SHANGHAI, Jan 25 (SMM) – Shanghai nonferrous metals all closed in the negative zone as the market speculated on the geopolitical risks between Ukraine and Russia, which suppressed the market risk appetite. Meanwhile, the holiday mood also pervaded the China market as the CNY is less than a week away. The market became more cautious.
Shanghai copper lost 2.19%, aluminium fell 0.68%, lead retreated 2%, zinc dropped 1.2%, tin declined 4.38%, and nickel plunged 8%.
Copper: The most-traded SHFE 2203 copper closed down 2.19% or 1560 yuan/mt at 69570 yuan/mt, with open interest down 6165 lots to 139370 lots.
On the macro front, the US dollar index surged to the two-week high on Monday, which was boosted by the rising geopolitical risks in Ukraine as well as the potential hawkish stance of the US Fed’s rate meeting that triggered risk aversion sentiment. Nonetheless, the US dollar index growth was dragged on by the overnight US Markit manufacturing PMI in January, which fell short of expectation. The intraday US dollar index rose by 0.28%, while oil prices dropped by 2%.
Tonight, the market shall watch the World Economic Outlook report to be released by IMF as well as the January Conference Board Consumer Confidence Index.
Aluminium: The most-traded SHFE 2203 aluminium closed down 0.68% or 145 yuan/mt to 21055 yuan/mt, with open interest down 3749 lots to 206797 lots.
The aluminium market was modest, with concerns over upstream supply, low midstream operating capacity, and moderate demand in the downstream new energy sector in the traditional seasonal low. The supply of aluminium ingot dropped as the smelters increased the proportion of liquid aluminium in their product portfolio.
Lead: The most-traded SHFE 2203 lead closed down 2% or 315 yuan/mt at 15455 yuan/mt, with open interest down 2695 lots to 55707 lots.
In the spot market, primary lead smelters mostly offered with discounts of 50-300 yuan/mt over SMM #1 lead, while there were few secondary refined lead available in the market. Jijin lead was quoted at 15510 yuan/mt in Zhejiang and Jiangsu, flat over SHEF 2202. Lead prices are likely to sustain the downward trend amid the weakening demand.
Zinc: The most-traded SHFE 2203 zinc closed down 1.2% or 300 yuan/mt at 24740 yuan/mt, with open interest down 1812 lots to 118792 lots.
On the fundamentals, the domestic market has been transiting to a seasonal supply surplus. The terminal demand was sluggish amid high zinc prices, and the zinc inventory kept rising.
Tin: The most-traded SHFE 2203 tin closed down 4.38% or 14530 yuan/mt at 316900 yuan/mt, with open interest down 1395 lots to 36560 lots.
The spot transactions were rare today, and the downstream participants mostly closed for CNY holiday. Nonetheless, most large-sized smelters will maintain normal production during the holiday, hence the market is expected to see short-term supply surplus.
In addition, according to SHFE notice, the margin ratio of trading SHFE tin contract has been adjusted to 14%, while the daily limit up and down has been set at 12%, increasing the threshold of futures transactions. Meanwhile, risk aversion sentiment is likely to drag on the market recently as the CNY approaches.
Nickel: The most-traded SHFE 2203 nickel closed down 8% or 14220 yuan/mt to 163460 yuan/mt, with open interest down 293 lots to 152113 lots.
Nickel prices have been hitting new highs on account of low inventories, with the highest at 180,880 yuan/mt. However, the prices quickly pulled back amid market bubble burst as well as the news regarding shipment of nickel matte from Indonesia to China. Meanwhile, SHFE also adjusted the margin ratio and commission charges of SHFE nickel 2202 and 2203, suppressing nickel prices.
The spot supply of nickel briquette and plate was tight, but the downstream has mostly finished its restocking. Hence the spot transactions were thin.