SMM Evening Comments (Jun 24): Shanghai Nonferrous Metals All Closed with Losses amid Deep Market Panics

SHANGHAI, Jun 24 (SMM) – Shanghai nonferrous metals closed all with losses as the market was in deep concerns over a potential economic recession after the release of major economic readings in the US and Europe. The preliminary US Markit manufacturing PMI for June was significantly less than expected, which refreshed the 23-month low, and the US 30-year mortgage rate hit its highest level since 2008; the number of first-time jobless claims last week was near a five-month high.

Shanghai copper slid 4.15%, aluminium fell 2.24%, lead dropped 1.39%, zinc declined 4.86%, tin shed 9.49%, and nickel lost 8.91%.

Copper: The most-traded SHFE 2208 copper closed down 4.15% or 2,750 yuan/mt at 63,440 yuan/mt, with open interest up 17,279 lots to 143,339 lots.

On the macro front, data released yesterday showed that the preliminary US Markit manufacturing PMI for June was significantly less than expected, which refreshed the 23-month low, and the US 30-year mortgage rate hit its highest level since 2008; the number of first-time jobless claims last week was near a five-month high. As such, market concerns about the recession continued to rise. Federal Reserve Chairman Jerome Powell said in congressional testimony overnight that it was appropriate for the Fed to keep raising interest rates and that it would take all necessary measures to restore price stability, with copper prices under great pressure.

In the spot market, on the last trading before the end of June long-term order, market transactions picked up. The downstream also purchased on dips as copper futures prices have dropped for 10 consecutive trading days, with the premiums firming around 100 yuan/mt. Spot premiums are likely to rise as semi-annual settlement will begin next week. Meanwhile, the downstream restocking demand was sluggish, and the inflow of imports will also contain the premiums.

Aluminium: The most-traded SHFE 2207 aluminium closed down 2.24% or 435 yuan/mt to 18,970 yuan/mt, with open interest down 8,912 lots to 85,405 lots.

Market transactions were not well today, including south China, east China and Gongyi city, with premiums falling down. And the downstream stood wait-and-see. The export market is also disrupted by the issue the seasonal low.

Lead: The most-traded SHFE 2208 lead closed down 1.39% or 210 yuan/mt at 14,915 yuan/mt, with open interest up 3,833 lots to 56,293 lots.

Lead prices continued to fall today, and traders set their quotes according to the market dynamics. The prices of secondary lead have dropped to the break-even point as lead prices kept falling, and the smelters began to hold firm to their prices, with some quoted flat over primary lead. The downstream, on the other hand, purchased on dips and on demand. Some demand was re-directed to the primary lead market, and transactions with small orders were modest.

Zinc: The most-traded SHFE 2208 zinc closed down 4.86% or 1,220 yuan/mt at 23,905 yuan/mt, with open interest up 19,104 lots to 108,994 lots.

On the supply side, July domestic zinc concentrate TCs rose 100 yuan/mt in metal content on the backdrop of steeply falling zinc prices. On the consumption side, the downstream operating rates remained low. In the spot market, the SMM zinc ingot social inventory across seven major markets in China totalled 208,300 mt as of Friday June 24, down 9,800 mt from this Monday. On the whole, the strong bearishness on the macro front has outperformed the support from the fundamentals.

Tin: The most-traded SHFE 2207 tin closed down 9.49% or 21,480 yuan/mt at 204,860 yuan/mt, with open interest up 2,279 lots to 33,178 lots.

In the spot market, quotes from smelters were still low in morning trade, while some non-deliverable brands stayed firm to their offers. The downstream, however, purchased only on demand, and falling prices failed to appeal the buyers. SHFE warrants inventory fell 14 mt today, and dropped for a combined 388 mt in the past week to 3,167 mt. SHFE tin inventory fell 296 mt this week to 3,726 mt. LME inventory rose 180 mt today, and 175 mt in the week. Also, according to SMM statistics, the social inventory declined 216 mt to 5,449 mt, and the average operating rate in Yunnan and Jiangxi was merely 7.74%.

Nickel: The most-traded SHFE 2207 nickel closed down 8.91% or 16,860 yuan/mt at 172,310 yuan/mt, with open interest down 6,190 lots to 51,442 lots.

On the fundamentals, pure nickel imports stood profitable, and some salt factories turned to produce refined nickel, slightly pulling up pure nickel supply. On the demand side, due to issues like the procurement cycle, overall transactions were still poor despite the existence of rigid demand. In addition, the demand for pure nickel may be suppressed with the rising production of Indonesia NPI and intermediate products.

[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.]