SMM Evening Comments (Aug 16): Shanghai Nonferrous Metals Mostly Closed with Losses amid Potential Economic Recession

SHANGHAI, Aug 16 (SMM) – Shanghai nonferrous metals closed mostly with losses with more signs indicating slowing economic development based on the August US Federal Reserve manufacturing index and US single-family builder confidence falling to near the lowest level since the start of the pandemic.

Shanghai copper added 0.16%, aluminium fell 0.25%, lead slid 0.4%, zinc gained 1.54%, tin dropped 0.12%, and nickel declined 1.87%.

Copper: The most-traded SHFE 2209 copper closed up 0.16% or 100 yuan/mt at 62,040 yuan/mt, with open interest down 3,367 lots to 155,892 lots.

On the macro front, the August US Federal Reserve manufacturing index and US single-family builder confidence fell to near the lowest level since the start of the pandemic, indicating further economic slowdown. The China National Bureau of Statistics released data showing that in July, the value added of industries above national scale grew by 3.8% year-on-year, down 0.1 percentage points from the previous month. From January to July, national real estate development investment was 794.62 billion yuan, down 6.4% year-on-year.

In the spot market, the spot premiums rose slightly with improving market transactions. Standard-quality was initially in premiums of 320-330 yuan/mt in morning trade, and then rose quickly to 340-350 yuan/mt as the transactions were active. Though the market cooled slightly after the premiums rose, the overall situation outperformed yesterday. The spread between good and standard-quality copper was still around 20 yuan/mt.

Aluminium: The most-traded SHFE 2209 aluminium closed down 0.25% or 45 yuan/mt to 18,225 yuan/mt, with open interest down 8,816 lots to 146,986 lots.

On the fundamentals, production cuts out of power supply shortage in Sichuan province expanded to 390,000 mt, and aluminium output in August is expected to fall slightly MoM. Though the supply pressure has eased, the downstream sector is still in the seasonal low, and processing companies in Sichuan, Chongqing, Zhejiang and Jiangsu are likely to be hit by the power rationing. As such, aluminium inventory keeps rising.

Lead: The most-traded SHFE 2209 lead closed down 0.4% or 60 yuan/mt at 15,040 yuan/mt, with open interest down 1,539 lots to 53,441 lots.

SHFE lead dropped today, and the cargo holders quoted based on the market dynamics. The premium/discount stood largely unchanged from a day ago. The downstream inquiries were moderate, and the players purchased on rigid demand. Retail sales were also improving.

Zinc: The most-traded SHFE 2209 zinc closed up 1.54% or 380 yuan/mt at 25,095 yuan/mt, with open interest up 4,436 lots to 127,987 lots.

SHFE zinc rose palpably amid supply tightness, and is expected to rise more significantly following LME zinc after Nyrstar, the largest zinc smelter in the world, announced to close the smelter BUDEL starting from September 1.

Tin: The most-traded SHFE 2209 tin closed down 0.12% or 240 yuan/mt at 198,760 yuan/mt, with open interest down 7,414 lots to 39,951 lots.

In the spot market, quotes from the smelters were relatively stable, and some were less firm to the prices. However, the number of quotes from the traders dropped slightly, and premiums of non-deliverable brands rose amid tight supply, narrowing the spread between different brands. Market transactions weakened compared with yesterday, and the downstream demand contracted after centralised procurement. SHFE warrants fell 98 mt to 2,924 mt today, and LME tin inventory added 95 mt to 4,160 mt as of August 15.

Nickel: The most-traded SHFE 2209 nickel closed down 1.87% or 3,300 yuan/mt at 173,600 yuan/mt, with open interest down 7,550 lots to 70,787 lots.

In the spot market, Jinchuan and NORNICKEL were in premiums of 5,000-6,800 yuan/mt and 3,000-3,300 yuan/mt respectively, up from the last trading day. Pure nickel transactions fell short recently as the futures prices fluctuated more greatly.

[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.]