SMM Morning Comments (Dec 14): Shanghai Base Metals Basically Trended Lower amid A Cautious Market

SHANGHAI, Dec 14 (SMM) – Shanghai base metals basically trended lower amid a cautious market which expected the Fed to wrap up the bond purchasing program early than estimate. Meanwhile, their counterparts on LME mostly closed in the positive zone.

LME copper rose 0.12%, aluminium added 1.8%, zinc rose 1.09%, and lead lost 0.15%.

SHFE copper fell 0.66%, aluminium rose 2.01%, nickel lost 1.57%, lead decreased 0.51%, and zinc lost 0.32%.

Copper: Three-month LME copper opened at $9,486/mt last night and rose 0.12% to close at $9,465/mt after hitting the lowest point at $9434.5/mt. The trading volume was 8850 lots, and the open interest was 263,000 lots. Three-month LME copper is expected to trade between $9400-9500/mt today.

The SHFE 2201 copper contract opened at 69,270 yuan/mt, hitting the lowest levels at 68,920 yuan/mt, and closed 0.66% lower at 68,960 yuan/mt. The trading volume was 36,000 lots, and the open interest was 135,000 lots. SHFE copper is expected to trade between 68,600-69,200 yuan/mt today, with spot prices between a discount of 90 yuan/mt and a premium of 50 yuan/mt.

On the macro front, the FOMC meeting to be held this week is expected to wrap up the massive COVID stimulus package early than market estimate, and the market is also looking for hint regarding the timeline next year. While the broad market expected the Fed to raise the interest rate twice next year. US dollar rose last night, pressuring copper futures slightly. In spot market, the traders mostly liquidated their inventory ahead of the year-end. However, the downstream, especially in Ningbo and Yixing, was greatly restrained by the COVID pandemic, which resulted in the suspension of some factories, weighing on the already-slack market. Hence the premiums dropped sharply.

Aluminium: LME aluminium opened at $2,612/mt last night and closed at $2,662.5/mt, up 1.8%.

During last night’s night session, the most-traded SHFE 2201 aluminium contract opened at 19,200 yuan/mt, with the highest and lowest prices at 19,300 yuan/mt and 19,185 yuan/mt before closing at 19,275 yuan/mt, up 380 yuan/mt or 2.01%.

On the supply side, the aluminium output was still at a low level, and the market shall watch how the Winter Olympics will impact the production in Inner Mongolia. On the demand side, the aluminium ingot social inventory dropped another 37,000 mt over last Monday. While the rebounding thermal coal prices have prevented the cost side from collapsing. Hence the SHFE aluminium rallied by more than 2% last night.

Lead: Three-month LME lead opened at $2,289/mt, hitting the lowest and highest points at $2,316/mt and $2,286/mt respectively, and closed 0.15% lower at $2,290.5/mt.

The most-liquid SHFE 2201 lead contract opened at 15,805 yuan/mt and hit the highest point at 15,870 yuan/mt, before closing at 15,725 yuan/mt last night, down 0.51%.

Zinc: Three-month LME zinc rose 1.09% to settle at $3,315/mt last Friday, with open interest decreasing 2239 lots to 260,000 lots. Zinc stocks across LME-listed warehouses gained 26475 mt or 16.1% to 190900 mt, marking the second consecutive day of great increase. The increase was mainly contributed by warehouse in Singapore. And the delivery of warrants was mainly located in Asia, hence the supply in Europe was still tight. LME zinc is expected to move between $3300-3350/mt today.

The most-liquid SHFE 2201 zinc contract lost 0.32% to settle at 23420 yuan/mt in last night, with open interest increasing 1238 lots to 185,000 lots. The output of zinc ingots in December will be less than expected amid suspension of production on environmental protection in Guangxi. TCs continue to fall in December, and the costs at smelters remained high, which will still support zinc prices. The most-traded SHFE zinc contract is expected to move between 23200-23700 yuan/mt today, and spot premiums for domestic #0 Shuangyan will be seen at 120-130 yuan/mt over the December contract.

On the supply side, the zinc output from smelters in December may not rise to market satisfaction, and the TCs dropped further amid short supply of ore. On the demand side, the environmental protection-related production suspension and reduction sustained, and the operation of some galvanising in the north was restricted. While some infrastructure construction projects were also postponed until next year, dragging on operating rates of galvanising industry. In the spot market, the transaction was light, even though the traders lowered their premiums to promote the sales.

Nickel: SHFE nickel prices closed at 143600 yuan/mt last night, a drop of 1570 yuan/mt or 1.57%, from the settlement price of the previous trading day. Trading volume was 139,000 lots, and open interest increased by 3,000 lots to 164,000 lots. The market moves were basically a reasonable result of falling downstream output and weakening demand.

Tin: The SHFE 2201 tin contract stayed congestion last night after pulling back from highs. On the fundamentals, the closed customs in Myanmar was still impacting the market, resulting in tight ore supply. The production of downstream solder companies was stable.