SMM Evening Comments (Aug 22): Shanghai Nonferrous Metals Closed with Gains as China Cuts Interest Rate

SHANGHAI, Aug 22 (SMM) – Shanghai nonferrous metals closed with gains as China announced to cut the one-year/five-year loan market quoted rate (LPR) by 5 basis points and 15 basis points respectively to 3.65% and 4.3%.

Shanghai copper rose 0.84%, aluminium advanced 0.6%, lead added 0.63%, zinc jumped 1.11%, tin gained 1.23%, and nickel climbed 4.51%.

Copper: The most-traded SHFE 2209 copper closed up 0.84% or 520 yuan/mt at 62,770 yuan/mt, with open interest down 4,845 lots to 143,995 lots.

In the spot market, the situation of supply tightness remained in place compared with a week ago, but the market was in a stalemate with the game between buyers and sellers. Standard-quality copper was initially in premiums of 550-560 yuan/mt, and good-quality copper was flat with standard-quality copper. The cargo holders held the say in pricing amid supply tightness. The premiums then rose slightly in the second trading session, with standard-quality quoted in premiums of 560-570 yuan/mt.

Aluminium: The most-traded SHFE 2209 aluminium closed up 0.6% or 110 yuan/mt to 18,580 yuan/mt, with open interest down 6,233 lots to 131,711 lots.

SHFE aluminium surged to a high of 18,730 yuan/mt in morning trade amid the possibility of a complete shutdown of aluminium production in Sichuan province due to power rationing. However, SMM aluminium ingot social inventory added 3,000 mt from last Thursday August 18 to 683,000 mt as of today. Aluminium billet inventory also added 2,500 mt to 118,800 mt. The news of accumulating social inventory pulled down the futures contract, which hovered around the moving average.

Lead: The most-traded SHFE 2209 lead closed up 0.63% or 95 yuan/mt at 15,080 yuan/mt, with open interest down 4,204 lots to 39,649 lots.

Lead ingot supply and demand was affected by escalating power rationing across the country, with the supply side suffering slightly more. As such, lead prices rebounded. The traders were more active in making quotes, and most of whom quoted with premiums. The downstream mainly purchased on demand, and the retail market was also quiet.

Zinc: The most-traded SHFE 2209 zinc closed up 1.11% or 275 yuan/mt at 25,125 yuan/mt, with open interest down 7,651 lots to 101,876 lots.

SMM zinc ingot social inventory across seven major markets in China totalled 114,700 mt as of Monday August 22, down 10,600 mt from last Monday. The social inventory kept falling amid increasingly less arrivals of spots in Tianjin and Shanghai. In addition, zinc smelters in south China have been greatly affected by the power rationing. The delayed zinc arrivals underpinned zinc prices, while the consumption side has not yet improved.

Tin: The most-traded SHFE 2210 tin closed up 1.23% or 2,420 yuan/mt at 199,420 yuan/mt, with open interest up 3,200 lots to 26,588 lots.

In the spot market, quotes offered by smelters rose along with the futures contract in morning trade, and some smelters were less firm to their prices. On the other hand, the number of quotes for non-deliverable brands from the traders was small, while the premiums did not fall after the futures prices rose. Transactions in the spot market were poor, but the quotes remained resilient.

Nickel: The most-traded SHFE 2209 nickel closed up 4.51% or 7,700 yuan/mt at 178,500 yuan/mt, with open interest up 6,902 lots to 65,093 lots.

Pure nickel supply changed little recently, but a refined nickel plant in north China is reported to have carried out maintenance due to high temperature. Nonetheless, the plant has built the stocks enough to sustain refined nickel production for the month, hence the production will be little affected. On the demand side, the consumption was sluggish amid high nickel prices. On the macro front, energy crisis in Europe intensified amid the issue of Nord Stream 1 pipeline.

[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.]