SMM Evening Comments (Sep 14): Shanghai Nonferrous Metals Mostly Plummeted as the Market Cooled Down

SHANGHAI, Sep 14 (SMM) – Shanghai nonferrous metals closed with major losses as the market cooled down.

Shanghai copper lost 2.02%, aluminium plummeted 4.49%, lead dropped 1.59%, zinc fell 1.78$, tin slid 1.38%, and nickel plunged 4.09%.

Copper: The most-traded SHFE 2110 copper closed down 2.02% or 1,440 yuan/mt to 69840 yuan/mt, with open interest down 11621 lots to 124800 lots.

On the macro front, US consumer price index is due this Tuesday, and the market worried a high CPI reading may push Fed to dial back massive bond purchase by end of this year, driving up market risk aversion sentiment. Overnight US dollar index surged again, pressing SHFE copper. SHFE 09 – 10 spread maintained a backwardation structure of above 100 yuan/mt, but some capitals chose to exit the market and long paid off. Back-month futures saw reducing positions.

Tonight, the market shall watch seasonally adjusted US CPI for August on an annual and monthly basis. A rising CPI is welcome by the Fed officers, but the Fed is unlikely to take any major actions in the short term as most of the economic readings for August were disappointing. Nonetheless, the senior officers’ rhetoric will still influence market sentiment, potentially pushing down copper prices.

Aluminium: The most-traded SHFE 2110 aluminium closed down 4.49% or 1050 yuan/mt to 22320 yuan/mt, with open interest down 47601 lots to 186000 lots. There were no great changes or news from the macro or fundamental front, and the principal contradiction still lies in expected supply tightness amid energy consumption control, power rationing and coal shortage. However, the current high prices of aluminium is hard to influence the downstream sectors yet.

Lead: The most-traded SHFE 2110 lead closed down 1.59% or 240 yuan/mt to 14890 yuan/mt, with open interest up 2562 lots to 80894 lots. Primary smelters delivered at low premiums or flat, shipments were active in the trading market but deliveries have created losses. However, the downstream sector was not interest in taking in goods, thus the overall transaction was comparatively light. Domestic lead ingot inventory is likely to rise further in the short term.

Zinc: The most-traded SHFE 2110 zinc closed down 1.78% or 410 yuan/mt at 22585 yuan/mt, with open interest down 18743 lots to 91011 lots.

On the macro front, the US budget deficit in August turned out to be better than expected. And the recent fall in prices was partly triggered by worries over inflation. While costs also climbed due to supply shortage, insufficient inventory, rising commodity prices and high shipping costs.

On the fundamentals, the previously released national reserves had entered the marketed, pressuring spot premiums to some extent this week. Market transactions were comparatively thin.

Tin: The most-traded SHFE 2110 tin closed down 1.38% at 253720 yuan/mt, with open interest down 4139 lots. On the fundamentals, upstream supply is still expected to remain sufficient, and the digestion capacity of the downstream sector remains as the market focus.

Nickel: The most-traded SHFE 2110 nickel closed down 4.09% or 6250 yuan/mt at 146540 yuan/mt, with open interest down 23398 lots to 110324 lots. On the fundamentals, the demand from the new energy sector offered support of nickel prices, while the production restriction of stainless steel sent out bearish signals. Nickel prices are unlikely to significantly trend down in the short term as the short supply of nickel also remained.