SMM Evening Comments

Category:-Metal | 04-Aug-2022 04:14 PM

Shanghai nonferrous metals closed mostly with losses again today amid rising US dollar index as a result of frequent hawkish voices of US Fed officials, with rising expectations over a 75-basis-point rate hike in September.

Shanghai copper slid 2.6%, aluminium rose 0.14%, lead lost 0.07%, zinc dropped 0.08%, tin shed 0.48%, and nickel declined 0.53%.

Copper: The most-traded SHFE 2209 copper closed down 2.16% or 1,300 yuan/mt at 58,750 yuan/mt, with open interest up 3,300 lots to 160,822 lots.

On the macro front, the hawkish voices of US Fed officials recently weighed on the non-ferrous metals, with rising expectations over a 75-basis-point rate hike in September, and the US dollar index rallied.

In the spot market, the quotes were relatively stable. Standard-quality was in premiums of 170-180 yuan/mt in morning trade, and the traded good-quality copper was in premiums of 180-190 yuan/mt despite quotes of 200 yuan/mt, with a spread of 10 yuan/mt over standard-quality copper. In the second trading session, the premiums stabilised, and low-priced sources were scarce.

Rising risk appetite in the spot market yesterday triggered sell-offs, and the premiums slumped. The futures prices dropped again today, and the purchasing interest picked up after SHFE 2208 and 2209 contract spread expanded again.

Aluminium: The most-traded SHFE 2209 aluminium closed up 0.14% or 25 yuan/mt to 18,190 yuan/mt, with open interest up 2,243 lots to 167,481 lots.

In the spot market, SMM aluminium ingot social inventory stood at 678,000 mt as of Thursday August 4, up 7,000 mt from a week ago, and down 54,000 mt the same period last year. The inventory was down 56,000 mt compared with July 4. Low aluminium inventory will underpin aluminium prices, but eyes shall be kept on the future arrivals.

SMM aluminium billet social inventory dropped 1,000 mt from Monday August 1 to 116,400 mt, but added 8,800 mt compared with last Thursday. Upstream production has been relatively stable, hence the supply shows no signs of declining. Aluminium billet inventory is more than likely to rise next week.

Lead: The most-traded SHFE 2209 lead closed down 0.07% or 10 yuan/mt at 15,140 yuan/mt, with open interest down 1,863 lots to 54,694 lots.

SHFE lead remained rangebound, and the cargo holders started to quote against SHFE 2209 approaching the delivery of SHFE 2209, while the quotes maintained small discounts. The downstream mainly purchased on rigid demand, and favoured sources from smelter with greater discounts. The trading market changed little at present.

Zinc: The most-traded SHFE 2209 zinc closed down 0.08% or 20 yuan/mt at 23,655 yuan/mt, with open interest up 2,237 lots to 118,523 lots.

SHFE/LME price ratio dropped to 6.92 as LME zinc gained strong support on the fundamentals, and the zinc concentrate import loss was as high as 4,151 yuan/mt. Meanwhile, domestic zinc ore supply and demand was in a tight balance with easing supply shortage, while the social inventory remained low.

Tin: The most-traded SHFE 2209 tin closed down 0.48% or 920 yuan/mt at 191,410 yuan/mt, with open interest down 468 lots to 52,204 lots.

In the spot market, quotes from smelters changed little, and some were willing to sell. The number of quotes from the traders were few in morning trade, and the supply tightness of non-deliverable brands remained in place. Spot premiums rose slightly, but the overall transactions were muted. The downstream purchased on rigid demand.

Nickel: The most-traded SHFE 2209 nickel closed down 0.53% or 910 yuan/mt at 172,280 yuan/mt, with open interest down 3,384 lots to 79,507 lots.

On the fundamentals, nickel ore supply in the Philippines began to rally, while Indonesia nickel products exports rose quickly, especially high-grade nickel matte. The stainless steel sector failed to bring surprises, while the new energy vehicle market posted moderate demand. 

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