, aluminium gained 1.67%, lead advanced 0.33%, zinc inched up 0.02%, tin fell 1.84%, and nickel climbed 2.13%.

Copper: The most-traded SHFE 2211 copper closed up 0.89% or 540 yuan/mt at 61,320 yuan/mt, with open interest down 6,238 lots to 142,520 lots.

On the macro front, higher-than-expected Chinese manufacturing data boosted the demand outlook for the world's largest metal consumer, while the London Metal Exchange (LME) may remove more brands of metal produced by Russian companies from the exchange's deliverable list, also a bullish call.

The spot market closed the past trading week with high premiums and wide SHFE 2210 and 2211 spread. Standard-quality copper with next-month invoice was originally in premiums of 590-600 yuan/mt in early trade, with active transactions; good-quality copper quoted with premiums of 620 yuan/mt was quickly sold out, and the traders firmed the premiums at 630-650 yuan/mt. The transactions were mostly made in the first trading session, with downstream players more active than the traders. In the second trading session, mainstream standard-quality copper supply was even tight, and downstream players had to purchase with higher prices; the supply of good-quality copper was even scarce.

Aluminium: The most-traded SHFE 2211 aluminium closed up 1.67% or 300 yuan/mt to 18,270 yuan/mt, with open interest down 18,318 lots to 160,841 lots.

Market rumours were flying last night that the LME may negotiate a possible ban on Russian metal trading, triggering a surge in the price of LME aluminium. However, the price rise will not sustain, in view of weak demand. The short-term aluminium prices are expected to remain strong and volatile, with eyes on the progress of the LME’s potential ban on Russian metal trading.

Lead: The most-traded SHFE 2211 lead closed up 0.33% or 50 yuan/mt at 15,030 yuan/mt, with open interest down 2,084 lots to 46,536 lots.

US dollar index dropped slightly ahead of the National Day holiday, and SHFE base metals mostly nailed a winning session. SHFE lead also firmed above 15,000 yuan/mt. The transactions in the spot market were muted as the National Day holiday is imminent, but the downstream consumption was moderate. Smelters generally expected low inventory pressure post the holiday. The pandemic situation in Anhui shall still stay on the radar of market players.

Zinc: The most-traded SHFE 2211 zinc closed up 0.02% or 5 yuan/mt at 23,670 yuan/mt, with open interest down 3,920 lots to 103,351 lots.

SHFE zinc was stable as a whole today. Despite pressure from the macro front, downstream restocking ahead of the National Day holiday pulled down zinc ingot social inventory by 21,600 mt to 71,100 mt. Low spot inventory underpinned zinc prices. LME zinc is worth attention during the week-long holiday.

Tin: The most-traded SHFE 2211 tin closed down 1.84% or 3,320 yuan/mt at 177,210 yuan/mt, with open interest up 1,623 lots to 43,538 lots.

In the spot market, most smelters lowered their quotes along with falling SHFE tin in early trade, and the willingness to make shipment improved; but there were still some smelters holding firm to their prices. According to the traders, the number of quotes for non-deliverable brands was small, and the spot premiums were also at a low level. The overall market quotes were small in number ahead of the holiday, and the transactions were also in small amount. Downstream players have basically completed their restocking, with few trades observed in the market.

Nickel: The most-traded SHFE 2211 nickel closed up 2.13% or 3,840 yuan/mt at 184,370 yuan/mt, with open interest down 892 lots to 68,332 lots.

On the supply side, spot premiums rebounded after SHFE nickel dropped, and upstream players were more willing to sell. For NPI, the profits of NPI plants were sound with rising NPI prices, and the shipments increased, which released the finished product inventory pressure. On the demand side, expectations for stainless steel mills ramping up the production in October are high, but the demand growth may fall behind that of supply. Hence spot stainless steel prices are likely to fall post the National Day holiday. For alloy, the manufacturers maintained normal production in September, hence the demand for pure nickel did not fall significantly. To sum up, short-term nickel prices are likely to remain rangebound as both supply and demand are improving recently.

[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.]