SMM Evening Comments (Aug 11): Shanghai Nonferrous Metals Mostly Closed with Gains as Slowing US Inflation Boosts Longs

SHANGHAI, Aug 11 (SMM) – Shanghai nonferrous metals closed mostly with gains as the US CPI rose 8.5% year-on-year, which is lower than expected, with a reading of 9.1% in June. Slowing US inflation has boosted the confidence of longs, hence non-ferrous metals posted gains across the board.

Shanghai copper advanced 2.18%, aluminium rose 0.24%, lead was flat, zinc gained 2.04%, tin added 2.54%, and nickel jumped 5.59%.

Copper: The most-traded SHFE 2209 copper closed up 2.18% or 1,340 yuan/mt at 62,690 yuan/mt, with open interest up 97 lots to 160,597 lots.

On the macro front: 1. Labor Department data showed that the U.S. Consumer Price Index (CPI) was flat MoM in July after rising 1.3% in June. CPI rose 8.5% year-on-year, which is also lower than expected, with a reading of 9.1% in June. 2. Charles Evans, chairman of the Federal Reserve Bank of Columbia, said inflation remains "unacceptably high", and the Fed may need to raise the rate to 3.25%-3.50% this year, and to 3.75%-4.00% by the end of next year; Fed Kashkari said the Fed is still far from declaring victory over inflation, and the idea of cutting interest rates early next year is "unrealistic", a more realistic way is to raise the rates until the inflation reaches the 2% target. 3. Gross Domestic Product (GDP) grew by 2.5% year-on-year in the first half of 2022, and 0.4% year-on-year in the second quarter, resisting pressure to achieve positive growth; the Consumer Price Index (CPI) rose by 1.7% year-on-year in the first half of the year, keeping the price situation stable against a backdrop of high global inflation.

In the spot market, the traders held firm to the premiums again. Standard-quality copper was originally in premiums of 40-50 yuan/mt in morning trade, but the transactions were poor. Sources priced at premiums of 30 yuan/mt were quickly sold out. The spread between good and standard-quality copper remained at 10 yuan/mt. The downstream stood on the sidelines amid power rationing with little restocking demand.

Aluminium: The most-traded SHFE 2209 aluminium closed up 0.24% or 45 yuan/mt to 18,745 yuan/mt, with open interest down 1,056 lots to 174,633 lots.

The supply of aluminium is expected to slow down due to accident, while the demand stood sluggish, and some downstream manufacturers lowered the operating rates amid power rationing. On the whole, the fundamentals of aluminium changed little, and the prices are expected to remain rangebound.

Lead: The most-traded SHFE 2209 lead closed flat at 15,250 yuan/mt, with open interest down 1,751 lots to 57,064 lots.

SHFE lead consolidated with downward potentials, and cargo holders refrained from quoting approaching the delivery of SHFE 2208. Secondary lead was still offered with large discounts, and the downstream purchased on demand in light of rich options. The retail sales were modest.

Zinc: The most-traded SHFE 2209 zinc closed up 2.04% or 505 yuan/mt at 25,265 yuan/mt, with open interest up 5,751 lots to 137,237 lots.

The unadjusted US CPI in July recorded 8.5%, indicating slowing inflation, and the market expectations for aggressive rate hikes in the future weakened. However, the consumption side was unable to offer substantial support, and longs are advised to stay cautious.

Tin: The most-traded SHFE 2209 tin closed up 2.54% or 4,980 yuan/mt at 201,000 yuan/mt, with open interest up 8,407 lots to 56,263 lots.

In the spot market, the spread among quotes from smelters widened amid rising futures in the morning, and smelters frequently adjusted their offers. According to traders, on the other hand, the number of quotes for non-deliverable brands was low, while the premiums did not fall significantly after the futures prices rose. Spot transactions were muted today, and the downstream stood wait-and-see as a whole.

Nickel: The most-traded SHFE 2209 nickel closed up 5.59% or 9,370 yuan/mt at 177,020 yuan/mt, with open interest up 12,455 lots to 92,803 lots.

On the supply side, domestic pure nickel supply kept rising. According to SMM survey, the pure nickel output stood at 16,000 mt in July, up 2.89% MoM. For NPI, Indonesia NPI flowing back to China aggravated the domestic supply surplus. On the demand side, stainless steel mills have signs of production resumption. For alloy, the buyers mainly stood on the sidelines. In the mid and long run, pure nickel supply was in slight surplus as the demand was quite poor, and the rising production Indonesia will keep the prices on the downward track. Nonetheless, nickel prices will drop more slowly with the bullish macro front.

[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.]