SMM Evening Comments (Jan 21): Shanghai Nonferrous Metals Closed Mixed with Nickel Leading the Gains

SHANGHAI, Jan 21 (SMM) – Shanghai nonferrous metals closed mixed today as the US market was further pressured by the rising inflation. SHFE nickel, on the other hand, continue to lead the gains amid low inventories.  

Shanghai copper added 0.64%, aluminium fell 0.28%, lead dropped 0.13%, zinc gained 0.34%, tin advanced 1.24%, and nickel surged 4.21%.

Copper: The most-traded SHFE 2203 copper closed up 0.64% or 450 yuan/mt at 71290 yuan/mt, with open interest up 4198 lots to 154349 lots.

On the macro front, the monthly rate of US retail sales in December dropped 1.9%, while the annualised rate rose 16.95%, which was still quite strong though fell short of expectation. The initial jobless claims last week also rose unexpectedly, indicating the severe impacts from the recently resurging COVID pandemic. The inflation estimate heightens, and the market was expecting a rate hike of around 50 bp in March. The oils prices surged amid falling crude inventory, while the White House said that it will accelerate the release of national reserves.

In China, as of Friday, January 21, the copper inventories in major domestic markets decreased 3,500 mt from Monday to 89,000 mt, but added 2,400 mt from a week earlier to 86,600 mt, growing for the second straight week.

Aluminium: The most-traded SHFE 2203 aluminium closed down 0.28% or 60 yuan/mt to 21430 yuan/mt, with open interest up 3109 lots to 217675 lots.

On the supply side, some aluminium capacities were resumed in Yunnan and Qinghai, pushing up the domestic aluminium supply slightly. On the demand side, the downstream demand weakened as the Chinese New Year (CNY) approaches. The social inventories of aluminium stood at 726,000 mt as of January 20, up from the previous session. On the other hand, the alumina and thermal coal prices kept rising, offering support to aluminium prices.

Lead: The most-traded SHFE 2203 lead closed down 0.13% or 20 yuan/mt at 15675 yuan/mt, with open interest down 882 lots to 55964 lots.

In spot market, primary lead smelters offered in discounts of 40-100 yuan/mt over SMM #1 lead, while secondary lead smelters barely made shipments as the CNY is around the corner. In the trade market in Zhejiang and Jiangsu, the Mujin lead and Mulun lead were offered at 15,575 yuan/mt, flat over SHFE 2202 lead. The trades under small orders were lacklustre as the logistics were affected by the CNY holiday and the downstream has almost fulfilled their restocking demand. Lead prices are expected to move rangebound amid weakening demand next week.

Zinc: The most-traded SHFE 2203 zinc closed up 0.34% or 85 yuan/mt at 25215 yuan/mt, with open interest up 6155 lots to 127914 lots.

On the fundamentals, LME inventory kept falling amid strong overseas demand, fuelling spot zinc premiums to a high of $300/mt. The domestic zinc inventory rose slightly on the holiday factor. The supply side is still likely to be affected by environmental protection requirements, routine maintenance, etc. Hence the January output estimate was revised down.

Tin: The most-traded SHFE 2203 tin closed up 1.24% or 4010 yuan/mt at 327500 yuan/mt, with open interest up 2675 lots to 29778 lots.

The demand side was sluggish amid surging tin prices yesterday and as most downstream participants began to take holidays. The spot transactions were thin. China’s tin imports in December dropped drastically amid rumours that Indonesia will adjust its tin export policy as well as the rising financial pressures ahead of the CNY.

SHFE warrants inventory dropped 110 mt today, down 512 mt in the past week to a low of 2,239 mt, indicating insufficient spot supplies.

Nickel: The most-traded SHFE 2202 nickel closed up 4.21% or 7190 yuan/mt to 178040 yuan/mt, with open interest down 29413 lots to 105882 lots.

SHFE nickel 2202 – 2203 was in backwardation of around 2,000 yuan/mt. The currently low inventory of nickel underpinned nickel prices.