SMM Morning Comments (Dec 22): Base Metals Mostly Closed with Gains Overnight on Stronger Market Confidence

SHANGHAI, Dec 22 (SMM) – Shanghai base metals mostly went up on Wednesday morning after the market confidence was boosted by the expectations of effective vaccines against COVID-19 variant Omicron overnight. Meanwhile, their counterparts on LME mostly went downward.

LME metals mostly closed higher in the trading on Tuesday. Copper increased 1.01%, aluminium rose 3.96%, zinc gained 2.77%, and lead fell 0.71%.

SHFE metals performed similarly in the overnight trading. Copper increased 0.58%, aluminium gained 1.33%, zinc rose 0.96%, and lead fell 0.93%.

Copper: Three-month LME copper opened at $9,536/mt last night and moved down to $9,482.5/mt, then rebounded to $9,570/mt, before closing at $9,555/mt, up 1.01%. The trading volume was 9,990 lots, and the open interest was 247,000 lots. LME copper is expected to trade between $9,500-9,600 yuan/mt today.

The SHFE 2202 copper contract opened at 69,340 yuan/mt and rose 0.58% High to close at 69,400 yuan/mt in the overnight trading. The trading volume was 32,000 lots, and open interest was 137,000 lots. SHFE copper is expected to trade between 69,100-69,700 yuan/mt today, with spot premiums between 200-320 yuan/mt.

The market was optimistic that vaccines can help curb the spread of the COVID-19 variant Omicron. There were also signs that US President Biden may revive his $2 trillion bill, which boosted the market confidence. The US dollar index pulled back slightly overnight, and the copper futures rallied. In the spot market, more companies were closed for settlement at the end of the year, so the downstream companies remained wait-and-see amid fewer market participants. The overall transactions were sluggish. However, the quotations stagnated as the goods holders were reluctant to lower the prices significantly amid limited inventory. The traders may continue to hold firm to the quotations on the low inventories at the end of the year.

Aluminium: The most-liquid SHFE 2201 aluminium contract rose 1.33% to settle at 19,805 yuan/mt overnight. Three-month LME aluminium rose 3.96% to settle at $2,768.5/mt yesterday.

Lead: Three-month LME lead opened at $2,299/mt in the overnight trading and went down in the European session. Then the prices rebounded to the highest level at $2,314/mt as the longs increased positions, and gained support at $2,274/mt after pulling back. LME lead closed at $2,291.5/mt, down $16.7/mt or 0.71%.

The most-traded SHFE 2202 lead contract opened at 15,635 yuan/mt in the overnight trading, hitting the lowest point at 15,350 yuan/mt, and closed at 15,405 yuan/mt, down 145 yuan/mt or 0.93%.

Zinc: Three-month LME zinc gained 2.77% to settle at $3,434.5/mt overnight, with open interest decreasing 217 lots to 245,000 lots. Zinc stocks across LME-listed warehouses dropped by 425 mt or 0.21% to 204,225 mt. The natural gas and electricity prices in Europe hit record highs overnight amid energy crisis, boosting zinc prices. LME zinc is expected to move between $3,400-3,450/mt today. The most-liquid SHFE 2202 zinc contract rose 0.96% to settle at 23,755 yuan/mt, with open interest increasing 4,227 lots to 85,663 lots. On the supply side, the shortage of domestic concentrate continued, and the prices of additional products such like sulphuric acid at smelters trended lower, suppressing the profit profile of smelters. The increase in the output at smelters is limited. On the consumer side, downstream companies mainly focus on collecting funds and intend to reduce the production at the end of the year. The overall operating rates weakened. Companies restocked on demand and spot transactions were muted. The most-traded zinc contract is expected to move between 23,500-24,000 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 30-50 yuan/mt over the January contract.

Tin: Spot supply stabilised and the inventory of warrants continued to decline. Supply and demand maintained balance. SHFE 2201 tin contract stood firm. The closing price was once again close to the upper limit of the recent congestion range overnight. Long and short positions were gradually shifted into 2202 contract. Price trend rarely gets rid of congestion at high levels amid supply-demand balance and the shift of contract.