SMM Evening Comments (Dec 29): Shanghai Nonferrous Metals Mostly Closed with Gains, the Market Stood Quiet

SHANGHAI, Dec 29 (SMM) – Shanghai nonferrous metals mostly closed in the positive territory. The market, however, was quiet as a whole approaching the year-end, with sluggish market transactions.

Shanghai copper lost 0.18%, aluminium rose 0.76%, lead gained 0.42%, zinc jumped 0.19%, tin advanced 0.18%, and nickel added 0.51%.

Copper: The most-traded SHFE 2202 copper closed down 0.18% or 130 yuan/mt at 70200 yuan/mt, with open interest down 6935 lots to 141209 lots.

On the macro front, the omicron variant kept spreading all over the world, and the confirmed COVID cases increased day after day, which kept the market on edge. Meanwhile, China Smelters Purchase Team (CSPT) finalised the guidance TC/RC for spot copper concentrate in Q1 2022 at $70/mt or $0.07/lb, up 32% from the same period in 2021.

On the fundamentals, the copper ore supply demonstrated upside potential, and improved from the previous periods. However, the supply of blister copper was still tight, putting pressures on the smelters coupled with steeply falling sulphuric acid. And the rush work by the year-end historical seen in the previous years did not come this year, hence the supply of refined copper will rise only limitedly. The falling copper inventory offered some support to SHFE copper though the downstream demand was sluggish.

Aluminium: The most-traded SHFE 2202 aluminium closed up 0.76% or 150 yuan/mt to 19910 yuan/mt, with open interest down 9408 lots to 205118 lots.

On the fundamentals, the profitability of aluminium improved amid falling costs. The aluminium output in China rose slowly amid small-scale production resumption in Yunnan and Inner Mongolia. The social inventory of aluminium ingot dropped. And the spot market stood quiet.

Lead: The most-traded SHFE 2202 lead closed up 0.42% or 65 yuan/mt at 15500 yuan/mt, with open interest down 4912 lots to 37460 lots.

In spot market, lead prices dropped slightly. Primary lead smelters’ offers were generally flat with SMM #1 lead prices, and secondary lead was quoted with discounts of 200-250 yuan/mt over SMM #1 lead. In the mainstream trading markets in Zhejiang and Jiangsu, the market prices were in discounts of 10-0 yuan/mt over SHFE 2201. The spot transactions were stable approaching the year-end, and the downstream mainly purchased on rigid demand.

Lead prices will largely remain stable in the near term amid stable total output and a sluggish spot market.

Zinc: The most-traded SHFE 2202 zinc closed up 0.19% or 45 yuan/mt at 24090 yuan/mt, with open interest up 1157 lots to 103282 lots.

Currently, the downstream was sluggish in demand as zinc prices stood high. Some downstream companies planned to suspend the production in light of the environmental protection incident in the north. Overseas energy issue was still the major influencing factor for zinc prices. The market kept worrying about the supply side amid surging electricity prices in the Europe and low LME inventory. The spot market was also quiet around the year-end.

The market shall keep an eye on the meeting pertaining to natural gas held between the US and Russia at the beginning of next year.

Tin: The most-traded SHFE 2202 tin closed up 0.18% or 510 yuan/mt at 290010 yuan/mt, with open interest up 829 lots to 43594 lots.

On the fundamentals, domestic warrants inventory dropped slightly, the spot transactions were thin. However, a few traders sold with discounts, lowering the transaction price floor.

Nickel: The most-traded SHFE 2202 nickel closed up 0.51% or 760 yuan/mt to 149350 yuan/mt, with open interest up 3446 lots to 152116 lots.

Currently, the fundamentals were unable to support nickel prices, and the demand for nickel from the stainless steel and new energy sectors dropped marginally. Low pure nickel inventory offered some support to nickel prices.