SMM Evening Comments (Jan 13): Shanghai Nonferrous Metals Closed Mixed with Tightening Risk Exposures

SHANGHAI, Jan 13 (SMM) – Shanghai nonferrous metals closed mixed today, as the high US inflation rate tightened risk exposures; but the reading was basically in line with market estimate.

Shanghai copper advanced 1.29%, aluminium lost 1.27%, lead rose 0.79%, zinc added 0.36%, tin dropped 0.27%, and nickel gained 0.78%.

Copper: The most-traded SHFE 2202 copper closed up 1.29% or 910 yuan/mt at 71440 yuan/mt, with open interest down 2645 lots to 117648 lots.

On the macro front, the US Department of Labor released is consumer price index (CPI), which rose the by 7%, the highest in 39 years, paving the way for the interest rate hike to kick off as early as in March. On the other hand, however, the CPI reading was in line with market estimate. And the comparatively dovish speech delivered by Fed President Powell pressured the US dollar index to some extent, which has been rising on the back of high rate hike estimate.

For oil, the oil prices kept rising amid tight supply, and the crude stocks in the US, the largest oil consuming country, dropped to the lowest since 2018. The WTI and Brent oil prices both recorded gains of over 1%, coupled with falling US dollar index and concerns over omicron variant.

Tonight, the market shall watch the US PPI in December, the initial jobless claims in the US last week, as well as the continuing jobless claims in the week of January 1.

Aluminium: The most-traded SHFE 2202 aluminium closed down 1.27% or 275 yuan/mt to 21375 yuan/mt, with open interest down 11765 lots to 172829 lots.

The fundamentals in the aluminium sector have not changed much recently. The operating aluminium capacity is likely to rise slightly in January, while the downstream operating rates may drop in the month. The high aluminium prices are expected to trigger risk aversion sentiment in the market, which calls for close attention.

Lead: The most-traded SHFE 2202 lead closed up 0.79% or 120 yuan/mt at 15365 yuan/mt, with open interest down 5112 lots to 34583 lots.

On the fundamentals, the logistics have already been restricted though it is still 2 weeks away from the Chinese New Year, mainly because the recent wave of COVID pandemic in China has brought many uncertainties. And the truck drivers wished to return to their hometown early. The spot transaction is about to come to a close, though the downstream purchase has not completely ended.

Zinc: The most-traded SHFE 2202 zinc closed up 0.36% or 90 yuan/mt at 24810 yuan/mt, with open interest down 7713 lots to 65984 lots.

On the fundamentals, the Vazante mine (with an annual capacity of 140,000 mt) affilicated to Nexa, will reduce its daily output by 60% amid the rainstorm in Minas Gerais. Zinc prices still gained support amid low inventory and rising smelting costs.

Tin: The most-traded SHFE 2202 tin closed down 0.27% or 820 yuan/mt at 308310 yuan/mt, with open interest down 4393 lots to 38613 lots.

In terms of chart moves, a large amount of capitals left the board, cooling the market to some extent. On the fundamentals, the spot shipments met some difficulties, stopping the significant increase in warrants inventory.

Nickel: The most-traded SHFE 2202 nickel closed up 0.78% or 1250 yuan/mt to 162120 yuan/mt, with open interest up 87 lots to 170335 lots.

On the fundamentals, nickel ore supply from the Philippines is likely to fall in the rainy season, shoring up nickel prices. The output of smelters will be low ahead of the CNY as they have completed the annual production targets in 2021. Downstream stainless steel exports are likely to improve. Nickel prices were firm amid low domestic and overseas inventories and some short-term restocking demand.