SMM Evening Comments (Dec 8): Shanghai Nonferrous Metals All Closed in the Positive Territory amid Silencing Omicron Influences

SHANGHAI, Dec 8 (SMM) - Shanghai nonferrous metals closed the day with gains amid a positive macro front as the market worries over omicron COVID variant weakened after statistics showed that it is likely to be milder than Delta variant.

Shanghai copper was flat, aluminium rose 0.61%, lead advanced 1.88%, zinc jumped 1.42%, tin gained 1.15%, and nickel climbed 1.14%.

Copper: The most-traded SHFE 2201 copper closed up 0.07% or 50 yuan/mt to 69570 yuan/mt, with open interest down 5619 lots to 139268 lots.

On the macro front, the US Department of Commerce announced that the commodities and services trade deficit in October dropped 17.6% to $6,710 billion, the smallest deficit in six months since April ($6,620 billion). The revised reading for September stood at $8,140 billion. The market also became less worried about the omicron variant as statistics showed that it may be milder than Delta. The risk sentiment also improved after the central bank of China signalled steady growth strategy.

On the fundamentals, the imports of copper ore in Q4 increased greatly, resulting in sufficient supply. However, the supply of blister copper was still tight, hence the smelters faced greater production pressures, coupled with steeply falling nickel sulphate prices. The downstream operating rates of processing companies increased after the power rationing eased in November. However, the downstream was sluggish in demand amid seasonal low by year-end. And most of them purchased on dips as they were more sensitive to copper prices. The SHFE and LME copper inventory has been falling recently, and both stood at historical low. The supply and demand pattern was tight.

Aluminium: The most-traded SHFE 2201 aluminium closed up 0.61% or 115 yuan/mt to 18870 yuan/mt, with open interest down 9306 lots to 178045 lots.

On the supply side, the aluminium output in November dropped 3% year-on-year and stood at a low level in November, according to SMM. The exports of unwrought aluminium and aluminium semis rose by more than 20% YoY in the same month, supporting aluminium prices.

Lead: The most-traded SHFE 2201 lead closed up 1.88% or 280 yuan/mt at 15175 yuan/mt, with open interest down 2657 lots to 40736 lots.

On the fundamentals, the production of downstream companies was stable, and they were inclined to purchase on dips when lead prices dropped. The profits of secondary lead thinned, and smelters made shipments by holding the prices firm, hence the discounts narrowed further.

Zinc: The most-traded SHFE 2201 zinc closed up 1.42% or 325 yuan/mt at 23175 yuan/mt, with open interest down 3173 lots to 68685 lots.

The final reading of Q3 GDP in eurozone was released today, which was in line with expectation and boosted market confidence over economic recovery. In the spot market, the premiums in Shanghai rose as the demand in Ningbo was seeking supplies from other regions as well as due to logistics disruptions. The purchase in Guangdong and Tianjin was still made on rigid demand. The overall downstream sector was wait and see after zinc prices increased.

Tin: The most-traded SHFE 2201 tin closed up 1.15% or 3210 yuan/mt at 283090 yuan/mt, with open interest down 3418 lots to 39246 lots.

On the fundamentals, the tin output in November dropped slightly on the month, maintaining a weak demand-supply pattern, according to SMM research. The spot supplies were still stable as a whole, while the warrants inventory dropped slightly. The capitals were less interested in staying in the market as there has been no significant changes on the fundamental front.

Nickel: The most-traded SHFE 2202 nickel closed up 1.14% or 1670 yuan/mt to 148200 yuan/mt, with open interest up 7889 lots to 165994 lots.

The fundamentals have been weak recently, and the ferronickel market almost stagnated. The demand from stainless steel sector for nickel also weakened. And the prices of nickel sulphate could hardly rise in the short term.