SMM Evening Comments (Jul 5): Shanghai Nonferrous Metals Closed Mixed on Easing Market Sentiment

SHANGHAI, Jul 5 (SMM) – Shanghai nonferrous metals closed mixed as the economic readings were still less cheering. The US ISM manufacturing PMI registered 53 in June, a new low since June 2020, compared to estimate 54.9 and previous reading 56.1.

Shanghai copper fell 1.85%, aluminium lost 2.81%, lead dropped 0.76%, zinc gained 1.8%, tin shed 1.16%, and nickel rose 0.55%.

Copper: The most-traded SHFE 2208 copper closed down 1.85% or 1,130 yuan/mt at 60,110 yuan/mt, with open interest up 1,376 lots to 155,659 lots.

On the macro front, the US ISM manufacturing PMI registered 53 in June, a new low since June 2020, compared to estimate 54.9 and previous reading 56.1. The new orders index fell below 50.

In the spot market, purchases were not quite active, and the spot premiums kept falling. But the backwardation of SHFE front-month and next-month contract, which was less than 100 yuan/mt, appealed the traders to restock, underpinning the spot premiums. In morning trade, standard-quality copper was in premiums of 100 yuan/mt with few transactions, then the goods holders lowered the premiums to 80-90 yuan/mt, but the transactions were still sluggish. In afternoon trade, there were sources in premiums of 70 yuan/mt, and some were traded at 60 yuan/mt as traders forced down the prices. The market could hardly hold firm to the prices with the constant inflow of imports.

Aluminium: The most-traded SHFE 2208 aluminium closed down 2.81% or 535 yuan/mt to 18,485 yuan/mt, with open interest up 11,742 lots to 193,265 lots.

Aluminium supply is still on the rise, while the latest social inventory statistics result showed that aluminium social inventory has stopped falling. Aluminium billet inventory also rose with a weekly increase of 2,300 mt, indicating the impact of seasonal low. Aluminium prices are still pressured on the fundamentals, and are expected to fall in the near term.

Lead: The most-traded SHFE 2208 lead closed down 0.76% or 115 yuan/mt at 14,955 yuan/mt, with open interest up 1,421 lots to 52,536 lots.

In the spot market, discounts of smelters narrowed slightly after lead prices fell, but the downstream turned away from the high prices, and the transactions with small orders were still think. The market shall watch if the cost of secondary refined lead could offer strong support.

Zinc: The most-traded SHFE 2208 zinc closed up 1.8% or 410 yuan/mt at 23,130 yuan/mt, with open interest up 5,902 lots to 118,485 lots.

SHFE zinc rose slightly in the morning when US dollar index dropped, but lost some of its gains when the index surged in the afternoon. In addition, the lingering pandemic in Shanghai and Beijing still suppressed the confidence of longs to some extent, though the impact is weakening marginally.

Tin: The most-traded SHFE 2208 tin closed down 1.16% or 2,250 yuan/mt at 191,810 yuan/mt, with open interest up 4,017 lots to 51,805 lots.

In the spot market, smelters’ quotes were relatively stable in morning trade, and were less firm to their prices despite rebounding futures prices. The premiums offered by traders were flat from yesterday, and the overall transactions were modest. SHFE warrants fell 96 lots to 3,723 lots, and LME tin inventory rose 24 mt to 3,585 mt on July 4.

Nickel: The most-traded SHFE 2208 nickel closed up 0.55% or 920 yuan/mt at 168,790 yuan/mt, with open interest up 3,862 lots to 76,810 lots.

The subsiding expectations for further rate hikes recently boosted nickel prices to some extent.

On the supply side, traders were generally wait-and-see amid greatly fluctuating nickel prices recently, and the purchasing of Jinchuan nickel by traders were less than expected, resulting in less sources available in Shanghai.

On the demand side, the market sentiment has been affected by resurging pandemic in Wuxi over the weekend, but the impact is unlikely to last long or stay strong. The transaction in Foshan, after the typhoon Chaba, has returned to normal, with the local market being little affected. In terms of alloy, the downstream was generally bearish on nickel prices, which, coupled with few orders except the military sector, resulted in less demand for nickel.

Nickel prices are likely to remain rangebound amid weak demand and rising primary nickel supply in the long run.

[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.]