SMM Evening Comments (Oct 10): Shanghai Nonferrous Metals Closed Mostly with Gains on First Trading Day post Holiday

SHANGHAI, Oct 10 (SMM) – Shanghai nonferrous metals closed mostly with gains in the first trading day after the National Day holiday.

On the macro front, the US job market was still strong evidenced by better-than-expected new non-farm payrolls as well as falling unemployment rate, triggering concerns over future rate hikes. In addition, the European economic situation is still worrying. Continuously rebounding US dollar pressured the non-ferrous metals.

Shanghai copper jumped 0.31%, aluminium gained 1.56%, lead advanced 1.46%, zinc inched up 1.76%, tin fell 1.37%, and nickel dropped 3.1%.

Copper: The most-traded SHFE 2211 copper closed up 0.31% or 190 yuan/mt at 61,260 yuan/mt, with open interest up 978 lots to 143,498 lots.

On the macro front, the US job market was still strong evidenced by better-than-expected new non-farm payrolls as well as falling unemployment rate, triggering concerns over future rate hikes. In addition, the European economic situation is still worrying. Continuously rebounding US dollar pressured the non-ferrous metals.

In the spot market, the market transactions were modest amid greatly fluctuating spot prices, with traders being the most active participant. High SHFE copper price as well as wide SHFE 2210 and 2211 contract spread in the backwardation structure encouraged the traders to sell. Bu the downstream purchases were not quite active. The market supply is expected to remain abundant in light of approaching delivery of SHFE 2210 as well as the open import window. But the deliverable sources were limited. Spot premiums would fall if SHFE 2210 and 2211 contract spread maintains the backwardation structure.

Aluminium: The most-traded SHFE 2211 aluminium closed up 1.56% or 285 yuan/mt to 18,565 yuan/mt, with open interest down 4,352 lots to 156,489 lots.

The fundamentals in China offered solid support to SHFE aluminium, but the overseas macro front is quite volatile. As such, SHFE aluminium moved in a wide range amid the mixture of bullish and bearish factors. The follow-up attention shall be paid to the potential ban of Russian metals by LME, as well as domestic consumption post the National Day holiday.

Lead: The most-traded SHFE 2211 lead closed up 1.46% or 220 yuan/mt at 15,245 yuan/mt, with open interest up 4,449 lots to 50,985 lots.

SHFE lead gained support from the fundamentals. The supply side saw both production recovery and restrictions, hence the overall pressure is controllable. The demand side is now in the seasonal high, according to the production scheduling of lead-acid battery companies.

Zinc: The most-traded SHFE 2211 zinc closed up 1.76% or 420 yuan/mt at 24,305 yuan/mt, with open interest up 8,315 lots to 111,666 lots.

SHFE zinc was on the rise today. SMM zinc ingot social inventory added 13,600 mt to 84,700 mt during the National Day holiday, which fell short of expectations and was at a relatively low level. The pandemic situation has restricted the transportation of goods of some smelters. Hence SHFE zinc is well supported in the near term. SHFE tin warrants added 37 mt to 1,477 mt today, and LME tin inventory fell 85 mt to 4,605 mt. 

Tin: The most-traded SHFE 2211 tin closed down 1.37% or 2,430 yuan/mt at 175,160 yuan/mt, with open interest down 4,326 lots to 39,212 lots.

In the spot market, the quotes offered by the smelters fell along with SHFE tin, except a few smelters who held firm to the prices. The traders were relatively cautious in making quotes in early trade, and the spread among different brands was narrow. The market transactions were moderate. The downstream purchases as appropriate post the National Day holiday, and some restocked on rigid demand. And a few buyers favoured imported goods.  

Nickel: The most-traded SHFE 2211 nickel closed down 3.1% or 5,740 yuan/mt at 179,200 yuan/mt, with open interest down 8,380 lots to 59,952 lots.

On the supply side, NPI plants were more willing to sell in light of improving profitability, and their inventory pressure eased. On the demand side, stainless steel mills are highly likely to ramp up the production, but the demand growth may lag behind the supply side. For alloy, the demand for pure nickel remained resilient in September, which extends into October.

For inventory, LME inventory stood at 52,362 mt as of October 7, and SMM pure nickel inventory across six markets in China totalled 8,194 as of October 10. Currently speaking, most pure nickel buyers purchased on demand instead of restocking ahead of the National Day holiday. In addition, SHFE nickel still deviates from the fundamentals, hence the weak demand for pure nickel is unlikely to support SHFE nickel. The contract is expected to remain on the downward track in the near term.

[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.]