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SMM Morning Comments (Jan 25): SHFE Base Metals Fell across the Board Overnight, Nickel Slumped 6.88%
Jan 25, 2022 09:51CST
Source:SMM
Shanghai base metals fell across the board overnight after the investors left the market with profits. LME metals performed similarly on Tuesday.

SHANGHAI, Jan 25 (SMM) – Shanghai base metals fell across the board overnight after the investors left the market with profits. LME metals performed similarly on Monday.

LME copper fell 1.18%, aluminium rose 0.51%, lead decreased 0.68%, and zinc lost 1.85%.

SHFE copper dropped 1.74%, aluminium dipped 0.05%, lead fell 0.96%, zinc lost 1%, and nickel slumped 6.88%.

Copper: Three-month LME copper opened at $9,783/mt on Monday, hitting the lowest level at $9,660/mt, and closed 1.18% lower at $9,747/mt. The trading volume was 21,000 lots, and the open interest was 242,000 lots. Three-month LME copper is expected to trade between $9,700-9,800/mt today,

The SHFE 2203 copper contract opened at 70,020 yuan/mt and decreased 1.74% to settle at 69,890 yuan/mt last night, after hitting the lowest and highest points at 69,550-70,100 yuan/mt respectively. The trading volume was 66,000 lots, and the open interest was 142,000 lots. SHFE copper is expected to trade between 69,700-70,300 yuan/mt today, with spot premiums between 100-280 yuan/mt.

On the macro front, the U.S. dollar index rose to a nearly two-week high yesterday, boosted by the risk aversion brought about by geopolitical risks in Ukraine and the market's early reaction to the possible hawkish voices from the Fed's meeting on interest rates. The non-ferrous metals futures generally closed lower overnight after the investors left the market with profits amid spreading tensions in the market. On the low inventories, some holders that had sufficient capitals still held firm to the quotations, but the transactions were sluggish as the traders and enterprises have gradually entered a state of holiday. The quotations are expected to stay varied.

Aluminium: LME aluminium opened at $3,030/mt on Monday and closed at $3,038/mt, an increase of $15.5/mt or 0.51%.

Overnight, the most-traded SHFE 2203 aluminium contract opened at 21,040 yuan/mt, with the highest and lowest prices at 21,175 yuan/mt and 20,995 yuan/mt before closing at 21,110 yuan/mt, down 90 yuan/mt or 0.05%.

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. 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. In the short term, SHFE aluminium will remain at a high level. It is still necessary to be alert to possible exit of bulls before the Spring Festival and the changes in overseas supply and demand.

Lead: Three-month LME lead opened at $2,360.5/mt on Monday, hitting the lowest level at $2,335/mt and closed at $2,339/mt, a decrease of 0.68%.

The most-liquid SHFE 2203 lead contract opened at 15680 on Monday night, and was dragged down by LME lead to 15,505 yuan/mt before closing at 15,530 yuan/mt, a decrease of 0.96%.

Zinc: LME zinc declined to $3,566/mt after opening at $3,636/mt on Monday, and closed at $3,582/mt, down $67.5/mt or 1.85%. Trading volume fell to 6,661 lots, and the open interest increased by 2,168 lots to 255,000 lots. 

Overnight, the most-traded SHFE 2203 zinc contract opened at 24,750 yuan/mt and then rose to 24,925 yuan/mt before falling back to 24,685 yuan/mt, and closed at 24,790 yuan/mt, down 250 yuan/mt or 1%. Trading volume rose to 120,000 lots, and open interest decreased by 1,741 lots to 238,400 lots. TCs of zinc ore in various regions in China remained unchanged last week. Imported zinc ore ordered by some smelters will arrive at ports one after another next week. It is expected that the production of large refined zinc enterprises will remain stable. Domestic downstream processing enterprises have begun to close for the Spring Festival. Trades in the spot market declined. The current domestic market is shifting to a seasonal oversupply. Due to the high zinc prices, stocking by end-users was poor. Inventory may continue to accumulate. It is expected that the short-term zinc price will have limited upward space and face the risk of correction. The most-traded SHFE zinc contract is expected to move within a range of 24,500-24,900 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 100 yuan/mt over the SHFE 2202 zinc contract.

Nickel: SHFE nickel prices finally closed at 165,450 yuan/mt in the overnight trading, down 12,220 yuan/mt from the settlement price of the previous trading day, a decrease of 6.88%. The open interest decreased. The news of high matte nickel output has a certain impact on the market sentiment. The bulls took profits ahead of CNY holidays also lowered SHFE nickel. At present, the spot market has basically halted operations for the holidays. The market shall focus on the fluctuation of nickel futures caused by cash flows.

Tin: Overnight, the SHFE 2203 tin contract fell after a lower opening. The inventory in the spot market decreased slightly, and trades were sluggish. SHFE tin will hover at highs amid weaker supply and demand before the upcoming Chinese New Year.


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