SMM Morning Comments (Dec 9): Base Metals Basically Rose across the Board on Plunging US Dollar

SHANGHAI, Dec 9 (SMM) – Shanghai base metals trended mixed on Thursday morning. Meanwhile, their counterparts on LME all trended lower.

LME metals all closed with gains overnight. Copper rose 1.07%, aluminium increased 0.4%, lead went up 4.09%, and zinc gained 1.69%.

SHFE metals performed similarly overnight. Copper increased 0.2%, aluminium rose 0.13%, zinc gained 1.29%, and nickel dipped 0.03%.

Copper: Three-month LME copper opened at $9,563/mt last night and moved down to $9,533/mt, then rebounded to $9,672/mt, before closing at $9,653/mt, up 1.07%. The trading volume was 10,000 lots, and the open interest was 262,000 lots. Three-month LME copper is expected to trade between $9,600-9,700/mt today.

The most-active SHFE 2201 copper contract opened at 69,510 yuan/mt and rose 0.2% to close at 69,850 yuan/mt in overnight trading, after hitting the lowest and highest levels at 69,290 yuan/mt and 69,920 yuan/mt respectively. The trading volume was 37,000 lots, and the open interest was 139,000 lots. SHFE copper is expected to trade between 69,400-70,000 yuan/mt today, with spot prices between a discount of 50 yuan/mt and a premium of 80 yuan/mt.

The CEO of Pfizer said that the third dose of Pfizer’s COVID-19 vaccine can neutralise the Omicron variant, which further eased the market concerns. The three major US stock indexes closed with gains again overnight, while the US dollar index plunged. Copper futures kept rising. The spot quotations rebounded to premiums and the traders kept purchasing, but the market acceptance of the premiums was low. The transactions muted, and the quotations stagnated. The premiums may not rise further amid weak consumption and low market acceptance.

Aluminium: LME aluminium opened at $2,625/mt last night and closed at $2,635/mt, an increase of $10.5/mt or 0.4%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 18,900 yuan/mt, with the highest and lowest prices at 18,930 yuan/mt and 18,740 yuan/mt before closing at 18,880 yuan/mt, up 25 yuan/mt or 0.13%.

On the supply side, the aluminium output was still at a low level. While the demand side was also comparatively quiet by the year-end, which is unlikely to push up aluminium prices significantly.

Lead: Three-month LME lead opened at $2,203/mt in the overnight trading on Wednesday, and fluctuated between $2,195-2,210/mt in the Asian session. Then the new progress in the study of Omicron variant and plunging US dollar index boosted the metals prices. LME lead rose to the highest point at $2,297.5/mt and closed at $2,290/mt, up 4.09%.

The most-liquid SHFE 2201 lead contract opened at 15,285 yuan/mt and hit the highest point at 15,500 yuan/mt, before closing at 15,455 yuan/mt last night up 2.42%, with open interest increasing 799 lots to 41,535 lots.

Zinc: Three-month LME zinc gained 2.69% to settle at $3,319/mt last night, with open interest decreasing 424 lots to 264,000 lots. LME stocks across LME-listed warehouses fell by 1,425 mt or 0.94% to 150,675 mt. The economic readings in the eurozone was encouraging, indicating steady economic recovery. The low LME inventory also underpinned zinc prices. Hence LME zinc is likely to move between $3210-3260/mt today.

The most-traded SHFE 2201 zinc contract gained 300 yuan/mt or 1.29% to settle at 23,475 yuan/mt, with open interest increasing by 5,358 lots to 74,043 lots. SHFE 2201 zinc is expected to move between 23100-23600 yuan/mt today, and #0 Shuangyan zinc will trade in premiums of 60-70 yuan/mt over SHFE 2201 zinc.

On the macro front, the energy crisis in the eurozone intensified overnight, and electricity prices climbed to record high. The US inflation in November peaked again, setting a 40-year high. The Japan GDP annual rate in the third quarter dropped 3.6% from the second quarter. Today the market shall watch China CPI and PPI readings for November, as well as the social financing data.

Nickel: The SHFE 2202 nickel contract opened at 148890 yuan/mt last night and tested 149,000 yuan/mt. It closed at 148,360 yuan/mt, down 40 yuan/mt or 0.03%. The trading volume was 124,000 lots, and open interest decreased by 9,985 lots to 156,000 lots. The nickel prices are expected to remain volatile in the short term with weak fundamental support.

Tin: Overnight SHFE 2201 was congested and comparatively quiet, and the capitals continued to leave the market. On the fundamentals, the supply and demand pattern was still balanced, and spot supplies returned to stability. The spot premiums, on the other hand, changed little in the near term. The longs and shorts were still focused on short-term speculation. As such, tin prices are likely to hover at high levels amid weak demand-supply balance and low participation of market speculators.