SMM Evening Comments (Nov 4): Shanghai Nonferrous Metals Closed Mostly with Gains on Easing Market Sentiment

SHANGHAI, Nov 4 (SMM) – Shanghai nonferrous metals closed mostly with gains as the market sentiment improved after the investors digested the news of US rate hike.

Shanghai copper gained 1.34%, aluminium added 2.03%, lead rose 0.83%, zinc jumped 2.43%, tin climbed 0.91%, and nickel lost 0.15%.

Copper: The most-traded SHFE 2212 copper closed up 1.34% or 850 yuan/mt at 64,250 yuan/mt, with open interest up 1,530 lots to 192,238 lots.

On the macro front: (1) US trade balance for September stood at $-73.3 billion, against a previous reading of $-65.68 billion and a forecast of $-72.2 billion. (Bullish ☆) (2) U.S. initial jobless claims in the week of October 29 came in at 217,000, against a previous value of 218,000 and a forecast of 220,000. (Bearish ☆)

In the spot market, the futures prices rebounded quickly after hitting low, and SHFE 2211 and 2212 spread was still high in a backwardation structure, alluding relatively tight supply in the spot market. It is worth noting that the imported copper did not appeal the buyers, while the traders’ frequent adjust of spot premiums dragged on the premiums of mainstream copper, which, however, gained support from low inventory.

Aluminium: The most-traded SHFE 2212 aluminium closed up 2.03% or 365 yuan/mt at 18,385 yuan/mt, with open interest down 9,363 lots to 157,347 lots.

From the supply side, some aluminium smelters in Henan province reduced production. In addition, the release of new capacity and resumption of idled capacity are slow, thus the supply pressure has somewhat eased. SMM statistics showed that the domestic social inventory of aluminium ingots decreased 41,000 mt from a week ago to 580,000 mt as of November 3 mainly due to fewer arrivals and downstream dip buying. The pandemic in Henan weighed on downstream operating rates. The production and transportation of downstream enterprises will continue to be affected by the pandemic in the short term. It is expected that SHFE aluminium will remain rangebound in the short term.

Lead: The most-traded SHFE 2212 lead closed up 0.83% or 125 yuan/mt at 15,230 yuan/mt, with open interest down 818 lots to 53,044 lots.

SHFE lead rebounded today, and the cargo holders were quite active in making shipments, and the discounts expanded. Nonetheless, some holders intended to ship their cargos to the delivery warehouses, hence the market supply was reduced to some extent. The downstream players posted little rigid demand, and stood wait-and-see on high lead prices.

Zinc: The most-traded SHFE 2212 zinc closed up 2.43% or 555 yuan/mt at 23,370 yuan/mt, with open interest down 5,055 lots to 107,095 lots.

SMM zinc ingot social inventory across seven major markets in China fell 18,800 mt on a weekly basis to 60,000 mt with downstream players purchasing on dips. And low inventory underpinned zinc price. SHFE 2211 and 2212 spread widened to over 800 yuan/mt again, which is worth attention.

Tin: The most-traded SHFE 2212 tin closed up 0.91% or 1,430 yuan/mt at 159,410 yuan/mt, with open interest down 718 lots to 42,514 lots.

In the spot market, quotes offered by the smelters changed little in early trade, and some were firm to their prices; and mainstream smelters were calmer and stopped selling off in panic. The quotes from the traders were stable, and the premiums fell slightly after SHFE tin rose. Market transactions weakened with only a few shipments. The downstream players were increasingly wait-and-see as the prices rebounded.

Nickel: The most-traded SHFE 2212 nickel closed down 0.15% or 280 yuan/mt at 192,310 yuan/mt, with open interest up 2,575 lots to 85,231 lots.

In the spot market, Jinchuan nickel was in premiums of 5,500-6,000 yuan/mt, with an average of 5,750 yuan/mt, up 500 yuan/mt on a daily basis. NORNICKEL nickel was in premiums of 3,300-3,700 yuan/mt, with an average of 3,500 yuan/mt, up 250 yuan/mt from the previous trading day. SHFE nickel retreated slightly today, and the premiums rebounded; while the high spot prices still contained market transactions. For nickel briquette, the prices stood between 192,900-193,500 yuan/mt, down 2,050 yuan/mt from yesterday.

[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.]