SMM Evening Comments (Dec 7): Shanghai Nonferrous Metals Closed with Mixed Performance as Market Worries Economic Recovery

Published: Dec 7, 2021 19:00
Shanghai nonferrous metals closed with mixed performance as the market became more worried about the current economic situation after the People’s Bank of China announced to kick off the process of reducing RRR rate soon.

SHANGHAI, Dec 7 (SMM) – Shanghai nonferrous metals closed with mixed performance as the market became more worried about the current economic situation after the People’s Bank of China announced to kick off the process of reducing RRR rate soon.

Shanghai copper rose 0.13%, aluminium lost 0.5%, lead edged up 0.3%, zinc was flat, tin gained 0.52%, and nickel dropped 0.78%.

Copper: The most-traded SHFE 2201 copper closed up 0.13% or 90 yuan/mt to 69420 yuan/mt, with open interest down 4448 lots to 144887 lots.

Copper prices were pressured by the hawkish attitude of the Fed. And the longs were boosted by the news of China central bank’s reducing RRR rate, however the SHFE copper was little affected from the positive side.

LME registered warrants of copper rose more slowly, and the inventory was still at a low level. SHFE warrants inventory also dropped by 1,800 mt to 5,583 mt. And the inventory is likely to stay low in the near term due to improving consumption by the year-end.

Aluminium: The most-traded SHFE 2201 aluminium closed down 0.5% or 95 yuan/mt to 18790 yuan/mt, with open interest down 4110 lots to 187351 lots.

On the supply side, the aluminium output stood low as there is minimal increase in supplies. On the demand side, the social inventory continued to drop according to the statistics yesterday, supporting aluminium prices.

Lead: The most-traded SHFE 2201 lead closed up 0.3% or 45 yuan/mt at 14955 yuan/mt, with open interest down 4650 lots to 43393 lots.

SHFE lead moved up as the People’s Bank of China announced that it will start the process of lowering RRR rate by December 15. And the traders also held firm to the current prices amid a weak market. Hence lead prices rallied and tested 15,000 yuan/mt.

In spot market, SMM #1 lead quotes were flat, while smelters were bullish about lead prices, re-directing the demand to trading market. The transactions of warrants were relative active.

Zinc: The most-traded SHFE 2201 zinc closed down 0.09% or 20 yuan/mt at 22860 yuan/mt, with open interest down 4573 lots to 71858 lots.

Market pessimism did not ease today on the news that the central bank of China will lower the RRR rate, hence SHFE zinc moved down further. LME zinc inventory has dropped 550 mt to 152,100 mt, supporting zinc prices. In the spot market, spot premiums in Shanghai trended up as the warehouses in Ningbo were closed for COVID control, but the downstream still purchased on rigid demand. On the supply side, the smelters in Hunan and Shaanxi will cut their output. The total output in December may fall short of expectation.

Tin: The most-traded SHFE 2201 tin closed up 0.52% or 1460 yuan/mt at 284010 yuan/mt, with open interest down 3001 lots to 42664 lots.

On the fundamentals, the supply and demand remained weak, and the spot transactions prices dropped slightly but managed not to slump. The supply in spot market today tightened.

Nickel: The most-traded SHFE 2202 nickel closed down 0.78% or 1160 yuan/mt to 146800 yuan/mt, with open interest down 12941 lots to 158105 lots.

The capital fled from the market as the China central bank’s decision to lower RRR rate has heightened market worries over the current economic situation. The fundamentals were still sluggish as ferronickel prices faced great downside pressures and spot prices of nickel sulphate fluctuated wildly. And the nickel sulphate manufacturers were also planning to reduce the output due to cost pressure. 

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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SMM Evening Comments (Dec 7): Shanghai Nonferrous Metals Closed with Mixed Performance as Market Worries Economic Recovery - Shanghai Metals Market (SMM)