SHANGHAI, Feb 23 (SMM) – Shanghai base metals mostly closed with gains in the overnight trading as the tension between Russia and Ukraine continued to intensify. Their counterparts on LME performed similarly.
LME copper inched up 0.09%, aluminium rose 0.4%, and lead gained 1.10%, and zinc advanced 1.2%.
SHFE copper rose 0.04%, aluminium dropped 0.24%, lead increased 0.42%, zinc gained 1.05%, and nickel fell 1.61%.
Copper: LME copper opened at $9,921/mt in the overnight trading, then fell continually after briefly hitting a high. At last, the prices closed at $9,884/mt, up 0.09%. Trading volume was 13,000 lots, and the open interest was 252,000 lots. LME copper is expected to move between $9840-9940/mt.
The most-traded SHFE 2204 copper contract opened at 71,450 yuan/mt in overnight trading, then fell after reaching a high level of 71,550 yuan/mt. At last, the prices closed at 71,190 yuan/mt, up 0.04%. The open interest reached 124,000 lots. SHFE 2204 is expected to move between 71000-71500 yuan/mt, and the spot premiums between -50 – 50 yuan/mt.
On the macro front, the US economic readings delivered diverged performance amid the uncertainties hovering the Russia-Ukraine crisis. The estimate that the US Fed would raise the rate by 50 basis points in Marched dropped, and the US dollar index moved in a narrow range. Meanwhile, the market risk aversion sentiment rose with the escalating geopolitical tensions.
In the spot market, some places in Jiangsu were still restricted by the COVID-related pandemic prevention and control measures. And some smelters shipped their goods to Shanghai, containing the spot premiums.
Aluminium: Three-month LME aluminium opened at $3,285/mt on Tuesday morning, and gained $13/mt or 0.4% to close at $3,303/mt.
The most traded SHFE 2204 aluminium contract opened at 23,000 yuan/mt last night, hitting the lowest and highest points at 22,805 yuan/mt and 23,070 yuan/mt respectively, and closed 55 yuan/mt or 0.24% lower at 22,820 yuan/mt.
On the macro front, US president Biden announced to impose sanctions on Russia’s debt. China continued to ensure the supply and stabilise the prices of commodities. On the supply side, the production restrictions in Baise, Guangxi are lifted, and the local operating rates of aluminium and alumina plants will not drop further. The tension between Russia and Ukraine and the energy shortage will still weigh on the overseas supply. The downstream processing companies are steadily raising their operating rates, and the consumption is recovering, which is expected to reduce the aluminium social inventory. The aluminium prices are expected to remain rangebound at a high level.
Lead: Three-month LME lead opened at $2,324.5/mt on Tuesday, hitting the lowest and highest points at $2,305/mt and 2,348.5/mt respectively, and closed at $2,348/mt, up 1.10%.
The most traded SHFE 2204 lead contract opened at 15,595 yuan/mt last night, and rose by 0.42% to close at 15,560 yuan/mt, after hitting the lowest and highest levels at 15,490 yuan/mt and 15,610 yuan/mt respectively.
Zinc: LME zinc prices realized rise and then fall overnight, ending up with 3,560 US$/mt. During Asian trading hours, LME zinc prices fluctuated within a narrow range, from 3,550-3,570 US$/mt. While in the European trading hours, the primary prices dropped to a minimum of 3,546 US$/mt. However, the price of natural gas in Europe soared, causing market worries.
Oil prices edged close to 100US$/ barrel overnight after Russia ordered troops into two separate areas of eastern Ukraine. However, oil prices rose slowly, settling near 2014 highs amid Western efforts to thwart a full-scale Russian aggression. Global benchmark Brent crude futures hit 99.50 $/barrel, the highest level since September 2014, closing at 96.84 $/barrel, up 1.52 $/barrel, or 1.5%. U.S. crude futures also hit a seven-year high of 96 $/barrel and settled at 92.35 $/barrel, up 1.28 $/barrel, or 1.4%, from last Friday.
U.S. consumer confidence fell to a five-month low in February as fewer consumers planned to buy a home and car and travel for a vacation in the next six months amid concerns about the short-term economic outlook. After the Russian-Ukrainian crisis escalated, Germany announced it was suspending the certification of the Nord Stream 2 Baltic gas pipeline project, which aimed to double the volume of gas shipped directly from Russia to Germany. As a result, benchmark natural gas prices jumped. However, Russian President Vladimir Putin has promised that Russia will continue to supply natural gas to the global market.
Overnight, SHFE zinc prices surged and fell back. The most-traded 2204 contract opened at 25,000 yuan/mt, moving even higher. After reaching a new high of 25,100 yuan/mt, it continued to rise to a maximum of 25,280 yuan/mt. Capital left the market, and after the price fell, it closed at 25,095 yuan/mt, up 260 yuan/mt, or 1.05%. The trading volume increased to 123,000 lots, and the open interest dropped by 8,493 lots to 241,600 lots. SHFE zinc had a potential of rising in short term, capital thus decreased their investment to wait and see, with zinc price violate intensely.
Overall, on the supply side, due to the closure of the imports and the reduction of long-term orders for imported zinc ingots, the imports volume in the first quarter is expected to be low year-on-year. On the consumer side, the downstream has gradually resumed work and production. In the north, due to environmental protection issues, the pace of resumption of production has been disturbed. However, the current downstream raw material inventory is at a low level. Driven by the demand for replenishment, the speed of inventory decline can be expected. On the spot side, after the zinc price fell, downstream purchases increased, which led to the narrowing of spot discounts in Tianjin and Guangdong. SHFE 2110 contract is expected to move between 24,800-25,300 yuan/mt today and spot premiums for domestic #0 Shuangyan will be seen at 50-60 yuan/mt .
Nickel: The most-traded SHFE 2204 opened at 180000 yuan/mt in the night trading, and moved between 178,000-180,000 yuan/mt in the trading hours. The contract closed at 175,850 yuan/mt, down 2,880 yuan/mt or 1.61%. The contract is expected to move between 175,000-185,000 yuan/mt today.
On the macro front, the supplies of nickel from Russia is likely to be disturbed by the heightening geopolitical tensions. On the fundamentals, LME pure nickel inventory kept dropping, and nickel prices gained strong support. The demand from downstream sectors, mainly stainless steel and new energy, has been robust, hence the prices of NPI and nickel sulphate rose as a whole, which also offered some support to nickel prices.
Tin: Last night, SHFE tin traded in small amount ,and prices fluctuated in a narrow range. Fundamentally, the inventory of warehouse increased slightly, the quotations of merchants in the spot market were active but inactive in trade amount. Discounts appeared in the market, but the overall performance was still poor. In terms of the trend, The SHFE tin prices last night still maintained at a high level and fluctuating in a narrow range. Investment slowed their pace, reflecting the intentions of both longs and shorts to wait and see. To sum up, in the short term, the fundamentals supply and demand have not changed significantly, and the dynamic balance of supply and demand will be still maintained. Therefore, under such influence, the probability of maintaining a high level will be large.
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