SMM Evening Comments (Oct 24): Shanghai Nonferrous Metals Closed Mixed on Weakening Rate Hike Expectations

SHANGHAI, Oct 24 (SMM) – Shanghai nonferrous metals closed mixed on dovish signals released by some UF Fed officials last Friday. Fed's Daley: "We'll slow the pace of rate hikes, not pause them, but raise them by 50 or 25 basis points".

Shanghai copper added 1.17%, aluminium fell 0.27%, lead slid 0.55%, zinc lost 2.14%, tin fell 1.23%, and nickel gained 1.22%.

Copper: The most-traded SHFE 2211 copper closed up 1.17% or 740 yuan/mt at 63,810 yuan/mt, with open interest down 701 lots to 131,846 lots.

On the macro front: (1) Total U.S. oil wells for the week of Oct 21 stood at 612, against a previous value of 610 and a forecast of 614 (bullish ☆) (2) US initial jobless claims for the week of Oct 15 recorded 214,000, against of previous reading of 226,000 and a forecast of 230,000. (bearish ☆)

In the spot market, SHFE copper regained nearly 1,000 yuan/mt in one day. Though premiums dropped slightly, the downstream players were still wait-and-see. The transfer of ownership became smooth again, which, coupled with the inflow of imported production, greatly improved the market supply. And the cargo holders found it difficult to hold the prices firm. Spot premiums are likely to drop this week after opening high.

Aluminium: The most-traded SHFE 2211 aluminium closed down 0.27% or 50 yuan/mt to 18,575 yuan/mt, with open interest down 2,808 lots to 125,297 lots.

SMM aluminium ingot social inventory stood at 626,000 mt, down 10,000 mt from a week ago. However, SHFE aluminium failed to gain support and dropped today with longs leaving the market. The supply in Gongyi city was restricted due to the pandemic control measures.

Lead: The most-traded SHFE 2211 lead closed down 0.55% or 85 yuan/mt at 15,365 yuan/mt, with open interest down 11,376 lots to 46,232 lots.

Though the supply of primary and secondary lead recovered slowly approaching the weekend, the operating rates of downstream lead-acid battery companies rose slightly, hence the lead ingot social inventory kept falling. The fundamentals were still able to offer some support to SHFE lead.

Zinc: The most-traded SHFE 2211 zinc closed down 2.14% or 540 yuan/mt at 24,675 yuan/mt, with open interest down 19,280 lots to 93,047 lots.

SHFE zinc was relatively stable today, and the downstream demand was contained by high SHFE zinc price earlier. Low zinc ingot social inventory offered support to zinc price despite falling spot premiums. SHFE zinc is likely to remain rangebound in the near term.

Tin: The most-traded SHFE 2212 tin closed down 1.23% or 2,050 yuan/mt at 165,010 yuan/mt, with open interest down 4,443 lots to 48,238 lots.

In the spot market, the quotes offered by the smelters showed a narrow spread, and some smelters were slightly less firm to the prices; some were quite willing to sell by lowering the prices. Spot premiums offered by the traders changed little, while the shipments were sluggish. The downstream players still mainly purchased on rigid demand. SHFE warrants inventory fell 97 mt to 2,030 mt.

Nickel: The most-traded SHFE 2211 nickel closed up 1.22% or 2,250 yuan/mt at 187,220 yuan/mt, with open interest down 314 lots to 57,422 lots.

Jinchuan nickel was in premiums of 8,000-8,500 yuan/mt today, with an average of 8,250 yuan/mt, down 400 yuan/mt from a day ago. NORNICKEL nickel was in premiums of 3,000-3,300 yuan/mt, down 500 yuan/mt on a daily basis. Pure nickel premiums fell today as the traders were more interest in making shipments approaching the end of the month. SHFE nickel was relatively resilient recently with dovish voices from US Fed officers last Friday. However, the market transactions were poor. For nickel briquette, the prices stood between 189,700-190,200 yuan/mt, up 5,250 yuan/mt from a day ago.

[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.]