SHANGHAI, Dec 3 (SMM) – Shanghai nonferrous metals mostly closed with gains as the market sentiment stabilised from the short-term shock of the newly discovered COVID variant Omicron.
Shanghai copper gained 0.52%, aluminium rose 0.45%, lead was flat, zinc advanced 0.85%, tin edged up 0.18%, and nickel jumped 0.61%.
Copper: The most-traded SHFE 2201 copper closed up 0.52% or 360 yuan/mt to 69460 yuan/mt, with open interest down 3369 lots to 152611 lots.
On the macro front, more and more Fed officers agreed that it is justified in accelerating tapering as inflation remains high. The sustained hawkish stance has heightened the estimate of contracting liquidity, pushing up US dollar index, which pressured copper prices. In terms of oil, OPEC+ unexpectedly announced to extend the production expansion period for one month, while reserved the flexibility to reduce output in light of shocks from the COVID. The US oil tumbled 4.8% on the news of extended production expansion, but recovered the losses later after the market noticed the flexibility in production. The White House also said that it will not re-consider the strategic crude reserves release plan, hence US oil rose around 2% to close the day.
On the fundamentals, the copper inventory in the bonded zone lost 5,700 mt from a week ago to 183,500 mt, marking the eighth consecutive month of declining. The inventory in Shanghai and Guangdong both dropped, offering some support to copper prices.
Tonight, the market shall watch the US non-farm payrolls in November.
Aluminium: The most-traded SHFE 2201 aluminium closed up 0.45% or 85 yuan/mt to 18975 yuan/mt, with open interest down 8241 lots to 191546 lots.
The supply side was stable with no news on production resumptions or suspensions. On the demand side, the downstream operating rates rose for now amid loosening power rationing, while the market shall still watch if the overall operating rates will drop amid production restrictions in the heating season and ahead of the Beijing Winter Olympics.
Lead: The most-traded SHFE 2201 lead closed down 0.03% or 5 yuan/mt at 15265 yuan/mt, with open interest down 457 lots to 40491 lots.
In spot market, the smelters were less interest in selling after lead prices dropped. The primary lead smelters mostly quoted with discounts of 50 – 0 yuan/mt over SMM #1 lead, while the offers in trading market in Zhejiang and Jiangsu were in premiums of 0 – 30 yuan/mt over SHFE 2112. The discounts from secondary lead smelters narrowed to 200 yuan/mt over SMM #1 lead, but the downstream mainly purchased on rigid demand. Hence the market was quiet.
Meanwhile, the production of smelters is likely to be disrupted by the environmental protection-related inspections on solid waste treatment; therefore, the supply side will see limited increase. The spot market is also expected to weaken as the smelters and battery companies have been focusing on the return of capital by year-end. Lead prices will move weakly in the near-term on the combination of a bearish macro front on impendent interest rate hike.
Zinc: The most-traded SHFE 2201 zinc closed up 0.85% or 195 yuan/mt at 23265 yuan/mt, with open interest up 3306 lots to 78447 lots.
The fundamentals of SHFE zinc have been stable. On the supply side, the estimated output in December stands at 538,400 mt, down 10,000 mt from the previous estimate. And the smelting activities overseas were disrupted by high electricity prices, tightening zinc ingot supply. On the demand side, the downstream consumption has been moderate amid environmental protection-related factors and restrictions on the use of natural gas.
The zinc ingot inventory across seven major markets in China, however, dropped 5,000 mt from last Friday, boosting zinc prices, coupled with the recently issued 14th Five-Year Plan for Green Industrial Development.
Tin: The most-traded SHFE 2201 tin closed up 0.18% or 520 yuan/mt at 286960 yuan/mt, with open interest down 513 lots to 43469 lots.
On the fundamentals, the supply and demand have been stable recently, and the warrants dropped steadily. The market prices and premiums were also little changed. The tin prices are likely to hover at high levels recently.
Nickel: The most-traded SHFE 2202 nickel closed up 0.61% or 900 yuan/mt to 148890 yuan/mt, with open interest up 23404 lots to 178848 lots.
The fundamentals have been smooth, while the spot market sentiment was sluggish, weakening nickel prices from the fundamental front. Nickel prices are likely to move mildly in the near term.
