SMM Evening Comments (Oct 12): Shanghai Nonferrous Metals Closed with Mixed Performance amid Varying Influences of Power Rationing

SHANGHAI, Oct 12 (SMM) – Shanghai nonferrous metals closed all in the positive territory as the impacts of the power rationing policy varied in different regions and industries.

Shanghai copper edged up 0.17%, aluminium advanced 2%, lead rose 1.29%, zinc added 2.31%, tin fell 2%, and nickel slid 0.24%.

Copper: The most-traded SHFE 2111 copper closed up 0.17% or 120 yuan/mt to 69680 yuan/mt, with open interest up 1529 lots to 141300 lots.

On the macro front, WTI prices closed above $80/barrel for the first time since 2014, supporting the non-ferrous board. The stat-owned copper company in Chile lifted the premiums of European copper by 31%, boosting the prices of copper. The global energy crisis has blurred the prospect of copper demand, while the decision of Chile has sent out bullish signals regarding copper prices.

Tonight, the market shall watch the US NFIB small businesses confidence index in September.

Aluminium: The most-traded SHFE 2111 aluminium closed up 2% or 460 yuan/mt to 23495 yuan/mt, with open interest down 8525 lots to 220274 lots.

The supply of domestic aluminium is likely to fall amid multiple factors. First, the operating rates in Qinghai and Ningxia may fall in the month, with almost zero new or resumed operation activities. The recent heavy rainfall in Shanxi has blocked the transportation. Several cities in Henan also implemented the orderly use of power. The power rationing is likely to affect the demand side as well, suppressing the demand in the seasonal high. The inventory of social aluminium ingot is likely to rise slightly to around 850,000 mt by the end of October.

Generally speaking, the domestic supply and demand of aluminium will stay weak in the short term. But the supply side will take longer time to recover.

Lead: The most-traded SHFE 2111 lead closed up 1.29% or 190 yuan/mt at 14765 yuan/mt, with open interest down 3655 lots to 63239 lots.

The power rationing policy has been easing, but the smelters were not interested in resuming the production, especially secondary lead smelters who suspended production due to operating losses. The trading market was active ahead of the delivery of SHFE contracts, but the supply of lead ingot diverged in different regions and the in-plant inventory has been limited.

Zinc: The most-traded SHFE 2111 zinc closed up 2.31% or 535 yuan/mt at 23730 yuan/mt, with open interest up 8300 lots to 106094 lots.

On the macro front, the China government has issued notice to emphasis the stable supply of electricity related to people’s livelihood and the agriculture industry, which is likely to push up the industrial production costs. On the fundamentals, there has been no signs of intensifying power rationing policy across China, and the zinc prices may stay high amid the comparatively low social inventories.

Tin: The SHFE 2111 tin closed down 2% or 5660 yuan/mt at 277510 yuan/mt, with open interest down 4719 lots to 27731 lots.

More brands offered quotations compared with the previous trading day. And the output in October is likely to increase on the month according to the feedback from smelters. The demand also picked up amid falling prices. The supply and demand may reach a balance in the short term.

Nickel: The most-traded SHFE 2111 nickel closed down 0.24% or 350 yuan/mt to 144730 yuan/mt, with open interest down 3867 lots to 96762 lots.

On the fundamentals, the spot prices of stainless steel fell slightly, while high-grade NPI stood high. Some stainless steel mills have resumed their production, creating more demand for nickel. However, the production of nickel plants has not restored to a satisfying level, thus the supply of ferronickel is likely to drop, pushing up the near-term prices of ferronickel, coupled with rising production costs. The demand from the new energy sector remained positive, but the supply of nickel sulphate has been sufficient, constraining the upside momentum of nickel prices.