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SMM Evening Comments (Jan 24): Shanghai Nonferrous Metals Closed Mixed amid Calming Macro Sentiment
Jan 24, 2022 19:00CST
Source:SMM
Shanghai nonferrous metals closed mixed today as the market sentiment cooled down when the recent monetary policies in China and the US were in line with market estimate.

SHANGHAI, Jan 24 (SMM) – Shanghai nonferrous metals closed mixed today as the market sentiment cooled down when the recent monetary policies in China and the US were in line with market estimate.

Shanghai copper lost 1.14%, aluminium fell 2.32%, lead added 0.29%, zinc dropped 1.49%, tin advanced 0.81%, and nickel declined 1.19%.

Copper: The most-traded SHFE 2203 copper closed down 1.14% or 810 yuan/mt at 70480 yuan/mt, with open interest down 8814 lots to 145535 lots.

On the macro front, the US Fed made it clear that it will tighten the monetary policy, and the detailed measures are subject to the labour market and economic recovery. The market shall watch the interest rate meeting minutes due this week, as well as the readings of employment and economic performance. In China, the central government has emphasised greatly on economy stability by further lowering LPR. On the whole, copper prices dropped amid easing macro sentiment, but were still at a high level.

On the fundamentals, both the LME and SHFE inventories rose as the Chinese New Year (CNY) approaches. As of January 21, LME and SHFE copper inventories rose to 99,800 mt and 35,100 mt respectively, weighing on copper prices. Nonetheless, the inventory was at a low level, which will underpin copper prices.

Tonight, the market shall watch the US Markit manufacturing PMI in January.

Aluminium: The most-traded SHFE 2203 aluminium closed down 2.32% or 500 yuan/mt to 21025 yuan/mt, with open interest down 7129 lots to 210546 lots.

On the supply side, the operating aluminium capacity in Yunnan and Shanxi rose, but the overall operating capacity was still low. On the demand, some places have saw rising inventories amid weakening demand. The market shall still watch the risk aversion sentiment ahead of the CNY holiday, as well as the energy supply issues in Europe.

Lead: The most-traded SHFE 2203 lead closed up 0.29% or 45 yuan/mt at 15700 yuan/mt, with open interest up 2438 lots to 58402 lots.

In spot market, primary lead smelters quotes discounts of 100-350 yuan/mt over SMM 1# lead, while secondary lead smelters offered discounts of 275 yuan/mt over SMM #1 lead. In the trade market in Zhejiang and Jiangsu, Jijin lead and Mulun lead were offered at 15,700 yuan/mt, flat over SHFE 2202. The primary lead smelters actively made shipments after lead prices rose, and there were few secondary lead shipments. The market was quiet as a whole.

Zinc: The most-traded SHFE 2203 zinc closed down 1.49% or 375 yuan/mt at 24860 yuan/mt, with open interest down 7310 lots to 120604 lots.

On the fundamentals, the downstream participants were mostly closed for CNY holiday. And the demand was further suppressed by rising zinc prices which rose above 25,000 yuan/mt last week. The zinc inventory rose 10,500 mt on the week to 133,600 mt, and is likely rise by another 15,000-20,000 mt this week.  

Tin: The most-traded SHFE 2203 tin closed up 0.81% or 2630 yuan/mt at 328310 yuan/mt, with open interest up 8177 lots to 37955 lots.

The spot market was quiet ahead of the CNY, and the demand is expected to weaken further. SHFE warrants inventory dropped by 80 mt to 2,159 mt. The market is expected to see growing risk aversion sentiment this week.

Nickel: The most-traded SHFE 2202 nickel closed down 1.19% or 2100 yuan/mt to 174610 yuan/mt, with open interest down 20433 lots to 85449 lots.

On the macro front, LME and SS2203 both dropped, dragging down SHFE nickel. On the news front, Tsingshan was reportedly to have shipped the first batch of nickel matte back to China, weighing on nickel prices. On the fundamentals, the market transactions were thin. The stainless steel mills have less demand for nickel as they have built the stocks of raw materials. In the new energy sector, the costs of nickel sulphate stood high, and the upstream and downstream have not reached an agreement on the prices, hence the transactions were lacklustre.

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