SHANGHAI, Feb 13 (SMM) – SHFE and LME base metals closed mostly with losses last Friday. On the macro front, the market is currently focusing on the upcoming inflation data from the United States. Some investors are worried that it may exceed market expectations. The U.S. dollar index fluctuated higher last Friday night.
Copper: LME copper closed at $8,854/mt last Friday evening, a decline of 1.63%.Trading volume was 12,000 lots and open stood at 251,000 lots.
The most active SHFE 2303 copper contract finished at 68,050 yuan/mt last Friday evening, down 0.63%. Trading volume was 27,000 lots and open interest stood at 150,000 lots.
On the macro front, the market is currently focusing on the upcoming inflation data from the United States. Some investors are worried that it may exceed market expectations. The U.S. dollar index fluctuated higher last Friday night.
As of Friday February 10, copper inventory across major domestic markets tracked by SMM decreased 1,500 mt from February 6 and stood at 312,900 mt. Since the end of December, the domestic inventory has accumulated for seven consecutive weeks, but the stock accumulation has begun to slow last week. The decrease in inventory is mainly due to the rapid recovery of consumption in Guangdong, while the inventory in east China is still increasing due to the slow recovery and the inflow of goods from the north. In terms of consumption, most of the downstream plants have resumed last week, and it is expected that demand will continue to increase driven by the production resumption of more companies. As demand remains weak, copper prices may move down slightly in the near future.
Aluminium: The most-traded SHFE 2303 aluminium contract opened at 18,575 yuan/mt at last Friday’s night session before closing at 18,515 yuan/mt, a drop of 225 yuan/mt or 1.2%.
LME aluminium opened at $2,504/mt last Friday and closed at $2,455/mt, a decrease of $52/mt or 2.07%.
Production reduction in Yunnan has not yet been implemented, and market expectations for output cuts have weakened. If the scale of future production reduction meets expectations, the trading logic in the aluminium market may shift to cost, downstream consumption and inventory. Overall, the current aluminium market is filled with bearish and bullish factors, which is expected to keep aluminium prices rangebound in the short term.
Lead: Last Friday, LME lead opened at $2,122/mt and hovered sideways during the Asian trading hours. As the US dollar index rebounded during the European trading hours, LME lead dropped to $2,075.5/mt and finally closed at $2,091/mt, down $28/mt, or 1.32%.
On the evening of last Friday, the most-traded SHFE 2303 lead contract opened at 15,295 yuan/mt dropped to 15,210 yuan/mt dragged down by the weakening LME lead and finally closed at 15,235 yuan/mt, down 110 yuan/mt, or 0.72%.
Zinc: LME zinc opened at $3,134/mt last Friday, and hit a high of $3,137/mt before falling back to a low of $3,021/mt. It eventually closed at $3,024/mt, a decrease of $121.5/mt or 3.86%. The trading volume rose to 7,896 lots, and open interest was down by 2,184 lots to 201,000 lots.
LME zinc inventory increased by 4,875 mt or 22.81% to 26,250 mt, among which the inventory in Singapore climbed higher. The market was worried about overseas inflation again, and prices of non-ferrous metals generally fell. LME zinc saw a sharper decline as LME zinc inventory rebounded from low levels.
During last Friday’s night session, the most-traded SHFE 2303 zinc contract opened lower at 23,150 yuan/mt and kept falling before closing at 22,995 yuan/mt, down 270 yuan/mt or 1.16%. Trading volume was down to 60,676 lots, and open interest added 3,634 lots to 85,980 lots. SHFE zinc dropped for three consecutive days and found support at the lower end of the Bollinger Bands. The supply side was still under pressure on account of high output, but the operating rates of downstream enterprises recovered significantly, allowing the accumulation of social inventory to slow down. The domestic social financing data was acceptable, and attention shall be paid to the data on the real estate sector. It is expected that the short-term zinc prices will fluctuate with limited downside room.
Tin: SHFE tin fluctuated narrowly during the night trading of the previous trading day and the most-traded 2303 contract stood at 217,400 yuan/mt.
Fundamentally, the domestic warrant inventory remained stable and the spot premiums stabilised in the normal range. The shipments changed little from the previous trading day and the import window remained open as the imported tin prices were in obvious discounts.
SHFE tin fluctuated within a narrow range after opening and the most-traded 2303 contract closed at 217,400 yuan/mt. Due to the risk aversion mood of funds on last weekends, the open interest of 2303 contract greatly reduced ,6829 lots, and the that of SHFE 2304 and other forward-month contracts also reduced to varying degrees.
To sum up, SHFE tin remained volatile as the long-short game eased. In light of the high raw material inventory of downstream enterprises and the impact of imported tin, the spot market was stable.
Nickel: Nickel prices dropped first and then rose last week amid the frequently released macro factors and news. On February 3, the US Department of Labor announced that the seasonally adjusted non-farm employment was 517,000, which far exceeded the expectation of 185,000. This means that the current US economy is more resilient and the Fed will increase the rate hikes further in the future, which was bearish for commodity prices. On the news front, on February 9, nickel futures began to grow due to the incident of Trafigura nickel trading. SMM believes that the scam may confirm that the current nickel inventory is lower than the actual value, which intensified the market’s concerns about the tight supply of nickel and has a bullish effect on the futures prices. In terms of fundamentals, the SHFE/LME nickel price ratio rose, and spot imports began to gain profits. Some traders who locked in the price ratio are expected to clear customs this week. China produced 16,400 mt of refined nickel in January, down 1.5% on the month but up 37.24% on the year. The sharp increase was contributed by Jinchuan’s production ramp-up and the commissioning of new electrodeposited nickel production lines in China. On the demand side, when the nickel prices fell amid the macro sentiment early last week, downstream companies restocked some raw materials. According to SMM research, in-plant inventories of raw materials stored by alloy companies were consumed and reached a historical low at the beginning of the week. In addition, nickel prices declined. These factors boosted spot trading. However, affected by the later news factors, the prices of nickel rebounded, and the transactions became slack. In general, downstream enterprises are generally afraid of high nickel prices at present. Besides, spot pure nickel in the bonded zone warehouses will flow into the domestic spot market this week. SMM believes that the spot supply will be relatively sufficient this week. At present, the LME nickel prices have not yet returned to the fundamentals, and the prices may fluctuate wildly. When the LME nickel prices return to normal, SMM will resume the price forecast.
[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.]
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