SHANGHAI, Oct 25 (SMM) – LME and SHFE base metals closed mixed overnight. The manufacturing PMIs of Europe, the US, and the United Kingdom for October announced yesterday were all lower than expected, aggravating worries about a global economic recession. In particular, the US Markit manufacturing industry shrank for four consecutive months in October and hit a new 28-month low, throwing cold water on the expectations of further sharp rate hikes.
LME copper shed 1.03%, aluminium slid 0.22%, lead slipped 0.5%, and zinc added 0.81%.
SHFE copper gained 0.43%, aluminium fell 1.87%, lead rose 0.1%, and zinc inched up 0.06%.
Copper: LME copper opened at $7,590/mt on Monday, and once hit the lowest and highest price of $7,532/mt and $7,599/mt respectively. At last, the contract closed at $7,572/mt, down 1.03%. The trading volume was 12,000 lots, and open interest stood at 305,000 lots.
SHFE copper opened at 62,980 yuan/mt overnight, and fell to its lowest at 62,740 yuan/mt after climbing to 63,430 yuan/mt. At last, the contract closed at 63,020 yuan/mt, up 0.43%. The trading volume was 32,000 lots, and open interest stood at 175,000 lots.
The manufacturing PMIs of Europe, the US, and the United Kingdom for October announced yesterday were all lower than expected, aggravating worries about a global economic recession. Among them, the US Markit manufacturing industry shrank for four consecutive months in October and hit a new 28-month low, throwing cold water on the expectations of further sharp rate hikes, thus the US dollar then pared gains to 0.15%. On the fundamentals, as of Monday October 24, SMM copper inventories in major Chinese markets fell 18,600 mt compared with last Friday. Inventories in various regions all dropped, which was caused by the small arrivals of domestic copper and imported copper. SMM expects that the weekly inventory will drop slightly this week. On the demand side, the ownership transfer problem of a warehouse in Shanghai has been resolved, with the delivery of warrants flowing into the market and some goods shipped from north China to east China, the market supply remains relatively sufficient. Downstream companies were less willing to restock amid the high copper prices despite the spot premiums being lowered somewhat. Recently, affected by the devaluation of the RMB, copper prices in China have been higher than those in the foreign market. It is expected that SHFE copper will remain rangebound with some upward potential in the near future.
Aluminium: Overnight, the most-traded SHFE 2211 aluminium contract opened at 18,465 yuan/mt, with the highest price at 18,600 yuan/mt before closing at 18,580 yuan/mt, down 42 yuan/mt or 0.22%.
LME aluminium opened at $2,227.5 yuan/mt, with the highest and lowest prices at $2,234.5/mt and $2,170.5/mt before closing at 2,177 yuan/mt, down $41.5 yuan/mt or 1.87%.
At present, the overall fundamentals changed little, and the inventory of aluminium ingots remained low. The spot transactions in south China were relatively active, but that in east China were weak. On the macro level, concerns about the global economic recession are getting stronger, which may cool down the expectations of sharp interest rate hikes by Fed. In the absence of other unexpected events, aluminium prices will remain volatile.
Lead: LME lead opened at $1,903/mt overnight and ended 0.5% or $9.5/mt lower at $1,893.5/mt, after hitting the highest point at $1,935/mt and the lowest point at $1,885.5/mt. The most traded SHFE 2211 lead contract opened at 15,350 yuan/mt and rose 15 yuan/mt or 0.1% to 15,330 yuan/m, after briefly hitting the highest point at 15,395 yuan/mt and the lowest point at 15,320 yuan/mt.
Zinc: LME zinc closed at $2,914/mt on Monday, up $24/mt or 0.81%. The open interest increased 34,457 lots to 217,000 lots. LME inventory fell 25 mt overnight to 50,575 mt, still hovering at a low level.
The most traded SHFE 2212 zinc contract closed at 24,165 yuan/mt overnight, up 15 yuan/mt or 0.06%. The open interest rose 3,581 lots to 89,805 lots. On the supply side, a new round of negotiations on TCs for domestic zinc concentrate kicked off, where mines had less bargaining power due to sufficient domestic supply. Smelters intended to raise the TCs to around 5,000 yuan/mt. At the same time, slightly increasing prices of by-products sulphuric acid prompted domestic smelters to enjoy large profit margin, and the support for zinc prices from supply side weakened. Considering that the low social inventory will hardly improve in the near future, the downside room for zinc prices will be limited.
Overnight, Rishi Sunak became the first British Prime Minister with roots in India, who claimed that stability and unity were his priority. US Treasury Secretary Yellen said the Treasury was taking steps to strengthen the resilience of the US debt market, private money markets and bond funds. Currently, the US financial system was still working well despite increased global volatility. The preliminary reading of US manufacturing PMI fell to 49.9 in October, the first time it has been below 50 since June 2020. US business activity has contracted for the fourth consecutive month in October, with enterprises from manufacturing and service sectors reporting weaker customer demand in the monthly PMI survey. This is the latest evidence of a softening economy amid high inflation and rising interest rates. China's exports to Russia rose at a double-digit pace for the third consecutive month in September, in comparison with the falling external demand elsewhere amid the war between Russia and Ukraine and a global economic slowdown.
Tin: Domestic tin ingot social inventory dropped slightly, while LME tin inventory remained largely stable. The import profit is expected to remain stable, and concentrated arrivals of imported tin are expected at the end of October. SHFE tin opened low at Monday’s night session, but then rebounded and stabilised, closing at above 165,000 yuan/mt. The domestic supply and demand are temporarily balanced, but there are expectations for increasing imported tin with SHFE tin outperforming LME tin. Therefore, the short-term SHFE tin prices may move downward.
Nickel: On the supply side, Jinchuan nickel premiums fell due to the end-of-month factor. The customs clearance volume of imported pure nickel in September was 13,684 mt, up 11% MoM, of which nickel briquettes and nickel powder increased significantly. In terms of NPI, there is currently a backlog of Indonesia NPI. The demand for imported NPI does not decrease amid the large steel mills’ ramp-up of production, resulting in high NPI prices and tight supply. On the demand side, spot stainless steel prices in Wuxi and Foshan markets stayed almost unchanged, but some traders lowered their quotes along with the falling futures prices, thus the social inventories fell slowly. The demand for pure nickel from the alloy sector still exists at present, and the consumption of pure nickel is growing. In summary, the upstream of pure nickel is still tight, and the downward space for nickel prices will be limited in the near future.
[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.]
