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SMM Evening Comments (Nov 29): Shanghai Nonferrous Metals Closed Mixed as Market is Recovering from Broad Declines Last Friday
Nov 29, 2021 19:00CST
Source:SMM
Shanghai nonferrous metals closed with mixed performance, as the market is recovering from the broad declines last Friday, triggered by the discovery of super COVID variant Omicron.

SHANGHAI, Nov 29 (SMM) – Shanghai nonferrous metals closed with mixed performance, as the market is recovering from the broad declines last Friday, triggered by the discovery of super COVID variant Omicron.

Shanghai copper lost 1.17%, aluminium dropped 1.37%, lead edged up 0.46%, zinc fell 2.86%, tin was flat, and nickel slid 1.53%.

Copper: The most-traded SHFE 2201 copper closed down 1.17% or 830 yuan/mt to 70230 yuan/mt, with open interest down 8910 lots to 162149 lots.

On the macro front, global stocks and commodities market tanked amid the newly discovered super COVID mutant in South Africa last Friday, and oil prices also plummeted. Overnight copper dropped on such a background, and rallied following the oil prices which rose by 5% after the market sentiment was repaired during the weekend.

On the fundamentals, LME copper inventory dropped 3,725 mt, which was greater than a day ago. LME board was generally in an upside trajectory, hence supporting domestic market.

Tonight the market shall watch the economic readings and consumer confidence index in Eurozone.

Aluminium: The most-traded SHFE 2201 aluminium closed down 1.37% or 265 yuan/mt to 19015 yuan/mt, with open interest down 8769 lots to 204811 lots.

On the supply side, the falling inventory was still able to offer some support. On the demand side, the orders for aluminium plate and sheet, alloy, etc. thinned in traditional seasonal low, but the operating rates will be stable in the short term.

The market shall watch the evolvement of COVID and inventory changes.

Lead: The most-traded SHFE 2201 lead closed up 0.46% or 70 yuan/mt at 15405 yuan/mt, with open interest down 4596 lots to 45292 lots.

In spot market, primary lead smelters narrowed its premiums over SMM #1 lead to 20 – 50 yuan/mt, and the traders in mainstream markets in Zhejiang and Jiangsu actively made shipments amid rising lead prices, with premiums of 10 – 30 yuan/mt over SHFE 2112 or discounts of 20 – 30 yuan/mt over SHFE 2201.

The secondary lead smelters, however, became more bearish amid continuously climbing lead prices, and the discounts of secondary refined lead expanded to 100 – 200 yuan/mt over SMM #1 lead.

In terms of spot transaction, the trading of warrants have been modest; but the downstream of the smelter sector remained cautious, hence the trading weakened from the previous trading day.

The domestic social inventory of lead ingot across five major market in China stood at 134,900 mt as of November 29, down 4,300 mt from Friday November 26 and 19,500 mt from Monday November 22. While the supply of secondary lead declined from the previous weeks as the output reduced due to maintenance caused by equipment failure or amid poor weather, though some smelter resumed their production. The downstream restocked on demand, offering short-term support to lead prices. But the lead prices lack further upside momentum after the maintenance of primary and secondary lead smelter draw to a close.

Zinc: The most-traded SHFE 2201 zinc closed down 2.86% or 675 yuan/mt at 22925 yuan/mt, with open interest down 9024 lots to 76557 lots.

SHFE zinc was congested today amid market pessimism on the back of repeating COVID and sluggish domestic demand, as well as the bullish sentiment brought on by output cuts among overseas smelters due to high electricity prices. Specially, if the COVID worsens, the demand side will be greatly damaged. Meanwhile, the overseas smelters’ production was uncertain as the electricity prices showed no signs of falling. Hence, SMM advises the participants to stay wait-and-see in light of multiple uncertainties.

Tin: The SHFE 2201 tin closed up 0.06% or 160 yuan/mt at 285920 yuan/mt, with open interest up 1113 lots to 44181 lots.

On the fundamentals, the supply and demand were still weak. The low operating rates among tin smelters last week were mainly the result of environmental protection-related restrictions, but are likely to recover soon. The inventory under warrants kept falling, while market supply was stable. The shipments of spot, however, improved to some point.

SMM believes that the SHFE tin prices will hover at high levels should there be no significant news that breaks the current market balance.

Nickel: The most-traded SHFE 2202 nickel closed down 1.53% or 2320 yuan/mt to 149200 yuan/mt, with open interest up 5049 lots to 136743 lots.

LME metals moved up today after the market digested the bearish sentiment generated on worsening COVID in South Africa, and SHFE nickel followed the board. On the fundamentals, the stainless steel sector’s demand for nickel weakened, and the market transaction was also slack. The marginal demand from new energy sector declined. Hence the near-term nickel prices are likely to stay congested.

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