SMM Morning Comments (Dec 30): SHFE Base Metals Closed Mixed on Strong Risk Appetite

SHANGHAI, Dec 30 (SMM) – Shanghai base metals mostly trended higher on Thursday morning, and their counterparts on LME trended mixed.

LME metals closed mixed in the trading on Wednesday. Copper increased $55.5/mt, lead increased 0.26%, aluminium fell 0.38%, and zinc dropped 0.38%.

SHFE metals closed mixed in the overnight trading. Copper fell 0.1%, aluminium increased 1.43%, lead dropped 0.13%, zinc lost 0.44%, and nickel rose 1.8%.

Copper: LME copper opened at $9,618.5/mt overnight, hitting the lowest and highest levels at $9,604/mt and $9,685/mt respectively, and closed at $9,674/mt. Three-month LME copper is expected to trade between $9,630-9,730/mt today.

The SHFE 2202 copper contract opened at 69,940 yuan/mt on in the overnight trading yesterday, hitting the highest point at 70,220 yuan/mt before falling to the lowest point at 69,850 yuan/mt, and closed at 70,170 yuan/mt, down 0.1%. The trading volume was 28,000 lots, and the open interest reached 140,000 lots. SHFE copper is expected to trade between 69,800-70,400 yuan/mt today, with spot prices between a discount of 30 yuan/mt and a premium of 100 yuan/mt.

The currency market gradually got rid of the influence of COVID-19 variant Omicron, and the risk appetite was strong. The US dollar index fell 0.2% overnight to a low of nearly a month, which boosted the copper futures. SHFE copper fluctuated around 70,000 yuan/mt. The market is expexcted to remain unchanged in the last two trading days in 2021 as the investers are avoiding risks.

Aluminium: LME aluminium opened at $2,821/mt on Wednesday and closed at $2,812/mt, down $8/mt or 0.28%.

The most-traded SHFE 2202 aluminium contract opened at 19,990 yuan/mt overnight, with the highest and lowest prices at 20,220 yuan/mt and 19,940 yuan/mt before closing at 20,155 yuan/mt, up 285 yuan/mt or 1.43%.

Natural gas shortage in Europe led to soaring natural gas and electricity prices. Alcoa will suspend aluminium production at its Spanish smelter for two years to cope with the recent surge in energy prices in Europe. There are frequent news of overseas production reductions. China released the "Development Plan for Raw Materials Industry in the 14th Five-Year Plan Period" yesterday, which proposes measures to reduce emissions and restrict new capacity for industrial materials such as aluminium and alumina. The supply disruptions in the domestic and overseas markets increased market concerns about supply, attracting longs to enter. The SHFE 2202 aluminium contract is expected to move at 20,000-20,500 yuan/mt on Thursday, and the spot discounts may narrow.

Lead: Three-month LME lead opened at $2,270/mt overnight, rising to $2,302.5/mt in the Asian session and falling to $2,258.5/mt in the European session. Later the US dollars dropped below 96 points, and LME lead rebounded to close at $2,278/mt, up 0.26%.

The most-liquid SHFE 2202 lead contract opened at 15,480 yuan/mt last night and fluctuated between 15,360 yuan/mt, before closing 0.13% lower at 15,380 yuan/mt, with open interest increasing 900 lots to 38,360 lots.

Zinc: Three-month LME zinc fell 0.38% to settle at $3,503.5/mt overnight, with open interest decreasing 1,357 lots to 247,000 lots. LME stocks across LME-listed warehouses fell by 250 mt or 0.12% to 202,975 mt. LME zinc is expected to move between $3,480-3,530/mt.

The most-liquid SHFE 2202 zinc contract fell 0.44% to settle at 23,985 yuan/mt, with open interest decreasing by 2,101 lots to 2.10 million lots. The shipments from some smelters slowed due to transportation restrictions born from COVID-19 pandemic, but the overall impact was limited. TCs continue to fall in December, and the costs at smelters remained high, which will still support zinc prices. The most-traded SHFE zinc contract is expected to move between 23,800-24,300 yuan/mt today, and spot premiums for domestic #0 Shuangyan will be seen at 120-140 yuan/mt over the January contract.

Nickel: After the market was closed for two days, three-month LME nickel increased 1.8% overnight to $20,450/mt.

The SHFE nickel contract opened at 149,350 yuan/mt overnight, facing resistence at 150,000 yuan/mt and fluctuating around 149,500 yuan/mt. It closed at 150,100 yuan/mt, up 750 yuan/mt or 0.5%. The trading volume was 132,000 yuan/mt, and the open interest declined 2,000 lots to 150,000 lots. The nickel fundamentals saw little contradictions amid weak demand, and the low inventories still supported the prices. The impact of capital flow and speculation on the prices are worth attention.

Tin: The most-traded SHFE 2202 tin contract gradually moved upward overnight, but underperformed the 2201 contract. It is expected that the most-traded SHFE 2202 tin contract will fluctuate rangebound amid weak spot market. The SHFE tin warrants continued to decline slightly. Some sellers in the spot market sold at discounts, but sales remained poor.