SMM Evening Comments (Aug 28): Shanghai nonferrous metals rose across the board amid revival hope

SHANGHAI, Aug 28 (SMM) — SHFE nonferrous metals closed higher across the board on Friday August 28 as Fed Chairman Jerome Powell announced a major policy shift Thursday to “average inflation targeting.”

U.S. government debt prices slipped lower early Friday, as markets responded to Federal Reserve Chairman Jerome Powell’s announcement of a major policy shift when it comes to inflation.

It comes after Powell said Friday that the U.S. central bank is willing to allow inflation to run hotter than normal, in an effort to support the labor market and broader economy. He described it as a “robust updating” of policy.

Tin was the best performer with a rise of 1.18%. Cooper advanced 0.91%, aluminium edged up 0.07%, zinc climbed 1.11%, lead increased 0.45% and nickel went up 0.59%.

The ferrous complex also traded higher. Iron ore increased 1.4%, rebar rose 0.24%, and hot-rolled coil gained 0.38%.

SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei increased 1,500 mt in the week ended August 28 to 177,200 mt, after an increase of 600 mt in the previous week.

Copper: The most-traded SHFE 2010 copper contract rose to an intraday high of 52,030 yuan/mt in the afternoon session, and closed 0.91% higher at 51,990 yuan/mt today. Fed Chairman Jerome Powell announced a major policy shift Thursday to “average inflation targeting.” That means the central bank will be more inclined to allow inflation to run higher than the standard 2% target before hiking interest rates. Eased macro optimism supported copper prices. The contract will test support from 52,000 yuan/mt tonight.

Aluminium: The most-liquid SHFE 2010 aluminium contract surged to an intraday high of 14,645 yuan/mt and ended 0.07% lower at 14,605 yuan/mt today. Open interest increased 7,841 lots to 121,000 lots as investors added their long positions. The basis and the flow of funds will come under scrutiny.

Zinc: The most-active SHFE 2010 zinc contract closed up 1.11% at 20,060 yuan/mt today. Open interest increased 7,419 lots to 113,000 lots. Zin prices rose due to improved macro sentiment, rising inflation expectation and consumption optimism. Whether the contract could remain above 20,000 yuan/mt will be monitored tonight.

Nickel: The most-traded SHFE 2011 contract finished the day 0.59% higher at 120,350 yuan/mt as the US dollar index declined and the Japanese Prime Minister plans to resign, leading to uncertainties in international relations. The contract is expected to move above 120,000 yuan/mt tonight.

Lead: The most-active SHFE 2010 contract climbed to an intraday high of 15,810 yuan/mt in the afternoon session, ending the day 0.45% higher at 15,795 yuan/mt. Open interest shrank 2,315 lots to 26,036 lots. Improved fundamentals consumption and the cost of secondary lead supported lead prices. Whether the contract could move above 5-day moving average of 15,800 yuan/mt will be monitored tonight.

Tin: The most-liquid SHFE 2011 tin contract rose to an intraday high of 144,650 yuan/mt as as investors added their long positions, and finished the day 1.18% higher at 144,450 yuan/mt today. Pressure above is expected to around 145,500 yuan/mt.