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SMM Morning Comments (Dec 23): Most Base Metals Closed with Gains as Crude Oil Prices Rose

iconDec 23, 2021 10:01
Shanghai base metals all rose in overnight trading as crude oil prices gained. LME base metals prices closed higher except for tin.

SHANGHAI, Dec 23 (SMM) – Shanghai base metals all rose in overnight trading as crude oil prices gained. LME base metals prices closed higher except for tin.

LME copper rose 0.91%, aluminium edged 1.93% higher, lead gained 1.35%, and zinc rose 3.22%.

SHFE copper rose 0.03%, aluminium advanced 1.89%, lead rose 1.62%, zinc surged 2.81%, and nickel rose 1.71%.

Copper: LME copper prices rose 0.91% overnight and closed at $9,642/mt. Trading volume was 10,557 lots and open interest stood at 247,000 lots. The most-active SHFE 2202 copper contract prices rose 0.03% to close at 69,920 yuan/mt in overnight trading. Trading volume was 35,000 lots, and open interest was 140,000 lots. On the macro front, US regulators have granted emergency use authorisation for Pfizer's new COVID-19 oral drug. Investors have become more optimistic about the economic outlook, and risk appetite has continued to rise. In addition, the December US consumer confidence index announced yesterday exceeded expectations, showing that consumers are still optimistic. In addition, the final reading of US GDP in the third quarter and the annual rate of commercial retail sales of the Red Book last week also performed well, and market confidence boosted the rise of copper prices. In terms of spot markets, due to the inflow of imported goods and the contango structure of the SHFE front-month against the next-month contract as well as the weakening downstream orders, the willingness of sellers to sell has increased. Some traders lowered prices and the spot premiums are expected to fall in the short term. SHFE copper prices are expected to move between 69,600-70,100 yuan/mt today, and LME copper will trade between $9,590-9,690/mt. Spot premiums are likely to fluctuate between 90-160 yuan/mt.

Aluminium: The most-traded SHFE 2202 aluminium contract opened at 20,300 yuan/mt overnight, with the highest and lowest prices at 20,390 yuan/mt and 20,195 yuan/mt before closing at 20,245 yuan/mt, up 375 yuan/mt or 1.89%.

LME aluminium opened at $2,760/mt on Wednesday and closed at $2,822/mt, an increase of $53.5/mt or 1.93%.

In the short term, domestic aluminium production will remain at a low level. On the overseas supply side, considering the rise in energy costs in Europe and the expected reduction in production of some aluminium smelters in Western Europe, LME aluminium has received certain support. On the demand side, downstream consumption has been relatively stable recently, and social inventories of aluminium ingots have continued to decline. The aluminium plate/sheet, strip and foil segment performed better, while the demand for construction extrusion weakened. In the short term, SHFE aluminium will remain high due to low inventories and strong LME aluminium. It is still necessary to pay attention to the sustainability of consumption and the impact of changes in domestic and overseas costs on the supply side.

Lead: LME lead gained 1.35% or $31/mt to end at $2,322.5/mt on Wednesday night. SHFE Lead closed at 15,670 yuan/mt, an increase of 250 yuan/mt, or 1.62%.

Zinc: LME zinc opened at $3,427/mt on Wednesday, and hit a high of $3,550/mt before closing at $3,545/mt, an increase of $110.5/mt or 3.22%. The trading volume rose to 11,000 lots, and open interest decreased by 838 lots to 244,000 lots. LME zinc inventory decreased by 325 mt to 203,900 mt, a drop of 0.16%. Supply concerns and eased pandemic lifted LME zinc to a 2-month high. LME zinc is expected to move between $3,410-3,460/mt on Thursday.

Overnight, the most-traded SHFE 2202 zinc contract opened at 24,350 yuan/mt and hit a high of 24,545 yuan/mt before closing at 24,480 yuan/mt, up 670 yuan/mt or 2.81%. Trading volume was 102,446 lots, and open interest increased by 9,527 lots to 102,805 lots. On the supply side, there is energy crisis overseas. The prices of electricity and natural gas have both risen, and the production costs of smelters have risen again, boosting the price of zinc. On the consumption side, the off-season dragged down the operating rates of downstream enterprises, and the high inventory of finished products and thinner profits have made downstream enterprises lack enthusiasm for production. On the whole, the increase in production costs has a strong support for zinc prices, and the short-term focus is on downstream consumption. The most-traded SHFE zinc contract is expected to move within a range of 24,000-24,500 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 30-50 yuan/mt over the SHFE 2201 zinc contract.

Tin: The SHFE 2202 tin contract moved rangebound overnight. The domestic spot tin market remained stable, and warrants decreased. Tin ore supply from Myanmar will resume this week. SHFE tin will continue to hover sideways amid stable spot market.

Nickel: SHFE 2202 nickel contract prices closed at 146,850 yuan/mt on Wednesday, up 1,700 yuan/mt or 1.71% from the previous trading day. Trading volume was 114,000 lots, and open interest decreased by 5,928 lots to 144,000 lots. From a fundamental point of view, the current performance of spot nickel is relatively weak. The tight supply of nickel plates has eased, and the premium has declined. The buying interest has weakened. Without strong support for nickel prices at high levels, the prices are expected to fall after returning to fundamentals.

base metals

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