SMM Morning Comments (Sep 2): Most Base Metals Closed Lower on Slower Manufacturing Figures

SHANGHAI, Sep 2 (SMM) – Most of the base metals ended lower on slower growth in manufacturing of most Asian and European countries, which fuelled market concerns over global economic recovery.

SHFE copper fell 1.35% last evening; aluminium rose 0.05%; lead was up 0.3%; zinc dipped 0.09%.

LME copper fell 2.09%; aluminium fell 0.48%; zinc ended 0.80% lower; lead gained 1.06%.

Copper: LME copper prices dropped 2.09% overnight and closed at $9,336/mt. Trading volumes stood at 14,000 lots and open interest stood at 269,000 lots. SHFE 2110 copper closed at 68,650 yuan/mt last night, a drop of 1.35%. Trading volumes stood at 49,000 lots and open interest stood at 128,000 lots. ADP non-farm payrolls issued overnight increased by 374,000, which was far below market expectations. While the US manufacturing sector expanded faster than expected in August, manufacturers are still facing constraints from supply chain bottlenecks and labour market. Poor performance of domestic economic data grew investors' concerns over demand. In addition, the third batch of bidding for reserves offered by the SRB ended yesterday. The 30,000 mt of copper reserves offered combined with the influx of imported copper eased spot tightness.

SHFE copper prices are expected to move between 68,500-69,000 yuan/mt today, and LME copper will trade between $9,300-9,400/mt; spot premiums are likely to move between 160-220 yuan/mt.

Aluminium: The most-traded SHFE 2110 aluminium contract opened Wednesday’s night session at 21,055 yuan/mt, with the highest and lowest prices at 21,160 yuan/mt and 20,910 yuan/mt before closing at 21,085 yuan/mt, up 10 yuan/mt or 0.05%. LME aluminium opened at $2,710/mt on Wednesday morning and closed at $2,693.5/mt, down $13/mt or 0.48%. Domestic and overseas economic data for August fell short of expectations, and the recent remarks of the China Nonferrous Metals Industry Association also had negative impact on market sentiment. Bidding for the third batch of aluminium ingots of the SRB was completed on Wednesday. The release of 70,000 mt of SRB aluminium ingot reserves will help fill in supply gap to a certain extent in the short term. The exit of longs may lead to downward corrections in SHFE aluminium in the short term. Market will continue to pay attention to energy consumption control policy, inventory changes and actual demand in the peak season. SHFE aluminium is expected to hover at highs on Thursday.

Lead: Overnight, LME lead rose $24/mt or 1.06% to close at $2,282/mt. The US dollar index fell rapidly, bolstering LME lead. The US ADP employment data was far lower than expected. 
SHFE lead prices rose 45 yuan/mt or 0.3% to settle at 14,945 yuan/mt in the overnight trading.

Zinc: LME zinc fell after opening at $3,008.5/mt on Wednesday, but stopped falling at around the 60-day moving average. LME zinc closed the day at $2,965/mt, down $24/mt or 0.80%. Open interest decreased by 1,287 lots to 246,000 lots. LME zinc inventory decreased by 650 mt to 236,425 mt, a drop of 0.27%. Economic data in Europe and Asia mostly fell short of expectations.

The most-traded SHFE zinc contract fell to around 22,250 yuan/mt after opening Wednesday's night session at 22,190 yuan/mt. The contract closed at 22,145 yuan/mt, down 20 yuan/mt or 0.09%. Open interest increased by 479 lots to 99,054 lots. Bidding for 50,000 mt of zinc ingots of the SRB was basically completed on Wednesday, and the highest transaction price was slightly higher than that in the previous round.

The most-traded SHFE zinc contract is expected to move at 22,000-22,400 yuan/mt on Thursday. #0 domestic Shuangyan zinc is likely to trade at premiums of 150-170 yuan/mt over the SHFE 2110 zinc contract.

Tin: SHFE tin fluctuated at highs during Wednesday's night trading session. Supply tightness in the spot market has eased slightly when compared with last week, and some traders have begun to sell at discounts. Investors have shown little interest in entering the market. The most-traded SHFE 2110 tin contract is expected to meet resistance at 247,000 yuan/mt on Thursday and find support at 243,000 yuan/mt.

Nickel: SHFE nickel prices fell in the evening session as bulls reduced positions, and stemmed declines to hover around 146,500 yuan/mt until closing. Open interest on the 2110 nickel contract decreased 15,791 lots. The stainless steel market has remain weak as anti-dumping expectations and lower guidance price by steel mills caused stainless steel prices to plunge. This dragged down nickel prices.