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SMM Morning Comments (Dec 2): Most SHFE Base Metals Closed with Losses as Pandemic Depressed Market Sentiment
Dec 2, 2021 09:57CST
Most of the base metals prices in Shanghai ended with declines overnight, except for tin.

SHANGHAI, Dec 2 (SMM) – Most of the base metals prices in Shanghai ended with declines overnight, except for tin.

LME copper dropped 0.83%, aluminium rose 0.88%, lead rose 0.4%, and zinc fell 0.75%.

SHFE copper dipped 0.59%, aluminium decreased 1.02%, lead dropped 0.02%, and zinc lost 0.5%.

Copper: LME copper prices dropped 0.83% overnight and closed at $9,373/mt. Trading volumes stood at 15,000 lots and open interest stood at 254,000 lots. The most-active SHFE 2201 copper contract dipped 0.59% to close at 69,100 yuan/mt in overnight trading and are expected to trade between 68,700-69,300 yuan/mt. Trading volume was 56,000 lots, and open interest was 154,000 lots. On the macro side, the first case of omicron variant was discovered in the United States yesterday and this shocked the market. US stocks posted their biggest two-day decline since October 2020. Under risk aversion, the US dollar index rebounded. In addition, international crude oil was also affected by the pandemic, closing with declines for the second consecutive day. WTI prices set its lowest closing price since August 24 this year. The uncertainty brought about by the pandemic has led to a cautious market sentiment, and copper futures has continued to fall. In terms of spot, the start of the deliveries for long-term contracts and SHFE copper prices moving below 70,000 yuan/mt will attract downstream buyers to restock. Spot quotes will be raised. LME copper will trade between $9,330-9,430/mt today. The spot premiums are likely to move between 260-620 yuan/mt

Aluminium: Overnight, the most-traded SHFE 2201 aluminium contract opened at 19,120 yuan/mt, with the highest and lowest prices at 19,185 yuan/mt and 18,725 yuan/mt before closing at 18,925 yuan/mt, down 195 yuan/mt or 1.02%.

LME aluminium opened at $2,621/mt on Wednesday and closed at $2,648/mt, an increase of $23/mt or 0.88%.

The aluminium supply was stable. Operating rates of downstream processing companies picked up with the alleviation of power rationing. However, processing companies in the north may be subject to production restrictions due to the prevention of air pollution during the heating season and the Winter Olympics. It is expected that SHFE aluminium will remain rangebound in the short term.

Lead: Overnight, the LME lead closed at $2,285/mt, an increase of $9/mt or 0.4%. SHFE lead prices closed at 15,275 yuan/mt, down 30 yuan/mt or 0.02%.

Zinc: LME zinc opened at $3,190 yuan/mt on Wednesday, and hit a high of $3,241/mt before falling back to $3,157/mt, and closed at $3,160/mt, down $24/mt or 0.75%. Trading volume fell to 7,025 lots, and open interest decreased by 3,927 lots to 262,000 lots. LME zinc stocks dropped by 1,825 mt to 157,150 mt, a decrease of 1.15%. LME stocks continued to decline, but the virus mutation and expectations of US interest rate hike suppressed market sentiment. LME zinc is expected to move between $3,150-3,200/mt on Thursday.

Overnight, the most-traded SHFE 2201 zinc contract fell to 22,950 yuan/mt after opening at 23,025 yuan/mt, and closed at 22,980 yuan/mt, down 115 yuan/mt or 0.5%. Trading volume fell to 100,720 lots, and open interest decreased by 1,384 lots to 76,413 lots. The domestic and overseas electricity prices are high, and the production costs of smelters have increased. In the short term, attention will be paid to the production situation of smelters under the pressure of high costs. On the demand side, orders at die-casting zinc alloy companies have improved amid low zinc prices. However, the consumption of galvanising products in north China is still weak, and overall consumption has not improved significantly. With both supply and demand being weak, zinc prices will find little upward momentum in the short term. The most-traded SHFE zinc contract is expected to move within a range of 22,700-23,200 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 20-30 yuan/mt over the SHFE 2201 zinc contract.

Tin: Overnight, the SHFE 2201 tin contract rose before falling back, and closed at around 286,500 yuan/mt. Ports in Myanmar remain closed due to the pandemic. Spot premiums and prices in the spot market fell slightly. The SHFE 2201 tin contract will hover near current levels amid strong wait-and-see sentiment.

Nickel: SHFE nickel contract shed 1,310 yuan/mt to end at 147,780 yuan/mt in the overnight trading. Trading volumes decreased 178,000 lots to 155,000 lots and open interest decreased 10,281 lots to 153,000 lots. There is no major contradiction in the fundamentals at present. It is expected that the nickel prices will remain rangebound.


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