SMM Morning Comments (Dec 10): Base Metals Fell across the Board amid Stronger Risk Aversion Sentiments

SHANGHAI, Dec 10 (SMM) – Shanghai base metals basically trended higher on Friday morning. Meanwhile, their counterparts on LME trended mixed.

LME metals mostly dropped in the trading on Thursday. Copper fell 1.06%, aluminium dropped 0.3%, lead decreased 0.44%, and zinc inched up 0.02%.

SHFE metals fell across the board in the overnight trading. Copper dropped 0.43%, aluminium decreased 0.13%, zinc lost 0.06%, and nickel fell 1.36%.

Copper: Three-month LME copper opened at $9,605/mt and fell to the lowest point at $9,485/mt, then rebounded to close at $9,550.5/mt last night, down 1.06%. The trading volume was 11,000 lots, and the open interest was 262,000 lots. Three-month LME copper is expected to trade between $9,480-9,550/mt today.

The SHFE 2201 copper contract opened at 69,510 yuan/mt on Thursday night, falling to the lowest point at 69,180 yuan/mt before rebounding to the highest point at 69,570 yuan/mt, and closed at 69,400 yuan/mt, down 0.43%. The trading volume was 39,000 lots, and the open interest reached 136,000 lots. SHFE copper is expected to trade between 69000-69600 yuan/mt today, with spot prices between a discount of 10 yuan/mt and a premium of 70 yuan/mt.

The US initial jobless claims last week hit a record low in 52 years, which boosted the US dollar index. A Japanese research claims that the Omicron COVID-19 variant is more than four times more infectious than Delta variant in the early stage, and more countries have confirmed cases of infection and tightened pandemic prevention and control measures. The risk aversion sentiment once again increased and forced down the copper futures. The spot prices rebounded lightly yesterday, and the downstream users remained wait-and-see. The traders were reluctant to purchase at high current premiums, but the holders kept the prices firm due to the high costs. The transactions were muted.

Aluminium: LME aluminium opened at $2,622/mt on Thursday and closed at $2,627/mt, down $8/mt or 0.3%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 18,800 yuan/mt, with the highest and lowest prices at 18,805 yuan/mt and 18,690 yuan/mt before closing at 18,775 yuan/mt, down 25 yuan/mt or 0.13%.

Aluminium output remained low. Social stocks of aluminium ingots in China’s major trading regions was 952,000 mt on Thursday, down 50,000 mt on the week. Market volatility has declined towards the end of the year, and it is unlikely that aluminium prices will rise or fall sharply in the short term. SHFE aluminium is expected to continue to move within a narrow range.

Lead: Three-month LME lead opened at $2,282.5/mt last night and surged to the highest point at $2,300/mt before falling to the lowest level at $2,265/mt. It closed at $2,280/mt, a decrease of 0.44%.

The most-liquid SHFE 2201 lead contract opened at 15,465 yuan/mt last night and fluctuated between 15,410-15,460 yuan/mt, before closing at 15,440 yuan/mt, with open interest decreasing 2,185 lots to 39,959 lots.

Zinc: Three-month LME zinc inched up 0.02% to end at $3,319/mt last night, with open interest down 3,586 lots to 267,000 lots. Zinc stocks across LME-listed warehouses dropped by 275 mt or 0.18% to 150,400 mt. LME zinc is expected to move between $3,250-3,300/mt today.

The most-liquid SHFE 2201 zinc contract lost 0.06% to settle at 23,490 yuan/mt in overnight trading, with open interest decreasing 733 lots to 74,041 lots. Environmental protection has been strengthened recently, and the production in parts of Guangxi have been affected. The supply of zinc ingots may fall short of expectations. Producers restocked on demand. The orders were muted, but some companies have pre-holiday restocking demand. The most-traded zinc contract is expected to move between 23,100-23,600 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 120-150 yuan/mt over the SHFE 2201 zinc contract.

Nickel: SHFE 2202 nickel contract closed at 145,820 yuan/mt overnight, down 2,010 yuan/mt or 1.36% from the previous trading day. The trading volume was 109,000 lots. Open interest decreased by 5,499 lots to 160,000 lots. Tsingshan has reportedly yielded nickel matte in Indonesia yesterday afternoon. SHFE nickel prices thus fell 1.36%. LME nickel prices dipped 1.53%. However, the impact of the commissioning of the nickel matte project was insignificant. SMM believes that the reason is that the commissioning of the project met expectations, and the production schedule is later than the schedule in October originally planned at the beginning of the year. In addition, there is currently no economic advantage in converting NPI to nickel matte, and the production is just for order delivery.  We also mentioned that the current downstream demand is sluggish, and the influence of low inventory weakened. It is expected that nickel prices may still fluctuate around 145,000 yuan/mt today.

Tin: The SHFE 2201 tin contract hovered sideways in overnight trading. Spot prices and spot premiums were little changed amid stable fundamentals. The SHFE 2201 tin contract is expected to continue to fluctuate around current levels.