SMM Evening Comments (Mar 16): Shanghai Nonferrous Metals All Closed with Gains amid Estimate of Less-than-expected US Rate Hike

SHANGHAI, Mar 16 (SMM) – Shanghai nonferrous metals all closed with gains today as the market has been boosted by the estimate that the US Fed’s rate hike, with details to be disclosed soon, would be less than expected.   

Shanghai copper rose 0.85%, aluminium added 1.08%, lead jumped 0.83%, zinc advanced 0.97%, tin climbed 2.02%, and nickel surged 7.13%.

Copper: The most-traded SHFE 2204 copper closed up 0.85% or 610 yuan/mt at 72,090 yuan/mt, with open interest down 4,614 lots to 105,440 lots.

Demand in the spot market has been less satisfactory due to deteriorating COVID situation across China, but market sentiment was relatively optimistic evidenced by rising spot premiums. And if the Fed does raise the interest rate by 25 basis points, the market optimism may be reserved.

Aluminium: The most-traded SHFE 2204 aluminium closed up 1.08% or 235 yuan/mt to 21,960 yuan/mt, with open interest down 10,477 lots to 129,818 lots.

On the supply side, domestic aluminium operating capacity kept rising. On the demand side, the consumption is still recovering. The prices are expected to improve amid a heathy market.

Lead: The most-traded SHFE 2204 lead closed up 0.83% or 125 yuan/mt at 15,145 yuan/mt, with open interest down 4,285 lots to 23,887 lots.

In the spot market, smelters mostly quoted with small premiums or flat over the benchmark prices. The resurging pandemic across China has not yet affected the production of smelters, but the downstream restocked appropriately amid worries over rising logistics cost. Market transactions improved to some extent. In terms of secondary refined lead, the goods holders generally held firm to their prices, and the market stood mostly wait and see.

Zinc: The most-traded SHFE 2204 zinc closed up 0.97% or 245 yuan/mt at 25,475 yuan/mt, with open interest down 10,062 lots to 53,797 lots.

The State Council held a meeting today with emphasis on stable economic development, and suggested that it would release supporting polices to benefit market development and would be cautious regarding tightening policies. US Fed is set to release interest rate hike details, and market sentiment was boosted amid signals that this round of rate hike would be less than expected.

In addition, the current SHFE/LME price ratio was extremely against zinc imports, hence smelters mostly used domestic ore, and their smelting cost underpinned futures prices. However, weak consumption contained the upside momentum of futures to some extent. It is expected that zinc prices will stay at the current high level.

Tin: The most-traded SHFE 2205 tin closed up 2.02% or 6,600 yuan/mt at 333,520 yuan/mt, with open interest down 890 lots to 29,368 lots.

Tin prices continued to rebound today, and rose steadily. Investors kept leaving the market, indicating that both longs and shorts were not interest in opening positions.

On the fundamentals, spot supplies were relatively tight, and warrants inventory dropped slightly. Market shipments were at a low level. In other words, the supply and demand were both weak, as the demand has already been partly fulfilled when prices dropped earlier. Currently, rising prices and repeating COVID may weaken the demand side again.

Nickel: The most-traded SHFE 2204 nickel closed up 7.13% or 15,660 yuan/mt at 235,200 yuan/mt, with open interest down 2,840 lots to 63,378 lots.

LME nickel resumed market today, and the bourse announced last night that it would set a 5% limit for LME nickel (for today only, and subsequent limit will be subject to market moves today), which was far lower than market estimate. Currently, SHFE – LME spread remained unchanged at 100,000 yuan/mt, and the spread is unlikely to narrow quickly due to such price limit for LME nickel. In other words, LME nickel could serve as a driving force for SHFE nickel.

Nonetheless, LME nickel was once again suspended after opening at 4:00 pm Beijing time due to technical issues.