SMM Comments (Feb 16): Shanghai Base Metals Closed Mixed Overnight amid Eased Ukraine-Russian Tension

SHANGHAI, Feb 16 (SMM) – Shanghai base metals closed mixed overnight, after the risk assets rallied as a whole. Their counter parts on LME mostly went up on Tuesday.

LME copper rose 1.25%, aluminium fell 1.05%, lead increased 0.63%, and zinc gained 0.64%.

SHFE copper increased 0.76%, aluminium dropped 1.01%, lead gained 0.16%, and zinc dipped 0.08%.

Copper: Three-month LME copper opened at $9,951/mt last night and fell to $9,910/mt before rebounding to close at $9,974/mt, an increase of 1.25%. The trading volume was 10,000 lots, and the open interest reached 260,000 lots. Three-month LME copper is expected to trade between $9,920-10,020/mt today.

The most-traded SHFE 2203 copper closed at 71,410 yuan/mt in overnight trading, up 0.76%. The trading volume was 31,000, and the open interest was 126,000 lots. SHFE copper is expected to trade between $71,100-71,700/mt today, with spot premiums at 100-180 yuan/mt.

On the macro front, the Russia-Ukraine tension eased yesterday, some Russian troops assembled on the Russian-Ukrainian border have returned to their bases from military exercises. As such, overnight risk assets rallied as a whole, including the three US stock indexes; while the US dollar index dropped slightly, which all boosted copper prices. Nonetheless, the US PPI in January released last night was far better than expected, indicating high inflations. The rate hike expectation was again heightened.

In the spot market, the market is expected to pick after with the recovery of downstream consumption. In China, the inventory is still at a historical low level, and the import window could hardly open in the short term when LME copper outperformed SHFE copper.

Aluminium: LME aluminium opened at $3,223/mt on Tuesday and closed at $3,194/mt, down $34/mt or 1.05%.

Overnight, the most-traded SHFE 2203 aluminium contract opened at 22,645 yuan/mt, with the highest and lowest prices at 22,690 yuan/mt and 22,360 yuan/mt before closing at 22,455 yuan/mt, down 230 yuan/mt or 1.01%.

On the supply side, Baise in Guangxi lifted its COVID prevention and control measures yesterday, and the local transportation gradually returned to normal. The operating capacity of local aluminium smelters and alumina refineries is not expected to drop again. The growth rate of aluminium ingot inventories slowed down this week. Inventory may begin to decline with seasonal recovery of consumption. It is expected that SHFE aluminium price will continue to fluctuate at a high level in the short term. It is necessary to continue to pay attention to inventory changes, consumption recovery and Russia- Ukraine tensions.

Lead: LME lead opened at $2,287.5/mt on Tuesday, and closed 0.63% higher at $2,308.5/mt after hitting the highest point at $2,315/mt. The lead stocks across LME-listed warehouses dropped by 1,050 mt to 51,100 mt.

The most traded SHFE 2203 lead contract opened at 15,445 yuan/mt last night, hitting the highest level at 15,280 yuan/mt, and closed at 15,355 yuan/mt, up 0.16%. The open interest dropped by 460 lots to 31,730 lots. The SHFE lead inventory increased by 2,762 lots to 84,222 lots.

Zinc: LME zinc hit the lowest level at $3,568/mt in the trading on Tuesday, and closed at $3,599/mt, up $23/mt or 0.64%. The zinc inventory across LME-listed warehouses dropped by 800 mt to 150,725 mt. LME zinc is expected to trade between $3,560-3,610/mt today, amid the tension between Ukraine and Russia.

SHFE lead dropped 20 yuan/mt or 0.08% to close at 25,120 yuan/mt overnight. The downstream users have not resumed the production in large scales, and the social inventory changes post the Winter Olympics is worth attention. SHFE zinc is expected to trade between 25,000-25,500 yuan/mt today, and the premiums of domestic Shuangyan zinc will stand between 30-40 yuan/mt.

Nickel: On the supply side, the newly added nickel matte production lines have just been put into production, and it will take some time before the production reaches designed capacity. Hence the supply side will see only limited increment. On the demand side, the raw materials of nickel sulphate will require nickel briquette as a supplement, and the expected resumption of stainless steel production will create more demand for high-grade NPI. The downstream sector will offer some support to nickel prices amid robust demand outlook. Meanwhile, the falling LME inventory also serves as a bullish factor.

Tin: The SHFE 2202 tin contract moved rangebound overnight with the exit of capital. Inventory under warrants declined slightly. The spot market improved slightly.  SHFE tin is expected to hover at highs amid stable fundamentals.