SMM Evening Comments (Feb 2): Shanghai Nonferrous Metals Closed with Losses with Insufficient Momentum

SHANGHAI, Feb 2 (SMM) – Shanghai nonferrous metals closed mostly with losses with insufficient upside momentum. On the macro front, the Federal Reserve FOMC announced its interest rate resolution with a 25bp rate hike, which is in line with market expectations. Fed Chairman Jerome Powell said that "Given our expected economic outlook, I don't think we'll cut rates this year." The market is widely expecting the Fed to continue to raise rates by 25 bp in March, but Powell stressed that he does not hold any certainty about the May FOMC meeting. The dollar index dropped to around 100, boosting risky assets denominated in US dollar.

SHFE copper fell 0.72%, aluminium edged down 0.03%, lead gained 1.09%, zinc lost 0.84%, tin dropped 2.27%, and nickel slid 2.76%.

Copper: The most-traded SHFE 2303 copper closed down 0.72% or 500 yuan/mt at 69,060 yuan/mt, with open interest down 2,650 lots to 173,518 lots.

The spot prices changed little from a day ago, and slightly falling SHFE copper price failed to appeal downstream players. With expanding SHFE front-month and next-month spread in contango structure, some traders purchased on dips.

Aluminium: The most-traded SHFE 2303 aluminium closed down 0.03% or 5 yuan/mt at 19,095 yuan/mt, with open interest down 3,903 lots to 196,606 lots.

Aluminium price dropped minimally following a more palpable drop overnight after US announced the rate hike resolution, but the expectations of recovering demand will underpin aluminium price. The short-term focus shall be on European rate hike as well as the progress of power rationing in Yunnan province.

Lead: The most-traded SHFE 2303 lead closed up 1.09% or 165 yuan/mt at 15,340 yuan/mt, with open interest down 6,015 lots to 76,940 lots.

In the spot market, the cargo holders were relatively active in making shipments, and the number of quotations picked up compared with yesterday. Downstream players also started to make inquiries, while traders purchased when the discounts were considerable. Nonetheless, some players still stood on the sidelines before lead prices show a clear direction.

Zinc: The most-traded SHFE 2303 zinc closed down 0.84% or 205 yuan/mt at 24,125 yuan/mt, with open interest down 5,536 lots to 91,383 lots.

Market transactions have not yet picked up, but the downstream restocking interest improved, though some players were still wait-and-see.

Tin: The most-traded SHFE 2303 tin closed down 2.27% or 5,350 yuan/mt at 230,220 yuan/mt, with open interest down 916 lots to 32,454 lots.

In the spot market, SHFE tin did not post a strong direction, and downstream purchasing demand was muted, especially when some players were still in holiday. SHFE warrants inventory added 110 mt to 6,592 mt.

Nickel: The most-traded SHFE 2303 nickel closed down 2.76% or 6,190 yuan/mt at 217,980 yuan/mt, with open interest down 1,090 lots to 77,954 lots.

In the spot market, Jinchuan nickel was in premiums of 5,500-7,500 yuan/mt, with an average of 6,500 yuan/mt, up 650 yuan/mt from a day ago. NORNICKEL nickel was in premiums of 6,600-7,000 yuan/mt, with an average of 6,800 yuan/mt, down 450 yuan/mt on a daily basis. Though SHFE nickel pulled back, the price was still high. Nonetheless, the spot premiums were low as the upstream players were eager to sell. The market transactions improved slightly. For nickel briquette, the prices stood between 225,700-226,500 yuan/mt, down 3,250 yuan/mt from the previous trading day.

[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.]