SMM Evening Comments (Dec 9): Shanghai Nonferrous Metals Closed Mixed amid Encouraging China CPI and PPI Readings for November

SHANGHAI, Dec 9 (SMM) – Shanghai nonferrous metals closed mixed today as the China PPI and CPI readings for November were encouraging, indicating stable market moves in China.

Shanghai copper was flat, aluminium dropped 0.45%, lead advanced 2.85%, zinc jumped 1.69%, tin was unchanged, and nickel lost 1.54%.

Copper: The most-traded SHFE 2201 copper closed flat, with open interest up 155 lots to 139423 lots.

On the macro front, the YoY growth of China CPI reached 2.3% in November, much higher than 1.5% in October; while PPI grew 12.9% year-on-year, down from 12.9% in the previous month. The longs’ confidence was boosted amid a positive macro front.

In the US, he EIA crude inventory in the week of December 3 fell by 241,000 barrels, indicating continuing drops in inventory though the reading was 1.7 million barrels less than estimate. Regarding omicron COVID variant, the CEO of the largest private medical institution in South Africa suggested that the symptoms of omicron infected patients were much milder than the previous three waves, and the primary lab test from Pfizer showed that the booster shot of COVID vaccine will able to neutralise variant strains, which comforted the market to some extent. As a result, international oil prices drove by 0.6% on the whole yesterday, offering some support to copper prices.

However, the repeating COVID still fills the US economic recovery with great uncertainties. As the supporting monetary and fiscal policies linger, the massive stimulus package is bound to heighten US debt level. As such, the US House recently passed a bill, allowing a simple majority vote to validate the lifting of US debt ceiling. The following practice of the bill is worth close attention.

Tonight, the market shall watch the initial jobless claims in the week of December 4, which is estimated to be flat from the previous reading.

Aluminium: The most-traded SHFE 2201 aluminium closed down 0.45% or 85 yuan/mt to 18770 yuan/mt, with open interest up 644 lots to 178689 lots.

On the supply side, aluminium output remained at a low level. The demand side was quiet by the year-end. Hence aluminium prices will largely fluctuate in a narrow range in the short term.

Lead: The most-traded SHFE 2201 lead closed up 2.85% or 430 yuan/mt at 15520 yuan/mt, with open interest up 1408 lots to 42144 lots.

On the fundamentals, the production of smelters was gradually resumed in December, hence the supply and primary and secondary lead is both estimated to increase. And the downstream demand and export market are also worth of attention.

Zinc: The most-traded SHFE 2201 zinc closed up 1.69% or 390 yuan/mt at 23505 yuan/mt, with open interest up 6089 lots to 74774 lots.

On the fundamentals, LME inventory kept dropping by 275 mt to 150400 mt, underpinning zinc prices. On the supply side, zinc ingot supply is likely to fall in December as the smelters in Hunan and Shaanxi are likely to cut their output. In the spot market, the premiums in Shanghai expanded quickly, and spot supplies reduced; while the transactions picked up palpably.

Tin: The most-traded SHFE 2201 tin closed up 0.05% or 140 yuan/mt at 284330 yuan/mt, with open interest down 159 lots to 39087 lots.

On the fundamentals, the demand-supply pattern was still weak. Spot supply was stable, and warrants inventory dropped fractionally. As such, tin prices are more likely to stay congested as both the fundamentals and capital moves saw little changes.

Nickel: The most-traded SHFE 2202 nickel closed down 1.54% or 2280 yuan/mt to 146120 yuan/mt, with open interest down 729 lots to 165265 lots.

The additional output of high-grade nickel matte was in line with expectation, hence the market reacted calmly. However, the added production of high-grade nickel matte will squeeze the demand for pure nickel, which serves as a bearish factor to nickel prices. On the fundamentals, the pries of stainless steel and ferronickel continued to drop, and are unlikely to improve in 2021.