SMM Morning Comments (Dec 3): Base Metals Closed Mixed after OPEC+ Announced to Increase Crude Oil Production

SHANGHAI, Dec 3 (SMM) – Shanghai base metals all trended lower on Friday morning. Meanwhile, their counterparts on LME trended mixed.

LME metals basically closed lower in the trading on Thursday. Aluminium fell 1.32%, lead dropped 1.79%, zinc lost 0.13%, and copper rose 1.03%.

SHFE metals closed mixed in the overnight trading. Copper rose 0.52%, nickel increased 840 yuan/mt, aluminium dropped 0.53%, lead fell 0.56%, and zinc shed 0.41%.

Copper: Three-month LME copper opened at $9,414/mt last night and moved down to $9,358.5/mt, then rebounded to $9,508.5/mt, before closing at $9,469/mt, up 1.03%. The trading volume was 15,000 lots, and the open interest was 255,000 lots. Three-month LME copper is expected to trade between $9,400-9,500/mt today.

The most-active SHFE 2201 copper contract opened at 68,830 yuan/mt and rose 0.52% to close at 69,460 yuan/mt in overnight trading. The trading volume was 66,000 lots, and the open interest was 154,000 lots. SHFE copper is expected to trade between 69,100-69,600 yuan/mt today, with spot premiums between 240-600 yuan/mt.

OPEC+ announced yesterday that it would increase the production of 400,000 barrels of crude oil per day in January. However, the oil prices rose sharply in the late trading last night, and both U.S. oil and Brent crude oil closed more than 2% higher. Copper futures rebounded driven by rising US stocks and oil prices. The spot prices declined yesterday, while the Backwardation structure expanded to 400-450 yuan/mt, supporting the holders to keep the prices firm. The downstream purchases were sluggish due to high prices.

Aluminium: LME aluminium opened at $2,648.5/mt on Thursday and closed at $2,613/mt, down $35/mt or 1.32%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 18,840 yuan/mt, with the highest and lowest prices at 18,850 yuan/mt and 18,580 yuan/mt before closing at 18,665 yuan/mt, down 100 yuan/mt or 0.53%.

SMM statistics showed that the domestic aluminium ingot social stocks dropped by 15,000 mt from a week ago to 1.002 million mt on Thursday. It is still necessary to pay attention to the impact of the heating season and the Winter Olympics on downstream processing companies. It is expected that SHFE aluminium will remain rangebound in the short term.

Lead: Three-month LME lead opened at $2,282.5/mt last night and hit the highest price at $2,301/mt before dropping to the lowest level at $2,242.5/mt. It closed at $2,244/mt, down $41/mt or 1.79%.

The most traded SHFE lead contract opened at 15,310 yuan/mt last night, hitting the highest and lowest levels at 15,320 yuan/mt and 15,150 yuan/mt respectively, and closed at 15,185 yuan/mt, down 85 yuan/mt or 0.56%.

Zinc: Three-month LME zinc fell 0.13% to $3,156/mt, with open interest increasing 748 lots to 262,000 lots. LME zinc inventory decreased by 2,025 mt or 0.89% to 155,125 mt. Interest rate hikes estimate suppresses the upward room of LME zinc. LME zinc is expected to move between $3,150-3,200/mt.

The most-traded SHFE 2201 zinc contract fell 0.41% to settle at 22,975 yuan/mt last night, with open interest up 1,136 lots to 76,277 lots. The output is expected to stand at 538,400 mt in December, down 10,000 mt from the previous estimate. The overall consumption is flat. The operating rates at companies in north China fell slightly amid tight supply of natural gas. Holders are actively shipping goods amid ample sources of cargoes in the spot market, but downstream producers held a wait-and-see outlook, with market transactions thinned. Zinc prices are expected to congest in the short term. The most-traded zinc contract is expected to move between 22,700-23,200 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 20-30 yuan/mt over the SHFE 2201 zinc contract.

Nickel: SHFE nickel contract rose 840 yuan/mt to end at 148,230 yuan/mt in the overnight trading. Trading volumes decreased 193,000 lots to 171,000 lots and open interest decreased 2,711 lots to 153,000 lots.  SHFE nickel prices moved rangebound this week without significant fundamental contradictions. It is expected that the nickel prices will continue to fluctuate rangebound.

Tin: Overnight, the SHFE 2201 tin contract trended sideways. The closure of ports in Myanmar due to the pandemic will bring uncertainty to the supply of raw materials. Warrants continued to decline recently. The SHFE 2201 tin contract will continue to fluctuate around current levels amid strong wait-and-see sentiment.