SMM Evening Comments (Jan 20): Shanghai Nonferrous Metals Mostly Closed with Gains amid Loosening Monetary Policy in China

SHANGHAI, Jan 20 (SMM) – Shanghai nonferrous metals mostly closed with gains as the PBoC announced to lower the one-year and five-year LPR by 10 basis points and 5 basis points respectively to 3.7% and 4.6%.

Shanghai copper added 1.69%, aluminium fell 0.09%, lead rose 1.74%, zinc gained 1.617%, tin advanced 4.78%, and nickel surged 7.99%.

Copper: The most-traded SHFE 2203 copper closed up 1.69% or 1180 yuan/mt at 71180 yuan/mt, with open interest up 13968 lots to 150151 lots.

On the macro front, the People’ s Bank of China announced to lower the one-year and five-year LPR by 10 basis points and 5 basis points respectively to 3.7% and 4.6%. The PBoC has lowered the rates twice in a month, indicating determination and direction of macro policy, which pushed up copper prices.

For oil, crude prices hit a new high in seven years, and the International Energy Agency estimated that the demand is likely to return to the pre-pandemic level. The Bank of Paris raised its oil price forecast for 2022 and 2023, and suggesting a higher possibility for a high of $100/barrel.

Tonight, the market shall closely watch the December CPI in the eurozone, the US initial jobless claims in the week of January 15.

Aluminium: The most-traded SHFE 2203 aluminium closed down 0.09% or 20 yuan/mt to 21485 yuan/mt, with open interest down 7301 lots to 214566 lots.

On the supply side, the operating aluminium capacity was still low, despite increases in Yunnan and Shanxi. The demand side showed seasonal weakness, and the social inventory of aluminium ingot stood at 726,000 mt, rising on a weekly basis, according to SMM.

Lead: The most-traded SHFE 2203 lead closed up 1.74% or 270 yuan/mt at 15815 yuan/mt, with open interest up 10416 lots to 56846 lots.

On the fundamentals, the output of lead dropped amid the approaching Winter Olympics and resurging pandemic, while the downstream demand was also suppressed by the holiday factor.

Zinc: The most-traded SHFE 2203 zinc closed up 1.61% or 400 yuan/mt at 25210 yuan/mt, with open interest up 17029 lots to 121759 lots.

The weak supply and demand of domestic market sustained, and the upside momentum of SHFE zinc was offered by strong overseas demand.

Tin: The most-traded SHFE 2202 tin closed up 4.78% or 15190 yuan/mt at 333140 yuan/mt, with open interest up 985 lots to 39640 lots.

On the fundamentals, the pre-CNY holiday spot transactions were thin, partly because the downstream restocking is about to end. SHFE warrants reduced 156 mt, down for four straight days. According to the customs, the tin ore and concentrate imports stood at 13,324 mt in December, 2021, up 12.62% MoM and down 17.56% YoY. The annual imports in in 2021 totalled 184,299 mt, up 16.54% YoY. The imports of tin concentrate are likely to rise MoM in January, supplementing domestic supplies. However, China is a net refined tin exporter in December with a net export volume of 132 mt, mainly because the imports from Indonesia plummeted by 76.11%

Nickel: The most-traded SHFE 2202 nickel closed up 7.99% or 13050 yuan/mt to 176280 yuan/mt, with open interest up 10259 lots to 135295 lots.

The fundamentals and news front showed no palpable tendency. Meanwhile, according to foreign media, three power transmission towers were bombed, disrupting the production of nickel processors, which boosted nickel prices. Meanwhile, the recent gains in nickel prices were mainly fuelled by the low nickel inventory and tight market supply.