SMM Evening Comments (Jan 10): Shanghai Nonferrous Metals Closed Mixed, China SMEDI Rose for Two Months in A Row

SHANGHAI, Jan 10 (SMM) – Shanghai nonferrous metals closed mixed today. The Small and Medium Enterprises Development Index (SMEDI) was released today, which stood at 86.4 in December, up 0.1 percentage point MoM and rising for two straight months, but it was still lower than in the same period last year.

Shanghai copper rose 0.63%, aluminium added 1.07%, lead lost 0.91%, zinc dropped 0.88%, tin jumped 0.98%, and nickel gained 2.5%.

Copper: The most-traded SHFE 2202 copper closed up 0.63% or 440 yuan/mt at 69780 yuan/mt, with open interest down 3928 lots to 111072 lots.

On the macro front, the US December non-farm payrolls rose by only 199,000 though the labour forces have been in great shortage, which was far below market estimate. The employment is expected to grow mildly in the short term with rising COVID cases. But it the readings also indicated that labour market may have reached the level of full employment. The unemployment rate dropped to 3.9%, the lowest in 22 months, for the second straight month in December from 4.2% in November. The Wall Street stock market was mixed on the news, and the US dollar index dropped. The US debts yield rose. The overnight copper prices rose.

The market focus has now shifted to the employment data as well as the specific timeline of interest rate hike after the Fed’s hawkish speech last week that the economic readings and inflation rates have met the conditions for a rate hike.

Tonight, the market shall watch the December M2 money supplies and the social financing in China, as well as the employment rate in eurozone in November.

Aluminium: The most-traded SHFE 2202 aluminium closed up 1.07% or 225 yuan/mt to 21225 yuan/mt, with open interest down 13217 lots to 190949 lots.

On the supply side, the operating aluminium capacity in January is likely to rise slightly, and there is possibility that the output in Yunnan and Shanxi will increase. On the demand side, the downstream consumption weakened expect for the aluminium plate/sheet, strip and foil sector. And processing companies like aluminium billet are planning to reduce the output. The support to SHFE aluminium on the fundamentals has been weakening.

Lead: The most-traded SHFE 2202 lead closed down 0.91% or 140 yuan/mt at 15190 yuan/mt, with open interest up 6525 lots to 44851 lots.

On the fundamentals, primary lead supply rose, and secondary lead supply was low ahead of the Chinese New Year, while the downstream actively made inquiries and purchased on dips. However, the traders were broadly less interest in making shipments, resulting in thin transactions.

Zinc: The most-traded SHFE 2202 zinc closed down 0.88% or 215 yuan/mt at 24270 yuan/mt, with open interest down 6240 lots to 80732 lots.

On the macro front, Kazakhstan's National Security Council said that the situation in the country is now under control and the breeding ground for terrorists has been eliminated. The Small and Medium Enterprises Development Index (SMEDI) was released today, which stood at 86.4 in December, up 0.1 percentage point MoM and rising for two straight months, but it was still lower than in the same period last year. In terms of sub-indexes by industry, 5 recorded increase, 2 experienced drops and 1 was flat MoM. For sub-indexes by item, 6 saw increases and 2 were declines. Among them, the sub-indexes for construction and real state rose 0.5 and 0.4 percentage points respectively.

On the fundamentals, the inventory across seven major markets in China rose 1,300 mt over the weekend. And market shall still watch the electricity supply tightness in the Europe.

Tin: The most-traded SHFE 2202 tin closed up 0.98% or 2890 yuan/mt at 298750 yuan/mt, with open interest down 1351 lots to 41922 lots.

On the fundamentals, domestic warrants inventory rose steadily, and the quotes of deliverable brand in the spot market was scarce, while that of non-deliverable brands rose slightly. The market shipments were flat as a whole. The market demand and supply were both sluggish ahead of the CNY.

Nickel: The most-traded SHFE 2202 nickel closed up 2.5% or 3780 yuan/mt to 154840 yuan/mt, with open interest up 3192 lots to 151882 lots.

On the fundamentals, LME inventory dropped below 100,000 mt, and kept falling. In China, the pure nickel inventory stood low, and market supply was insufficient, which supported nickel prices. Stainless steel prices rose greatly, which pulled up SHFE nickel.