SMM Morning Comments (Sep 20): Base Metals Closed Mostly Mixed ahead of Multiple Rate Hike Resolutions

SHANGHAI, Sep 20 (SMM) – LME and SHFE base metals closed mixed as the market turned cautious ahead of the interest rate resolutions to be announced by multiple central banks, especially the US Fed.

LME copper lost 0.48%, aluminium slid 1.49%, lead fell 0.16%, and zinc added 0.24%.

SHFE copper lost 0.4%, aluminium rose 0.13%, lead added 0.2%, and zinc gained 0.18%.

Copper: LME copper opened at $7,719/mt on Monday, and then fell to $7,698.5/mt. At last, the contract closed at $7,772/mt, down 0.48%. Trading volume was 9,197 lots, and open interest stood at 248,000 lots.

SHFE 2210 copper contract opened at 62,020 yuan/mt overnight and fell to the daily moving average and then 61,960 yuan/mt. Then it rallied to 62,390 yuan/mt before closing at 62,270 yuan/mt, down 0.48%. Trading volume was 31,000 lots, and open interest stood at 138,000 lots.

On the macro front, US dollar index fell as the market was cautious ahead of the interest rate resolutions of multiple central banks.

On the fundamentals, SMM copper cathode inventory across major markets in China added 200 mt from last Friday to 84,700 mt on Monday. The social inventory rose slightly with the inflow of imported copper after the typhoon left. However, the supply tightness of copper scrap and blister copper affected the production of smelters to some extent. And some cargoes under bill of lading are scheduled to arrive at Chinese ports in October due to poor weather conditions. Hence domestic supply is unlikely to rise significantly. On the consumption side, the market outlook is optimistic with the arrival of restocking period ahead of the National Holiday. But the high spot premiums may contain the consumption to some extent.

Aluminium: The most-traded SHFE 2210 aluminium contract opened at 18,620 yuan/mt overnight and rose to 18,765 yuan/mt before closing at 18,735 yuan/mt, up 25 yuan/mt or 0.13%.

LME aluminium opened at $2,284/mt on Monday and closed at $2,249/mt, down $34/mt or 1.49%.

On the supply side, the news of production reduction in Yunnan province is still fermenting, and a number of smelters have slashed their production by 10% as required. The follow-up progress awaits further notices. On the demand side, SMM aluminium ingot social inventory accumulated compared with last Thursday, and the buyers purchased on rigid demand in the trading market. Aluminium prices are likely to remain rangebound in the near term with the wrestling between the supply and demand sides.

Lead: LME lead opened at $1,894.5/mt overnight. The Fed’s interest rate meeting is imminent. The US dollar remained high, hence most of the metals prices fell. LME lead fluctuated between $1,885-$1,900/mt and finally closed at $1,882/mt, down 0.16%, after hitting the lowest point at $1,880/mt.

The most traded SHFE 2210 lead contract opened at 14,835 yuan/mt overnight amid the decline of lead ingots inventory. As the short decreased positions, SHFE lead rose to 14,900 yuan/mt. However, as the battery scrap prices fell, SHFE lead finally closed at 14,900 yuan/mt, up 0.2%, with the open interest down 1,501 lots to 46,773 lots.

Zinc: LME zinc closed at $3,162/mt on Monday, up $7.5/mt or 0.24%. The open interest rose 6,940 lots 201,000 lots. Overnight LME inventory fell 25 mt to 75,675 mt, a drop of 0.03%.

The most traded SHFE 2210 zinc contract closed at 24,650 yuan/mt overnight, up 45 yuan/mt or 0.18%. The open interest fell 1,578 lots to 101,000 lots. On the supply side, the smelters resumed the production after the power rationing was lifted, and the imported zinc concentrate also supplemented the domestic supply. On the consumption side, the downstream sectors were poor as a whole except the galvanising sector with higher operating rates after the manufacturers resumed the production from the Mid-Autumn Festival. On the whole, the contradictions on the fundamentals were minimal.

Overnight, Reuters survey: MLF was stable, and most market players believed that China's LPR will be flat in September, with a 20% possibility of a minimal reduction in 5-year LPR. China and Russia held the 17th round of strategic security exchange targeting the "comprehensive strategic cooperation partnership". The Bank for International Settlements urged major economies to "strengthen" interest rate hikes despite rising risk of recession.

Tin: On the fundamentals, domestic social inventory fell slightly, alluding spot supply tightness, and the spot premiums narrowed. LME inventory was high, and the premiums overseas were relatively low; the import profit is expected to fall, but the import window remained open. In the futures market, the most-traded SHFE TIN contract rebounded quickly after opening low, and then consolidated without much upside momentum. Both the longs and shorts reduced their positions. To sum up, both the supply and demand are weak in the tin market, and the SHEF contract is more than likely to remain rangebound in the near term.

Nickel: On the supply side, overseas pure nickel imports still suffered losses, and domestic spot premiums for pure nickel kept falling. However, pure nickel supply was relatively sufficient against poor demand. For NPI, the market was in a stalemate. On the supply side, NPI plants have certain expectations toward the stainless steel market, hence were firm to their prices. But as more NPI plants were making shipments, rising supply would weigh on NPI prices. On the demand side, stainless steel demand picked up slightly, especially the hardware and home appliances sectors that are auxiliary to the real estate. In terms of alloy, the demand was suppressed by high spot premiums of pure nickel. Nickel prices are likely to fluctuate in the short term with downstream demand picking up gradually.

[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.]