SMM Evening Comments (Jan 6): Shanghai Nonferrous Metals Mostly Closed with Gains amid Surging Natural Gas Prices

SHANGHAI, Jan 6 (SMM) – Shanghai nonferrous metals mostly closed with gains as the natural gas prices were still quite high in the Europe, which even arose protests in Kazakhstan.   

Shanghai copper lost 0.53%, aluminium added 2.32%, lead rose 1.88%, zinc advanced 0.22%, tin jumped 0.76%, and nickel gained 0.75%.

Copper: The most-traded SHFE 2202 copper closed down 0.53% or 370 yuan/mt at 69520 yuan/mt, with open interest down 7511 lots to 115000 lots.

On the macro front, the December ISM servicing industry index in the US recorded the greatest fall in one year and a half, resulting in higher price pressures. Meanwhile, the initial jobless claims last week were still close to the historical low though the reading rose from the previous session. All these data indicated sustained high inflation and employment pressures, heightening the expectation of a tight monetary policy. St. Louis Federal Reserve Bank president Bullard said that the interest rate hike may start as early as in March, followed by the shrinking balance sheet. The San Francisco Fed president expressed the same opinion. The hawkish stance strengthened.

On the fundamentals, the copper inventory in the bonded zone rose 16,200 mt to 203,500 mt on the week. But the social inventory of copper in Shanghai declined 10,200 mt week-on-week, indicating that the real inventory was still low.

Tonight, the market shall watch the US unemployment rate in December and the CPI reading for December in the eurozone.

Aluminium: The most-traded SHFE 2202 aluminium closed up 2.32% or 480 yuan/mt to 21130 yuan/mt, with open interest down 8856 lots to 204163 lots.

On the supply side, the domestic aluminium output maintained a low level. The energy crisis in the Europe sustained, and overseas aluminium smelters are still expected to cut their output. On the demand side, the downstream operating rates were relatively stable. The aluminium inventory dropped 23,000 mt to 776,000 mt amid less arrivals.

Lead: The most-traded SHFE 2202 lead closed up 1.88% or 285 yuan/mt at 15415 yuan/mt, with open interest down 11451 lots to 38326 lots.

On the fundamentals, the lead supply and demand were stable. The downstream purchase interest was muted after lead prices rebounded.

Zinc: The most-traded SHFE 2202 zinc closed up 0.22% or 55 yuan/mt at 24500 yuan/mt, with open interest up 922 lots to 86972 lots.

On the macro front, there have been many protests in Kazakhstan due to rising natural gas prices, and the country was closed down. The protests have not yet been brought under control, hence the market expressed worries over the production of mines and smelters in the country. German and France published their November industry output data, which poses no surprises.

On the fundamentals, the combined inventory across seven major markets in China dropped on the week, mainly because the arrivals were lower than expected, which boosted the confidence of the longs.

Tin: The most-traded SHFE 2202 tin closed up 0.76% or 2250 yuan/mt at 298100 yuan/mt, with open interest up 263 lots to 43273 lots.

On the fundamentals, the domestic social inventories were largely unchanged, and the warrants inventory rose significantly. The spot offers of deliverable brands were rare heard, and the market transactions were stable.

Nickel: The most-traded SHFE 2202 nickel closed up 0.75% or 1130 yuan/mt to 152490 yuan/mt, with open interest up 5766 lots to 148690 lots.

On the macro front, the high overseas natural gas prices supported the non-ferrous metals prices. Intraday LME nickel moved up, and SHFE nickel shadowed its moves. On the fundamentals, the new energy and stainless steel sectors’ demand for nickel was stable, meaning that there was no palpable bearish factors. Low pure nickel inventory supported SHFE nickel.