SMM Evening Comments (Dec 22): Shanghai Nonferrous Metals Mostly Closed with Gains amid Rising Oil Prices

SHANGHAI, Dec 22 (SMM) – Shanghai nonferrous metals mostly closed in the positive territory amid rising international crude prices after it is reported that API crude stock dropped 2.86 million mt barrels from the previous session.

Shanghai copper rose 1%, aluminium gained 2.56%, lead lost 0.23%, zinc added 2.1%, tin advanced 0.77%, and nickel jumped 1.87%.

Copper: The most-traded SHFE 2202 copper closed up 1% or 690 yuan/mt at 69690 yuan/mt, with open interest up 1971 lots to 138605 lots.

On the macro front, the US API crude stock changed more palpably in the week of December 17, down 2.86 million barrels from the previous session, boosting international oil prices by 0.38%. In terms of COVID prevention and control, the FDA announced to approve the oral medicine for COVID developed by Pfizer and Merck by Wednesday the earliest, marking another milestone for pandemic control. Meanwhile, President Biden suggested that there is still possibility for a consensus with senate Manchin to pass the $2 trillion bill of “rebuilding a better future”, which boosted market sentiment. The market shall closely watch the progress of COVID variants as well as the pandemic prevention and control measures taken during the Christmas holiday. The Omicron is likely to suppress the travelling demand, impacting the fuel demand.

Tonight, the market shall keep an eye on the final annualised US GDP in Q3, the US existing home sales in November, as well as the EIA crude stock in the week of December 17.

Aluminium: The most-traded SHFE 2201 aluminium closed up 2.56% or 500 yuan/mt to 20045 yuan/mt, with open interest down 4063 lots to 111678 lots.

The power supply shortage fermented in the eurozone, and the market was increasingly worried about the potential aluminium production cuts in Montenegro and Germany by the end of the year. The longs entered the market accordingly. The market shall watch how the electricity issue will evolve in the eurozone.

Lead: The most-traded SHFE 2202 lead closed down 0.23% or 35 yuan/mt at 15515 yuan/mt, with open interest up 5478 lots to 42394 lots.

In spot market, the primary lead offers from smelters were mostly in discounts of 100-0 yuan/mt over SMM #1 lead, while the secondary lead was quoted with discounts of 180-250 yuan/mt over SMM #1 lead. In the trading market, the mainstream quotes were in discounts of 40-0 yuan/mt against SHFE 2201 lead. The downstream mostly purchased under long-term contracts, and the demand weakened by the year-end, resulting in a quiet spot market. The production of the smelters stabilised for the moment, and the shipments were at a comparatively high level; but the demand was weakening, pressuring lead prices.

Zinc: The most-traded SHFE 2202 zinc closed up 2.1% or 495 yuan/mt at 24025 yuan/mt, with open interest up 11842 lots to 93278 lots.

The longs were again excited by the energy crisis in the overseas market which raised the prices of natural gas and electricity. On the supply side, the zinc ore supply was still tight. And the downstream was quite sluggish in demand amid rising zinc prices, coupled with the year-end effect. The market shall watch if the overseas energy issue would lead to more production cuts.

Tin: The most-traded SHFE 2201 tin closed up 0.77% or 2180 yuan/mt at 286500 yuan/mt, with open interest down 1177 lots to 29304 lots.

On the fundamentals, domestic warrants inventory dropped gain, and the spot market prices were stable and did not shadow the moves of futures prices. The market shall pay attention to the participation of capitals and the sustainability of market activeness.

Nickel: The most-traded SHFE 2202 nickel closed up 1.87% or 2670 yuan/mt to 145820 yuan/mt, with open interest up 8826 lots to 150340 lots.

SHFE stopped falling for two days in a row and re-gained previous losses, mainly driven by the macro front. Rising crude prices pushed up the prices of non-ferrous metals. Meanwhile, as pure nickel inventory was still at a low level, nickel prices carried some support. In general, the support from the fundamentals was weak, while the stainless steel and new energy sectors were also low in demand for spots. SHFE nickel prices are expected to move rangebound recently.