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SMM Morning Comments (Jan 26): Shanghai Base Metals Closed Mixed amid Weakening Transactions Overnight
Jan 26, 2022 10:04CST
Shanghai base metals closed mixed overnight amid weakening transactions approaching the CNY. Their counterparts on LME mostly went up on Tuesday amid intensifying tension between Russian and Ukraine.

SHANGHAI, Jan 26 (SMM) – Shanghai base metals closed mixed overnight amid weakening transactions approaching the CNY. Their counterparts on LME mostly went up on Tuesday amid intensifying tension between Russian and Ukraine.

LME copper rose 1.02%, aluminium increased 1.88%, lead fell 0.28%, and zinc gained 0.14%.

SHFE copper rose 0.66%, aluminium won 1.51%, lead shed 0.29%, and zinc fell 0.24%.

Copper: Three-month LME copper opened at $9,694/mt on Tuesday and moved down to $9,660/mt, then rebounded to close at $9,846/mt, up 1.02%. The trading volume was 14,000 lots, and the open interest was 246,000 lots. Three-month LME copper is expected to trade between $9,780-9,880/mt today,

The SHFE 2203 copper contract opened at 69,570 yuan/mt last night, and rose to the highest point at 70,350 yuan/mt, before closing at 70,280 yuan/mt, an increase of 0.66%. The trading volume was 50,000 lots, and the open interest was 136,000 lots. SHFE copper is expected to trade between 69,800-70,400 yuan/mt today, with spot premiums between 80-210 yuan/mt.

Ahead of the Fed meeting, the global financial markets were nervous about the increasingly tense situation in Ukraine, and the oil prices rose more than 2% amid concerns about energy shortage, boosting copper futures to a certain extent. The transactions of spots were sluggish as the market participants have taken their CNY holidays. The transactions muted amid stopped logistics, and the premiums will stand stable before the CNY on the low inventory.

Aluminium: Three-month LME aluminium opened at $3.39.5/mt on Tuesday and closed at $3.95/mt, an increase of $57/mt or 1.88%.

The most-traded SHFE aluminium contract opened at 21,190 yuan/mt, with the highest and lowest prices at 21,505 yuan/mt and 21,115 yuan/mt respectively, and closed at 21,450 yuan/mt, up 350 yuan/mt or 1.51%.

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. The total inventory during the CNY is expected to stand lower than that in the same period in 2021, with the highest level below 1.2 million mt. The escalation of the Ukrainian-Russian tension has caused the market to worry about the reduction of overseas aluminium supply. Fewer longs in the SHFE market reduced their positions. SHFE aluminium is expected to fluctuate at high levels in the short term. SMM will continue to monitor the domestic risk aversion sentiments before the CNY and the overseas supply changes.

Lead: Three-month LME lead opened at $2,351/mt yesterday, hitting the lowest and highest points at $2,328/mt and 2,361.5/mt respectively, and ended 0.28% lower at $2,332.5/mt on Tuesday.

The most-active SHFE 2203 lead contract shed 0.29% to close at 15,470 yuan/mt in the overnight trading yesterday.

Zinc: Overnight LME zinc opened at $3576/mt, and then fluctuated between $3580-3600/mt. The contract once dropped below the 10-day average at $3564.5/mt and then bottomed out, and closed at $3,587/mt, up $5/mt or 0.14%. The open interest dropped 2076 lots to 252,000 lots. LME zinc is expected to move between $/mt today.

The most-traded SHFE 2203 zinc opened at 24825 yuan/mt and then hit a high of 24875 yuan/mt. The contract finally closed at 24705 yuan/mt, down 60 yuan/mt or 0.24%. The open interest rose 4222 lots to 243,900 lost. The contract is expected to move between 24400-24900 yuan/mt today, and the 0# Shuangyan zinc is expected to be offered with premiums of 90-100 yuan/mt over SHFE 2202.

On the fundamentals, TCs for domestic concentrate mostly stood between 3800-4200yuan/mt in metal content, which was unable to move significantly in the short term. The quotes for imported copper were also lacklustre amid weakening demand and more arrivals from abroad. On the demand side, the downstream demand slumped as most of the market participants have been closed for CNY holiday. On the whole, the fundamentals front has been weakening seasonally, while the market was pessimistic about the inventory increase post the holiday and bullish about the post-holiday demand.

Tin: On the fundamentals, the warrants inventory rose slightly, while the pre-holiday spot transactions were thin amid scarce shipments. The overnight SHFE 2203 tin contract were congested, and the investors had high risk aversion demand. As such, the SHFE contract is expected to move rangebound amid stable supply and demand, as well as the withdrawn of capitals.

Nickel: The SHFE nickel fell to the daily limit in the intraday trading on Tuesday, and fluctuated around 165,000 yuan/mt overnight before closing at 164,710 yuan/mt. On the fundamentals, the production cut of nickel sulphate due to the losses has led to the tight spot of nickel sulphate. Most PCAM manufacturers maintained the normal production, and they will keep the stable output after the CNY holiday. Hence they still have relatively high demand for nickel sulphate, while the output of MHP and high-grade nickel matte increases limitedly. In this case, only the nickel briquette can be directly purchased and used in production, which supports the demand of nickel briquette. The SHFE and LME nickel briquette stocks fall simultaneously by a total of over 5,000 mt/month. The domestic nickel plate spot remains in short supply, and the premiums stood high. Although the NORNICKEL output returned to normal, China’s imports of NORNICKEL have not increased significantly. Therefore, the SHFE nickel contracts are expected to remain in the Backwardation structure on the falling stocks of pure nickel. The low inventory will support the prices.

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