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SMM Morning Comments (Jan 11): Base Metals Mostly Closed Lower amid Stronger Expectations of Interest Rate Hike
Jan 11, 2022 10:02CST
Source:SMM
Shanghai base metals mostly trended lower on Tuesday morning amid stronger expectations of interest rate hikes.

SHANGHAI, Jan 11 (SMM) – Shanghai base metals mostly trended lower on Tuesday morning amid stronger expectations of interest rate hikes.

LME mostly closed lower on Monday. Copper fell 1.13%, aluminium rose 0.46%, lead dropped 0.78%, and zinc decreased 1.44%.

SHFE performed similarly in the overnight trading. Copper dropped 0.63%, aluminium rose 0.38%, lead increased 0.16%, zinc fell 0.8%, and nickel shed 0.92%.

Copper: Three-month LME copper contract opened at $9,674.5/mt yesterday, falling to the lowest point at $9,520/mt, and closed at $9,565/mt, down 1.13%. The trading volume was 9,518 lots, and the open interest reached 243,000 lots. Three-month LME copper is expected to trade between $9,500-9,600/mt today,

The SHFE 2202 copper contract opened at 69,780 yuan/mt last night, and fell to the lowest point at 69,100 yuan/mt, before closing at 69,290 yuan/mt, down 0.63%. The trading volume was 32,000 lots, and the open interest was 110,000 lots. SHFE copper is expected to trade between 69,000-69,600 yuan/mt today, with spot premiums between 200-360 yuan/mt.

On the macro front, the US employment rate was high, and the market is betting that the official speech at the Fed hearing and the US inflation data to be released this week will strengthen interest rate hike expectations. The US dollar index rose to 95.96 overnight, and the prices of copper futures fell. The spot prices moved up slightly. The premiums stood high last week and in the morning market, so the downstream users were wait and see. The inflow of some goods into the market caused the holders to hold less firm to the quotations.

Aluminium: LME aluminium opened at $2,920/mt on Monday and closed at $2,933/mt, an increase of $10.5/mt or 0.36%.

Overnight, the most-traded SHFE 2202 aluminium contract opened at 21,210 yuan/mt, with the highest and lowest prices at 21,300 yuan/mt and 21,160 yuan/mt before closing at 21,210 yuan/mt, up 80 yuan/mt or 0.38%.

The domestic operating aluminium capacity may continue to increase slightly in January. Consumption in downstream sectors showed signs of weakening, except for the aluminium plate/sheet, strip and foil sector. Although the social inventory continued to fall due to fewer arrivals and modest consumption, the support to aluminium prices is gradually weakening. Market needs to pay attention to the possible further aluminium production reduction caused by the energy shortage in Europe and the domestic aluminium inventory changes.

Lead: Three-month LME lead opened at $2,282.5/mt and closed $18/mt or 0.78% lower at $2,276.5/mt yesterday, after hitting the highest and lowest levels at $2,295.5/mt and $2,272/mt respectively.

The most-traded SHFE 2202 lead contract opened at 15,290 yuan/mt in the overnight trading, hitting the lowest point at 15,185 yuan/mt, and closed at 15,215 yuan/mt, up 25 yuan/mt or 0.16%.

Zinc: LME zinc opened at $3,534/mt on Monday, and rose to $3,560/mt, but then fell back to $3,473/mt before closing at $3,487.5/mt, down $51/mt or 1.44%. Trading volume fell to 6,450 lots, and open interest increased by 1,326 lots to 253,000 lots. LME zinc inventory decreased by 1,250 mt to 192,625 mt, a drop of 0.64%. LME zinc is expected to move between $2,480-2,530/mt on Tuesday.

Overnight, the most-traded SHFE 2202 zinc contract opened at 24,235 yuan/mt and fell to 23,985 yuan/mt before closing at 24,060 yuan/mt, down 195 yuan/mt or 0.8%. Trading volume was 76,129 lots, and open interest increased by 66 lots to 80,799 lots. On the supply side, the SHFE/LME zinc price ratio continued to decline. Domestic smelters lost more money in purchasing imported ore, and thus turned to domestic ore, allowing the TCs of domestic ore to continue to fall, which increased smelters’ production costs. On the consumer side, the total inventory of zinc ingots in the seven major regions in China was 126,800 mt on Monday, an increase of 1,300 mt when compared with January 7. Enterprises in Daqiuzhuang, Tianjin stopped production due to the pandemic, and the market transaction was light. On the whole, the high production cost of smelters will still support the price of zinc. In the short term, market will pay attention to whether there will be a large-scale accumulation of social inventories. The most-traded SHFE zinc contract is expected to move between 24,000-24,500 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 130-140 yuan/mt over the SHFE 2202 zinc contract.

Nickel: SHFE nickel contract shed 920 yuan/mt or 0.92% to end at 153,920 yuan/mt in the overnight trading. Trading volumes decreased 125,000 lots to 122,000 lots and open interest decreased 2,902 lots to 149,000 lots.

On the supply side, the import window was reopened for a short period of time, allowing some imported cargoes to enter China. But some of them were locked-in orders, and the available cargoes in the market were limited. Spot premiums continued to surge. Spot premiums of Jinchuan nickel stood at 4,200-5,000 yuan/mt, up 400 yuan/mt. And the spot premiums of NORNICKEL nickel stood at 1,600-2,000 yuan/mt against the SHFE 2202 contract. On the demand side, there were some purchases. Sales were sound despite high spot premiums and the trades were hectic. The nickel prices will continue to fluctuate at highs.

Tin: The SHFE 2202 tin contract fell to 295,000 yuan/mt in overnight trading. The transaction price in the spot market continued to rise slightly, and the domestic inventory under warrants continued to accumulate. It is expected that the domestic inventory under warrants will continue to rise slowly this week. SHFE tin will trade rangebound with the lack of capital inflows.


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