SMM Morning Comments (Dec 29): SHFE Base Metals Closed Mixed as US Dollar Rose

SHANGHAI, Dec 29 (SMM) – Shanghai base metals closed mixed in the night trading of Wednesday.

SHFE copper rose 0.1%, aluminium rose 0.38%, lead dipped 0.55%, zinc fell 0.89%, and nickel fell 1.51%.

Copper: The LME market was closed yesterday. The most-active SHFE 2202 copper contract prices rose 0.1% to close at 70,400 yuan/mt in overnight trading. Trading volume was 24,000 lots, and open interest was 146,000 lots. On the macro front, the Federal Reserve stated in a policy statement that as the full employment is about to be realised and inflation continues to soar, it will end the bond purchase program in March, and will conduct three interest rate hikes by 25 basis points each before the end of 2022. The Fed may raise interest rates as early as March, boosting the US dollar index. In terms of spot markets, structural changes will not be obvious in the short term. The spot discounts will remain at the end of the year. SHFE copper is expected to trade between 70,000-70,600 yuan/mt today, with spot discounts of 90 yuan/mt to premiums of 20 yuan/mt.

Aluminium: The most-liquid SHFE 2202 aluminium contract rose 0.38% to settle at 19,825 yuan/mt overnight. Three-month LME aluminium fell 0.98% to settle at $2,820/mt last Friday. The national social inventory of aluminium ingots has been declining for nearly two consecutive months, and it is expected that the destocking cycle can still be maintained in the short term. SHFE aluminium is expected to remain volatile as the support for the cost of aluminium weakened and the destocking of domestic social inventories continued. The most-traded SHFE aluminium contract is expected to move between 19,700-20,000 yuan/mt today.

Lead: Due to the Christmas holiday, the LME market was closed on December 27-28, and the market will open today. SHFE 2202 lead contract prices dipped 0.55% to end at 15,350 yuan/mt last night, with open interest down 2,369 lots to 40,003 lots.

Zinc: The most-liquid SHFE 2202 zinc contract fell 0.89% to settle at 23,885 yuan/mt, with open interest increasing by 1,822 lots to 104,000 lots. On the supply side, the output of overseas smelters stabilised after announcing production cuts or overhauls in the previous period. The energy shortages in Europe remain as the market focus. On the consumer side, the output of some enterprises in north China have been greatly affected by the Winter Olympics. The overall consumption is slightly sluggish. Zinc prices are expected to fluctuate and carry some downside potential as overseas markets remained closed and domestic consumption was relatively sluggish. The most-traded zinc contract is expected to move between 23,600-24,100 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 10-20 yuan/mt over the SHFE 2201 zinc contract.

Tin: Overnight, the SHFE 2202 tin contract fell after hitting highs. Fundamentally, domestic warrant inventories continued to decline slightly, spot shipments performed poor, and supply and demand were temporarily balanced. The SHFE 2202 tin contract rose to about 292,000 yuan/mt after opening, then fluctuated around 290,000 yuan/mt. The market held a wait-and-see outlook. The fundamentals stabilised. SHFE 2202 tin contract is expected to congest at high levels.

Nickel: The SHFE nickel contract closed at 146,940 yuan/mt in the overnight trading, down 2,260 yuan/mt or 1.51%. The downstream buying interest was moderate, and some traders moved cargoes to end-users. Trades among traders were limited. Both the supply and demand were weak. In the past two days, nickel prices have been subject to large fluctuations due to capital disturbances. However, the upward momentum of nickel prices is insufficient from the perspective of fundamentals. The market shall pay attention to the upward pressure for the nickel prices.