SMM Evening Comments (Jul 19): Shanghai nonferrous metals ended mixed as investors monitored virus and digested OPEC deal

SHANGHAI, Jul 19 (SMM) – SHFE nonferrous metals closed mixed on Monday July 19 as markets digested the latest OPEC + announcement regarding oil production, and continued to brood on inflation and rising Covid-19 cases.

Tin, the best performer, rose 3.32%, nickel advanced 1.11% and zinc went up 0.92%, while copper edged down 0.68%, lead fell 0.6% and aluminium weakened 1.13%.

The ferrous complex closed mixed. Hot-rolled coil decreased 0.1% and iron ore slipped 1.49%, while rebar rose 0.78%.

Copper: The most-traded SHFE 2108 copper contract finished the day 0.68% lower at 68,740 yuan/mt. Open interest fell 5,097 lots to 103,887 lots.

The National Development and Reform Commission said that in the next step, it will continue to follow the deployment of the State Council executive meeting, work with relevant departments to strengthen the monitoring and forecasting of commodity prices, organise the release of national reserves such as copper, aluminium and zinc, pay close attention to the abnormal fluctuations in market prices, continue to strengthen the linkage supervision of the spot market, and severely crack down on illegal price behaviors such as price gouging and hoarding. As soon as the news comes out, the market sentiment has been affected, and SHFE copper is now lacking in rising momentum. Last week, the PPI and CPI data released by US went up synchronously, and the hawkish sentiment in the market gradually rose. However, Federal Reserve Chairman Powell defended his loose stance for two consecutive days to hedge inflation concerns. On the whole, the market has heard some officials say that the inflation rate and employment rate have reached the expectations of the Federal Reserve. Powell also said that he would discuss the plan to gradually reduce the scale of debt purchase at the Federal Reserve meeting on interest rates in July.

The NANB real estate market index in July, and whether the data related to real estate consumption can exert pressure on copper prices again will be monitored tonight.

Aluminium: The most-liquid SHFE 2108 aluminium contract finished the day 1.13% lower at 19,275 yuan/mt. Open interest fell 22,543 lots to 193,213 lots.

Zinc: The most-active SHFE 2108 zinc contract closed up 0.92% at 22,495 yuan/mt. Open interest rose 6,887 lots to 86,744 lots. SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei increased 2,500 mt from last Friday July 16 to 116,900 mt as of Monday July 19. The stocks were up 6,200 mt from July 12.

Nickel: The most-traded SHFE 2107 nickel contract ended the day 1.11% higher at 142,390 yuan/mt today. Open interest rose 1,764 lots to 125,073 lots.

Lead: The most-traded SHFE 2108 lead contract ended the day 0.6% lower at 15,830 yuan/mt. Open interest fell 5,686 lots to 49,392 lots. Social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin increased 1,400 mt from last Friday. However, some smelters may start to limit power and production this week. It is expected that the increase of social inventories will slow down this week, and the contract will test support from the five-day moving average tonight. The export trend of the trade market and the actual impact of short-term power curtailment and other factors on the increase of inventories still should be monitored. It is expected that after the short-term favorable release caused by power curtailments and other factors, lead prices may continue to run under pressure, waiting for the battery consumption to turn around in summer.

Tin: The most-liquid SHFE 2108 tin contract fell to a session low of 227,700 yuan/mt and finished the day 3.32% higher at 233,000 yuan/mt today. Open interest fell 361 lots to 37,794 lots. From the long-term trend, tin prices are affected by the fundamental relationship between supply and demand, and the upward trend has been maintained for quite a long time. However, considering that the production of major downstream industries is approaching the traditional off-season, the persistently high spot prices of tin ingots also suppress the profit margins of production enterprises, so it is becoming more and more difficult to keep the price rising continuously. It cannot be ruled out that the prices will drop significantly after short-term surge and sharp decrease of positions.