SMM Evening Comments (Sep 29): Shanghai Nonferrous Metals was Mixed amid A New Record High of US Dollar

SHANGHAI, Sep 29 (SMM) – Shanghai nonferrous metals closed with mixed performances amid a new record high of the US dollar index, and the issue of debt limit in the US intensified today.

Shanghai copper lost 1.27%, aluminium advanced 0.84%, lead slid 0.42%, zinc edged down 0.29%, tin gained 1.15%, and nickel dropped 0.18%.

Copper: The most-traded SHFE 2111 copper closed down 1.27% or 880 yuan/mt to 68360 yuan/mt, with open interest down 550 lots to 117300 lots.

On the macro front, US Treasury Secretary Yellen warned the Congress again that the Treasury is likely to exhaust its extraordinary measures on October 18 if the Congress failed to raise or suspend the statutory debt limit. However, the Senate blocked the bill of suspending debt limit, adding debt risks. Meanwhile, Fed Chair Powell said that the Fed had almost met all conditions for tapering debt purchases. As such, overnight US debt interest rate and US dollar index trended higher, pressuring SHFE copper.

On the fundamentals, CSPT (China Smelters Purchase Team) held a general manager office conference in Shanghai this morning, at which the spot TC/RC guidance price was finalised at $70/mt and￠7.0/lb in Q4, higher than that in Q3 ($60/mt and￠6.0/lb for TC/RC, respectively).

Tonight, the market shall watch the climate index of Eurozone for September. The index is likely to fall amid tightening energy supply and power rationing.

Aluminium: The most-traded SHFE 2111 aluminium closed up 0.84% or 190 yuan/mt to 22820 yuan/mt, with open interest down 144 lots to 277,305 lots.

On the fundamentals, the supply of aluminium continued to fall amid intensifying power rationing, underpinning aluminium prices. While on the other side, the social inventories of aluminium and aluminium billet have been on the rise as the downstream sector turned away from the high prices, and the demand has also been constrained due to power rationing. Meanwhile, the National Food and Strategic Reserves Administration has decided to release the fourth batch of national reserves with an amount of 70,000 mt of aluminium, forming resistance against aluminium prices.

Lead: The most-traded SHFE 2111 lead closed down 0.42% or 60 yuan/mt at 14355 yuan/mt, with open interest up 6078 lots to 75114 lots.

The spot market was less active today. For primary lead, supply for small orders was insufficient amid power rationing and high delivery under long-term contracts. Mainstream quotes were mostly offered at premiums of 100 – 150 yuan/mt over average online prices. Inquires in the market shrank as most downstream companies have finished restocking in the previous trading days.

For secondary lead, the supply dropped as well amid a weakening market and tight supply of secondary crude lead. Most large smelters were wait-and-see, resulting in sluggish sport trading. Mainstream quotes of secondary refined lead (tax included) were offered at narrow premiums or flat against average online prices.

As the power rationing extended its influences, pre-holiday restocking demand of battery factories weakened. Since the overall output has been mega, the influences of price dynamics and power rationing on the supply side will be relatively small. As such, the market will get back to normal gradually.

Zinc: The most-traded SHFE 2111 zinc closed down 0.29% or 65 yuan/mt at 22690 yuan/mt, with open interest down 6376 lots to 95122 lots.

On the fundamentals, power rationing has been impacting the upstream and downstream sectors to varying degrees. Meanwhile, the National Food and Strategic Reserves Administration has decided to release 50,000 mt of zinc ingots, partly making up the reduced output due to power rationing. The social inventory was still at a historical low, underpinning zinc prices.

Tin: The SHFE 2110 tin closed up 1.15% at 272820 yuan/mt, with open interest down 2427 lots. The SHFE 2111 tin was relatively stable today, with capitals leaving the market.   

On the fundamentals, the influences of power rationing on upstream smelters were limited, while the downstream sector was more significantly affected. Therefore, the demand side is likely to fall in the near term. The spot market trading was subdued today, and is expected to remain so in the next trading day due to already fulfilled downstream restocking demand and previous active shipments of trades to avoid price risks during the holiday.

Nickel: The most-traded SHFE 2110 nickel closed down 0.18% or 250 yuan/mt to 141960 yuan/mt, with open interest down 13241 lots to 19088 lots.

Domestically speaking, the inventory of nickel ore rose more slowly, and the supply of raw materials remained tight. Besides, the accident of a nickel mine in Canada has triggered market concerns over supply. In China, the power rationing has also brought influences to the ferronickel plants. Meanwhile, many downstream steel mills have carried out maintenance recently, dragging down the supply. The new energy sector was still robust, with sound demand for nickel briquette.