SMM Evening Comments (Nov 30): Shanghai Nonferrous Metals Closed Mixed as Impacts from COVID Variant Weakened

SHANGHAI, Nov 30 (SMM) – Shanghai nonferrous metals closed with mixed performance, as the market has almost digested the impacts from the new COVID variant Omicron.

Shanghai copper lost 0.59%, aluminium inched up 0.19%, lead edged down 0.26%, zinc was flat, tin rose 0.62%, and nickel slid 0.42%.

Copper: The most-traded SHFE 2201 copper closed down 0.59% or 410 yuan/mt to 69450 yuan/mt, with open interest down 6855 lots to 155294 lots.

On the macro front, US President Biden said that there is no need to get panic about the Omicron COVID variant, and the new lockdowns are off the table, in an effort to comfort the market; hence copper prices rose slightly yesterday. However, the market has not completely shaken off the worries over Omicron, and overnight dropped and moved strongly in the trading day, and the market became more uncertain. In terms of oil, US government indicated that it will release more strategic crude reserves when necessary, and US oil prices dropped by more than 3% as the market is still weighing the impacts of Omicron on oil demand.

In China, the official manufacturing PMI readings for November have been released today, 0.4 point higher than the estimate, implying a slowly stabilising manufacturing industry. But the sector is still in the contraction territory, pulling down copper prices.

Tonight, the market shall watch the Eurozone CPI reading on an annual basis in November.

Aluminium: The most-traded SHFE 2201 aluminium closed up 0.19% or 35 yuan/mt to 18905 yuan/mt, with open interest down 1343 lots to 203468 lots.

Currently speaking, domestic aluminium supply could hardly rise, as aluminium smelters in north China are expected to reduce the output in the heating season and during the Beijing Winter Olympics, supporting aluminium prices.

On the demand side, the downstream consumption lacked highlights. And the demand is unlikely to pick up greatly by the end of the year amid environmental protection-related restrictions.

The market shall watch the inventory changes, production restriction policies in all regions, and the impacts of the new COVID variant. And the SHFE aluminium prices are likely to move rangebound in the near future.

Lead: The most-traded SHFE 2201 lead closed down 0.26% or 40 yuan/mt at 15340 yuan/mt, with open interest down 3293 lots to 41999 lots.

In the spot market, the primary lead smelters mostly quoted with premiums at 0 – 50 yuan/mt over SMM #1 lead, and the mainstream offers in trading markets in Zhejiang and Jiangsu were is premiums of 10 – 20 yuan/mt over SHFE 2111. The secondary lead smelters quoted with discounts of 150 – 200 yuan/mt over SMM #1 lead. The smelters actively made shipments as the lead prices have been resilient, leading to more supplies in the market. The downstream, however, took a wait-and-see stance, resulting in slack transactions. Meanwhile, the new COVID variant has brought about enhanced pandemic control measures taken by different countries, creating bearish sentiment in the market.

Hence, lead prices are likely to call back amid improved supply and shrinking demand.

Zinc: The most-traded SHFE 2201 zinc closed up 0.07% or 15 yuan/mt at 22870 yuan/mt, with open interest up 2146 lots to 78703 lots.

The zinc inventory has been at a low level, supporting zinc prices. In spot market, the downstream demand was still sluggish, and some have set their acceptable prices at around 22500 yuan/mt. At the same time, the demand has also been constrained by the restrictions on the use of natural gas in some places.

On the supply side, the overseas production was reduced amid high electricity prices, and domestic zinc ore supply also dropped. The monthly TCs estimate has been revised down by 50 yuan/mt in metal content. It is expected that the zinc ingot output will lower by 10,000 mt.

Tin: The SHFE 2201 tin closed up 0.62% or 1770 yuan/mt at 286260 yuan/mt, with open interest up 497 lots to 44678 lots.

On the fundamentals, the supply and demand pattern has been stable. The warrants kept falling, and spot prices stabilised at a high level. The trading volume stood largely unchanged. Hence, tin prices are more likely to stay high until some significant new breaks the current market balance.

Nickel: The most-traded SHFE 2202 nickel closed down 0.42% or 620 yuan/mt to 147790 yuan/mt, with open interest down 2755 lots to 133988 lots.

The support from the fundamental front weakened, and the spot market transactions were also thin. Pure nickel inventory continued to drop, and stayed at a low level; thus, SHFE nickel has limited downside room.