SMM Morning Comments (Feb 15): Shanghai Base Metals Mostly Fell Overnight Impacted by Geopolitics

SHANGHAI, Feb 15 (SMM) – Shanghai base metals mostly dropped overnight under the impact of geopolitics. Their counterparts on LME mostly moved upward on Monday.

LME copper rose 0.21%, aluminium increased 0.91%, lead gained 0.38%, and zinc fell 2.71%.

SHFE copper lost 0.17%, aluminium fell 0.31%, and lead increased 0.13%.

Copper: LME copper opened at $9,793/mt, rose 0.21% to end at $9,851/mt last night, after hitting a high point at $9,930/mt. Trading volume was 15,000 lots, and open interest increased to 263,000 lots.

The SHFE 2203 copper opened 71,070 yuan/mt on Monday night, hitting a lower point at 70,540 yuan/mt before rising to 71,300 yuan/mt, and closed at 71,130 yuan/mt, down 0.17%. The open interest reached 127,000 lots.

On macroeconomy, the President of Ukraine's comments heightened market tensions, with stock markets in Europe and the US generally sinking and the US Dollar Index recording three consecutive gains yesterday due to the risk aversion. Meanwhile, the president of the St. Louis Federal Reserve Bank renewing his call for the US Fed to accelerate the pace of interest rate boosted the US dollar's strength. The geopolitical situation between Russia and Ukraine escalates, and the current copper price trend is still dominated by market risk aversion. In terms of spot, as the monthly difference held steady at 60-80 yuan/ton, so that the market quotation for next month remained firm. Although the copper price has dropped from last week's high point, it still fluctuated in a strong position. The market’s buying interest was not high, and the holder was also reluctant to ship at a low price. LME copper will trade between $9,800-9,900/mt today; SHFE copper prices are expected to move between 70,000-71,600 yuan/mt. Spot premiums are likely to fluctuate between 80-200 yuan/mt.

Aluminium: LME aluminium opened at $3,189.5/mt on Monday and closed at $3,228/mt, an increase of $29/mt or 0.91%.

Overnight, the most-traded SHFE 2203 aluminium contract opened at 22,715 yuan/mt, with the highest and lowest prices at 22,790 yuan/mt and 22,470 yuan/mt before closing at 22,645 yuan/mt, down 70 yuan/mt or 0.31%.

The domestic operating aluminium capacity is lower than in the same period last year, and the pandemic in Baise, Guangxi still affects the production and transportation of local alumina refineries and aluminium smelters. Domestic aluminium ingot social inventory was 994,000 mt on Monday, which was 45,000 mt higher than last Thursday. The growth rate of inventory has slowed down. With the seasonal recovery of consumption, inventory is expected to decrease. It is expected that SHFE aluminium price will continue to fluctuate at a high level in the short term.

Lead: LME lead opened at $2,280/mt on Monday and fluctuated around $2,280/mt, risking $2,260/mt. It closed 0.38% higher at $2,294/mt.  

The most-liquid SHFE 2203 lead contract opened at 15,345 yuan/mt last night and increased 0.13% to settle at 15,385 yuan/mt, with the open interest decreasing 2,135 lots to 32,676 lots.

Zinc: LME zinc fell below the middle of Bollinger Band and gained support from the 40-day moving average. It closed at $3,576/mt, down $79.5/mt or 2.71%. LME zinc inventory decreased by 375 mt to 151,525 mt. The market sentiments were affected by the macro geopolitics. LME zinc is expected to move between $3,530-3,580/mt today.

SHFE zinc dropped overnight and gained support at 20-day moving average. The SHFE zinc inventory increased after the CNY holiday, SMM will continue to track the inventory changes. The SHFE zinc is expected to trade between 24,800-25,300 yuan/mt today, and spot premiums for domestic Shuangyan zinc will be seen at 30-40 yuan/mt.

Nickel: The overnight prices opened with a general decline in commodities due to the macro political situation, with precious metals such as gold and silver moving upwards due to risk aversion. The period opened at 176,000 yuan/mt overnight and then fell rapidly, hitting a low point of 170,000 yuan/mt, but with the support of the 20-day moving average, it fluctuated around 171,000 yuan/mt narrowly. On the supply side: in terms of pure nickel supply, although LME inventory accumulated slightly yesterday, the overall trend was still in a state of decreasing. On the demand side: nickel sulphate demand was still increasing, but current overseas nickel matte was not put into production as expected, and the output was limited.  So it is difficult to make up for the gap of nickel sulphate raw material temporarily, and nickel briquette is still the main raw material. Therefore, it is expected that the fundamentals of refined nickel are strong.

Tin: SHFE tin fell slightly overnight amid risk aversion. The continuous accumulation of warrant inventory reflects the increased willingness of sellers to deliver goods to SHFE warehouses amid poor sales in the spot market. However, the recent price drop has released demand to a certain extent, and transaction in the spot market has picked up. SHFE tin will continue to hover at highs.