SMM Evening Comments (Dec 28): Shanghai Nonferrous Metals Closed Mixed as the Market Was Quiet

SHANGHAI, Dec 28 (SMM) – Shanghai nonferrous metals closed mixed today as the market was quiet in the holiday season.

Shanghai copper rose 1.03%, aluminium lost 0.28%, lead gained 0.13%, zinc slid 0.82%, tin advanced 0.39%, and nickel added 0.75%.

Copper: The most-traded SHFE 2202 copper closed up 1.03% or 720 yuan/mt at 70450 yuan/mt, with open interest up 8117 lots to 148144 lots.

On the macro front, the US retails sales’ performance was outstanding, offsetting the negative impacts from cancelled flights due to omicron COVID variant as the market feared that the travel stocks may be suppressed. The market sentiment was also boosted by positive signals from the governments. President Biden suggested raising COVID test capability to meet the vast demand, and the UK and France authorities believed that the high vaccination rate will spare the hospitals from overburden even though the COVID cases were surging.

In China, PBoC work conference stressed the need to use a variety of monetary policy tools in 2022 to maintain reasonable liquidity, enhance the stability of total credit growth, increase support for the real economy, and maintain the growth rate of money supply and social financing scale to match the nominal economic growth rate.

Aluminium: The most-traded SHFE 2202 aluminium closed down 0.28% or 55 yuan/mt to 19860 yuan/mt, with open interest down 1899 lots to 214526 lots.

On the fundamentals, the costs of aluminium declined, improving the profitability. Some aluminium smelters in Yunnan and Inner Mongolia partly resumed the production, which slowly brought up the domestic aluminium output. However, the aluminium ingot social inventory in the major consuming markets dropped as the output proportional to aluminium ingot contracted, and the transport efficiency declined as well. The spot market, on the other hand, was quiet and the mainstream quotes were in discounts as most manufacturers were busy with collecting funds by the year-end.

Lead: The most-traded SHFE 2202 lead closed up 0.13% or 20 yuan/mt at 15400 yuan/mt, with open interest down 947 lots to 42372 lots.

The sell-off among smelters and traders basically came to an end, and the supply side made shipment based on price moves. The mainstream quotes from primary lead smelters were flat over SMM #1 lead, and secondary refined lead was offered with discounts of 200-250 yuan/mt over SMM #1 lead. In the trading market, the mainstream offers were in discounts of 10-0 yuan/mt over SHFE 2201 lead, but the transactions were thin. Some of the demand was fulfilled by secondary lead with greater discounts.

On the macro front, the natural gas prices in the Europe pulled back from highs amid easing supply shortages, but the supply will remain tight as a whole. In China, the net profit of industrial enterprises above designated scale rose 9% year-on-year in November, indicating improving profit structure. China’s macro economy policies emphasised stability, and will ease to some extent in order to supply the development of the real economy.

Zinc: The most-traded SHFE 2202 zinc closed down 0.82% or 200 yuan/mt at 24100 yuan/mt, with open interest down 2301 lots to 102125 lots.

The spot transactions were sluggish partly because the downstream demand was suppressed the high zinc prices. The suspension of bookkeeping of some traders was also among the causes. Meanwhile, some galvanising and zinc oxide plants were planning to suspend their production in the off-season, coupled with the environment protection incident in north China. SHFE zinc prices are likely to hover at the current high if the overseas energy crisis is still unresolved.

Tin: The most-traded SHFE 2202 tin closed up 0.39% or 1120 yuan/mt at 290200 yuan/mt, with open interest up 2546 lots to 42765 lots.

On the fundamentals, domestic warrants inventory kept falling, and the mainstream transaction prices were stable though the spot market saw less shipments.

Nickel: The most-traded SHFE 2202 nickel closed up 0.75% or 1110 yuan/mt to 149200 yuan/mt, with open interest down 6664 lots to 148670 lots.

On the news side, the Philippines was hit by typhoon Odette, and many areas suffered great damages, including Davao and Surigao mining blocks; hence the nickel ore supply may be influenced. On the fundamentals, the steel mills’ demand for nickel was low, but the NPI plants were trying to hold the prices firm amid production losses, which pushed up the NPI prices. The nickel sulphate market was expected to stay weak, pressuring SHFE nickel.