SMM Morning Comments (Jan 24): SHFE Base Metals Closed Mixed on Friday ahead of the US Fed Interest Meeting

SHANGHAI, Jan 24 (SMM) – Shanghai base metals closed mixed on Friday night ahead of the US Fed’s interest meeting. LME metals basically dropped in the trading on Friday.

LME copper fell 1.15%, aluminium dropped 2.97%, lead decreased 0.8%, and zinc shed 0.61%.

SHFE copper edged up 0.04%, aluminium fell 1.42%, lead rose 0.83%, zinc lost 0.52%, and nickel went up.

Copper: Three-month LME copper opened at $9,910/mt last Friday, hitting the lowest level at $9,876/mt before rebounding to $10,051/mt, and closed at 9933.5/mt, down 1.15%. The trading volume was 15,000 lots, and the open interest was 240,000 lots.

The SHFE 2203 copper contract opened at 71,280 yuan/mt last Friday night, and rose to the highest point at 71,120 yuan/mt, before closing at 71,320 yuan/mt, up 0.04%. The trading volume was 57,000 lots, and the open interest was 156,000 lots.

On the macro side, the market is still concerned about the changes in the Fed's interest hike. The copper prices fluctuated at high levels last week amid domestic increased liquidity. The market is waiting for the Fed's meeting this week, which may provide clearer guidance on interest hikes. The spot premiums may pull back rapidly this week as the downstream users will gradually take the CNY holidays. LME copper will trade between $9,870-9,970/mt today; SHFE copper prices are expected to move between 70,600-71,200 yuan/mt. Spot goods are likely to trade between discounts of 60 yuan/mt to premiums of 110 yuan/mt.

Aluminium: LME aluminium opened at $3,105/mt last Friday and closed at $3,022/mt, down $92.5/mt or 2.97%.

The most-traded SHFE 2203 aluminium contract opened at 21,310 yuan/mt during last Friday’s night session, with the highest and lowest prices at 21,600 yuan/mt and 21,180 yuan/mt before closing at 21,220 yuan/mt, down 305 yuan/mt or 1.42%.

On the supply side, although the production of aluminium in Yunnan and Shanxi increased, the overall output remained relatively low. In terms of demand, consumption has weakened as the Spring Festival approaches, and stocks began to grow in some areas. It is still necessary to be alert to possible exit of bulls before the Spring Festival and the energy shortage in Europe. Inventory increase during the Spring Festival this year may be smaller than in previous years, and the post-holiday inventory peak may be lower than 1.2 million mt.

Lead: Three-month LME lead opened at $2,362/mt last Friday and fluctuated around the intra-day moving average, then it hit the highest level at $2,388/mt in the European session before closing at $2,355/mt, down 0.8%.

The most-active SHFE 2203 lead contract opened at 15,780 yuan/mt in the overnight trading last Friday, hitting the highest and lowest levels at 15,875 yuan/mt and 15,720 yuan/mt respectively, and closed at 15,785 yuan/mt, up 0.83%.

Zinc: LME zinc opened at $3,654/mt last Friday, and hit a high of $3,679/mt before falling back, and closed at $3,649.5/mt, a decrease of $22.5/mt or 0.61%. Open interest added 2,204 lots to 252,000 lots. LME zinc inventory decreased by 4,725 mt to 167,065 mt. European spot premiums rose to around $300-350/mt, and the shortage of zinc ingots was still intensifying. The overseas fundamentals will remain positive in the short term. LME zinc is expected to move between $3,600-3,650/mt on Monday.

During last Friday’s night session, the most-traded SHFE 2203 zinc contract fell after opening at 25,235 yuan/mt, but then rallied to 25,415 yuan/mt before closing at 25,085 yuan/mt, down 130 yuan/mt or 0.52%. Open interest added 1,328 lots to 129,000 lots. Downstream purchases declined sharply due to upcoming CNY and the fact that zinc prices rose above 25,000 yuan/mt. The domestic zinc ingot inventory rose 10,500 mt to 133,600 mt. It is expected that the inventory will rise further this week, which will put pressure on zinc prices. However, it is expected that the inventory growth during the Spring Festival will be limited, and the post-holiday consumption will be optimistic. The most-traded SHFE zinc contract is expected to move within a range of 25,000-25,500 yuan/mt Monday. 0# domestic Shuangyan zinc may trade at premiums of 60-100 yuan/mt over the SHFE 2202 zinc contract.

Tin: The SHFE 2203 tin contract became the most-traded contract during last Friday’s night session, and fell back after hitting a new high. The spot market was relatively quiet due to approaching CNY.   SHFE tin may trade sideways with the outflows of capital amid pre-CNY risk aversion.

Nickel: LME and SHFE nickel prices hit highs last Friday evening. SHFE nickel reached 182,180 yuan/mt. Nickel prices have continued to rise rapidly since last week and hit new highs. The nickel futures prices have risen amid the low pure nickel inventories. At present, the logic driving pure nickel prices has not fundamentally changed. LME and domestic inventories have dropped to extremely low levels and are expected to continue to fall in the future. Pure nickel social inventories and bonded areas Inventories continued to fall, and the tight domestic and overseas supply bolstered nickel futures. If the supply tightness eases, the nickel prices may pull back temporarily. However, at present, the spot market of pure nickel has basically halted operations for CNY holidays. And there have been few trades at highs. The market shall pay attention to the potential price declines.