SMM Evening Comments (Jan 14): Shanghai Nonferrous Metals Closed Mixed amid Hawkish Fed Remarks

SHANGHAI, Jan 14 (SMM) – Shanghai nonferrous metals closed mixed today as the Fed governor indicated an early interest rate hike in March, who has been recognised one of the most dovish Fed officers before.

Shanghai copper dropped 0.63%, aluminium retreated 1.97%, lead rose 1.95%, zinc added 0.38%, tin dropped 0.54%, and nickel gained 2.46%.

Copper: The most-traded SHFE 2202 copper closed down 0.63% or 450 yuan/mt at 71460 yuan/mt, with open interest down 9329 lots to 108319 lots.

On the macro front, the US CPI recorded a gain of 7%, while the PPI surged by 9.7% year-on-year, the highest since 2010. The Fed officers frequently signalled hawkish stances amid increasing inflation pressures, and Fed governor Brainard, who has been recognised as one of the most dovish Fed officers before, indicated an early rate hike in March, triggering market concerns over liquidity.

On the fundamentals, the LME copper inventory kept dropping, but at a slower pace recently. The copper inventory in the bonded zone in China showed signs of rebounding. However, as the import window was closed, the import of copper lacked motivation.

Aluminium: The most-traded SHFE 2202 aluminium closed down 1.97% or 425 yuan/mt to 21160 yuan/mt, with open interest down 17900 lots to 154949 lots.

On the supply side, the operating aluminium capacity in January is expected to rise slightly in January. And the demand side has saw falling operating rates of aluminium processing companies. The social inventory kept falling on less arrivals.

Lead: The most-traded SHFE 2202 lead closed up 1.95% or 300 yuan/mt at 15655 yuan/mt, with open interest down 3230 lots to 31353 lots.

On the fundamentals, the supply side was relatively stable, but the logistics in many places was restricted. The transactions of small orders were thin in the day trading, and the downstream purchase is about to end, but the remained some pre-holiday restocking demand. The SHFE lead is likely to hover at a high level in the short term amid rising LME lead.

Zinc: The most-traded SHFE 2202 zinc closed up 0.38% or 95 yuan/mt at 24975 yuan/mt, with open interest down 1261 lots to 64723 lots.

Domestic refined zinc output rallied recently, but the TCs of zinc concentrate were low, resulting in slower increase in zinc output. The demand picked up slightly amid downstream pre-CNY holiday restocking.

Tin: The most-traded SHFE 2202 tin closed down 0.54% or 1670 yuan/mt at 309340 yuan/mt, with open interest down 2180 lots to 36433 lots.

On the fundamentals, the spot market was stable, and picked up slightly from a few days before. The warrants inventory rose significantly. Tin prices are likely to fall in the short term amid weakening demand as the Chinese New Year approaches.

Nickel: The most-traded SHFE 2202 nickel closed up 2.46% or 4020 yuan/mt to 167260 yuan/mt, with open interest down 3988 lots to 166347 lots.

On the news front, the Indonesia again expressed intentions of raising export tariff of NPI, arousing market concerns. However, as the Indonesia NPI costs are low, the raised export tariff may have limited impacts. On the fundamentals, LME and SHFE nickel inventories kept falling, and the spot supply of pure nickel and nickel briquette was tight. The supply is expected to remain tight as the import was closed, fuelling the surge in nickel prices.