SMM Evening Comments (Nov 24): Shanghai Nonferrous Metals Mostly Closed with Gains amid Positive Macro Front

SHANGHAI, Nov 24 (SMM) – Shanghai nonferrous metals mostly closed with gains. The possible export bans of tin and bauxite in Indonesia as well as a warming real estate market both pushed up the non-ferrous market.

Shanghai copper rose 0.35%, aluminium edged up 0.34%, lead jumped 2.11%, zinc gained 0.59%, tin lost 0.55%, and nickel advanced 2.11%.

Copper: The most-traded SHFE 2201 copper closed up 0.35% or 250 yuan/mt to 71220 yuan/mt, with open interest up 3109 lots to 176086 lots.

On the macro front, the US announced to release 50 million barrels of crude from the Strategic Petroleum Reserve in coordination with China, Japan, India, South Korea and UK. However, the WTI futures recorded the fastest growth in two weeks as the release fell short, which supported copper prices. Meanwhile, several US officers indicated an early interest rate hike by the Fed, and the implied inflation expectations have pulled back from record highs early this month, constraining copper prices.

On the fundamentals, LME copper inventory was still falling, which dropped around 5,000 mt to 81,600 mt yesterday, a new low in three months. SHFE copper inventory under warrants declined slightly by 100 mt. And the constantly low inventory created upside momentum for copper prices.

Tonight, the market shall watch the US jobless claims, the real GDP growth in Q3 on an annual basis, as well as the consumer expenditures.  

Aluminium: The most-traded SHFE 2201 aluminium closed up 0.34% or 65 yuan/mt to 19250 yuan/mt, with open interest down 6556 lots to 208194 lots.

On the whole, quite several alumina refiners and aluminium smelters in the north were expected to reduce their output in the heating season and ahead of the Beijing Winter Olympics. The shorts continued to reduce their positions as their confidence in the market weakened.

Lead: The most-traded SHFE 2112 lead closed up 2.11% or 315 yuan/mt at 15250 yuan/mt, with open interest down 5771 lots to 40133 lots.

In the spot market, primary lead smelters mostly quoted with high premiums of 100 – 150 yuan/mt over SMM 1# lead, and the transactions in mainstream trading markets like Zhejiang and Jiangsu were flat over SHFE 2112. A few traders quoted with premiums of 40 – 50 yuan/mt over SHFE 2112.

For secondary refined lead, the quotations from smelters were still firm, and were flat over SMM 1# lead. But a few smelters reported discounts of 100 – 150 yuan/mt over SMM 1# lead.

Downstream battery companies have been building up the stocks recently, and market supply also picked up around the delivery of long-term orders. Hence, the downstream became wait-and-see when the lead prices stood above 15,000 yuan/mt, and the spot transactions showed signs of weakening.

While lead prices still gained support from the fundamentals as social inventory kept falling under the influence of production cuts expectation of secondary lead.

Zinc: The most-traded SHFE 2201 zinc closed up 0.59% or 140 yuan/mt at 23755 yuan/mt, with open interest down 439 lots to 91053 lots.

Indonesian President expressed that the country will ban the export of tin and bauxite in 2024 and 2022, respectively, which pushed up the prices of SHFE tin and aluminium. Meanwhile, the mining activities Tara Mine has been suspended due to large water inflows for the protection of relative facilities and equipment. And it remains unclear as when it will resume normal operation.

In terms of zinc market, LME inventory in euro zone has been at historical low, and zinc ingot supply was tight. At the same time, the market also saw issues like high electricity costs across smelters, and relative low TCs of zinc concentrate. Hence, the zinc prices carried strong support in the short term. In China, the downstream demand was weak amid rising zinc prices, and traders had to lower the premiums to make shipments.

To sum up, the market is generally bullish due to inspiring news from overseas market. But the prices may pull back after hitting highs as the supply and demand pattern has been relative stable.

Tin: The SHFE 2112 tin closed down 0.55% or 1610 yuan/mt at 289410 yuan/mt, with open interest down 4115 lots to 23052 lots.

On the fundamentals, the inventory under warrants dropped slightly, and spot transactions also weakened marginally. The premiums rose slightly in early trade. On the supply side, the closed Myanmar customs is still impacting the market, but the raw materials in China have been unaffected for the moment. And the demand side has been stable.

The SHFE 2112 and spot prices are likely to hover at high levels at the same time, while the spread between SHFE 2201 and spot has been relatively wide. Therefore, the prices are likely to rise slightly to correct the spread.

Nickel: The most-traded SHFE 2202 nickel closed up 2.11% or 3150 yuan/mt to 152640 yuan/mt, with open interest up 27712 lots to 89774 lots.

On the macro front, the real estate sales readings warmed up, and overseas demand was also positive, boosting non-ferrous prices. While the performance of the stainless steel and new energy sectors was comparatively sluggish, which was unable to support nickel prices.