SMM Morning Comments (Dec 28): Shanghai Base Metals Were Driven up by Falling US Dollar Index

SHANGHAI, Dec 28 (SMM) – Shanghai base metals were boosted by the falling US dollar index overnight. LME market is closed from December 27 to 29.

SHFE copper rose 1.59%, aluminium increased 0.79%, lead gained 0.65%, zinc edged up 0.81%, and nickel went up 1,560 yuan/mt.

Copper: The SHFE 2202 copper contract opened at 69,810 yuan/mt last night, surging to 69,920 yuan/mt in the trading, and closed at 70,860 yuan/mt, up 1.59% overnight. The trading volume was 41,000 lots, and the open interest was 146,000 lots. SHFE copper is expected to trade between 70,400-71,000 yuan/mt today, with spot prices between a discount of 120 yuan/mt and a premium of 10 yuan/mt.

The US dollar index trended lower amid spreading COVID-19 variant Omicron across the world, which boosted the copper futures. The oil prices surged overnight, also providing upward momentum to copper futures.

In the spot market, most enterprises have suspended their bookkeeping with only 4 trading days left before the New Year, and the market transactions were scarce. The transactions are expected to be muted futher in the next few days.

Aluminium: Domestic social inventory of aluminium ingots has been declining for nearly two consecutive months, and it is expected that the destocking cycle can still be maintained in the short term. SHFE aluminium is expected to show no clear direction amid weakened cost support and continued destocking of domestic social inventories. The most-traded SHFE aluminium contract is expected to move within a range of 19,700-20,000 yuan/mt on Tuesday.

Lead: The most-liquid SHFE 2202 lead contract opened at 15,435 yuan/mt and hit the highest point at 15,510 yuan/mt on Monday night, before closing at 15,480 yuan/mt, up 0.65%, with open interest decreasing 190 lots to 43,129 lots.

Zinc: Overnight, the most-traded SHFE 2202 zinc contract opened at 24,050 yuan/mt, and fell slightly to 23,845 yuan/mt, but then rose to a high of 24,230 yuan/mt. The contract closed at 24,150 yuan/mt, up 195 yuan/mt or 0.81%. Transaction volume stood at 78,705 lots, and open interest decreased by 966 lots to 103,000 lots.

On the supply side, due to the pandemic in Manzhouli, the import of zinc ore from Russia and Mongolia by smelters in Inner Mongolia was hindered, and a large amount of cargo was piled up at the border, which caused some smelters to lower TCs in November. Zinc prices are currently greatly affected by overseas energy issue and are expected to continue to fluctuate rangebound. The most-traded SHFE zinc contract is expected to move within a range of 23,800-24,300 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 10-20 yuan/mt over the SHFE 2201 zinc contract.

Nickel: SHFE nickel prices closed at 149,460 yuan/mt, an increase of 1,560 yuan/mt from the closing price of the previous trading day. Trading volumes decreased 182,000 lots to 109,000 lots, and open interest decreased by 2,000 lots to 153,000 lots. On the whole, the fundamentals of nickel have not changed much. The demand from the two major downstream consumers nickel sulphate and stainless steel are still expected to be weak, and nickel prices are facing certain pressure. The LME market was closed on Monday and will be closed on Tuesday for Christmas holidays. The market shall pay careful attention to the fluctuations of SHFE nickel prices driven by the capital flows.

Tin: Overnight, the SHFE 2202 tin contract hovered around 290,000 yuan/mt after opening higher. The inventory of SHFE tin warrants decreased slightly. Trades were poor in the spot market.

SHFE tin is expected to hover sideways amid stable spot market.