SMM Evening Comments (Aug 17): Shanghai Nonferrous Metals Closed with Mixed Performances

SHANGHAI, Aug 17 (SMM) – Shanghai nonferrous metals market closed with mixed performances with SHFE aluminium hitting 13-year high.

Shanghai copper fell 0.77%, aluminium rose 1.41%, lead slid 0.45%, zinc climbed 1.22%, tin gained 2.43%, and nickel dropped 0.26%.

Copper: The most-traded SHFE copper contract closed down 0.77% or 540 yuan/mt to 69710 yuan/mt, with open interest down 5596 lots to 114600 lots.

On the macro front, Fed officers estimated that the Fed will begin to reduce bond purchase since this autumn. And a consensus was also reached that the tapering QE will commence in the following three months should the economy recovery sustains. Hawkish voices became louder. Overall, the macro front is slightly bearish, pressuring on copper prices at 70000 yuan/mt.

Tonight, the market shall closely watch the US retail sales data, the so-called “data-horror”, in July on a monthly basis, which will offer some guidance on the current status and outlook of an economy.

Aluminium: The most-traded SHFE 2109 aluminium closed up 1.41% or 285 yuan/mt to 20515 yuan/mt.

The NDRC held a routine press conference this morning to report the energy control performance in 1H. According to official data, energy consumption intensity in Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi, Jiangsu rose year-on-year instead of the required decrease. While the decrease rate in another 10 provinces fell behind schedule. In other words, the current energy-efficiency is quite unsatisfactory. The report triggered once again market concerns about even tightened supply, pushing up aluminium prices to its 13-year high.

SHFE aluminium prices are likely to fluctuate at high in the short term amid strong fundamentals. The most-traded contract is expected to move between 20300-21000 yuan/mt in the overnight market.

Lead: The most-traded SHFE 2109 lead closed down 0.45% or 70 yuan/mt to 15385 yuan/mt, with open interest down 499 lots to 82292 lots. Spot prices rose slightly, and smelters maintained quotations with premiums. Cargo holders were still unwilling to sell, while downstream purchase was mainly driven by rigid demand. Support at 15350 yuan/mt was relatively resilient though the fundamentals were weak and bearish sentiment kept spreading. Tonight the market shall see if SHFE zinc prices could rally from 15400 yuan/mt.

Zinc: SHFE zinc closed up 1.22% or 275 yuan/mt to 22790 yuan/mt, with open interest up 13888 lots to 77021 lots.

On the macro front, there were 42 confirmed COVID-19 cases in China yesterday with 6 found locally according to National Health Commission. Fall in number of new local cases has eased market worries to some extent, warming up the market sentiment.

On the fundamentals, NDRC announced that the approval process for projects with “high energy consumption and high pollution” will be suspended except for significant projects planned by the central government, and urged local governments to fulfill the targets of containing energy consumption increase and energy intensity. The news is likely to bring more uncertainties to power restriction policies and potentially trigger further decrease in supply. Zinc prices are likely to stay high in the short term.

Tin: The most-traded SHFE 2109 tin closed up 2.43% at 238100 yuan/mt, with open interest up 2238 lots. Intraday prices broke the previous high of 243990 yuan/mt and set a new record at 244890 yuan/mt, supported by news that Yunnan Tin Group was likely to call for bids. The market shall watch the performance of capitals at previous high. The sustainability of long capital will determine the price trend.

Nickel: The most-traded SHFE 2109 nickel closed down 0.26% or 380 yuan/mt at 145840 yuan/mt, with open interest down 11235 lots to 112000 lots. On the fundamentals, nickel ore prices remained high amid tightened supply of nickel sulphate and great demand from stainless steel and new energy sectors. SHFE nickel prices are expected to stay in congestion without strong bullish factor in the short term.