SMM Evening Comments (Feb 8): Shanghai Nonferrous Metals Closed Mixed amid Weakening US Dollar Index

SHANGHAI, Feb 8 (SMM) – Shanghai nonferrous metals closed mixed today. The US dollar weakened as the European Central Bank President Christine Lagarde contained market estimate of early interest rate hike.

Shanghai copper dipped 0.3%, aluminium advanced 2.32%, lead dropped 0.13%, zinc rose 1.31%, tin added 0.49%, and nickel added 0.85%.

Copper: The most-traded SHFE 2203 copper closed down 0.3% or 210 yuan/mt at 70590 yuan/mt, with open interest up 1274 lots to 128164 lots.

On the macro front, overnight US dollar and euro both weakened because European Central Bank President Christine Lagarde contained market estimate of early interest rate hike, which sent Europe government bond yield to multi-year high. And continuously falling US dollar index suppressed SHFE copper to some extent.

In addition, oil prices also dropped as there were faint signs showing that the nuclear negotiation between the US and Iran made progress, which may push the US to remove the oil export sanction on Iran.

On the fundamentals, LME copper dropped by another 2,200 mt to a low of 82,000 mt as of February 7.

Tonight the market shall watch the US trade account in December, as well as the moves of LME copper.

Aluminium: The most-traded SHFE 2203 aluminium closed up 2.32% or 515 yuan/mt to 22685 yuan/mt, with open interest up 1114 lots to 208232 lots.

SHFE aluminium prices rose amid a series of production cuts news. The aluminium and alumina production in Guangxi was reduced amid the breakout of COVID-19 pandemic in local area, while the aluminium smelters in Norsk Hydro will also cut their production. According to SMM research, an aluminium smelter in Tianyang city, Guangxi province had plans of cutting the output. There is expected to be more production cuts as the strict pandemic control measures will disrupt the logistics of aluminium and alumina. On the other hand, some aluminium smelters in Yunnan are expected to resume the production amid easing electricity supplies. The longs actively entered the market as the supply is unlikely to improve significantly in the short term.

Nonetheless, the market shall watch the slow resumption of production across the downstream as well as the impacts of environmental protection-related production restrictions.

Lead: The most-traded SHFE 2203 lead closed down 0.13% or 20 yuan/mt at 14840 yuan/mt, with open interest up 4440 lots to 59114 lots.

In the spot market, the participants were wait and see post the CNY holiday. Primary lead smelters were less interest in making shipments, resulting in thin transactions under small orders. Secondary lead smelters mostly held firm to their quotes. SHFE lead is expected to stop falling and stabilise shortly.

Zinc: The most-traded SHFE 2203 zinc closed up 1.31% or 330 yuan/mt at 25505 yuan/mt, with open interest up 281 lots to 108280 lots.

The zinc inventory kept rising in the traditional low, while the demand side remained sluggish for the moment. The market was optimistic about the demand outlook, but some of the demand in north China will be suppressed by the Beijing Winter Olympics. Investors shall watch the global energy supply as well as the development of domestic demand.

Tin: The most-traded SHFE 2203 tin closed up 0.49% or 1610 yuan/mt at 333300 yuan/mt, with open interest up 484 lots to 34068 lots.

The trading volume in the futures market has been low in the past two trading days, indicating that the investors were less interest in the current price level. The spot market recovered to some point, but market vitality was below the normal level. SHFE warrants inventory rose slightly by 28 mt to 2,678 mt.

Nickel: The most-traded SHFE 2203 nickel closed up 0.85% or 1450 yuan/mt to 172280 yuan/mt, with open interest up 430 lots to 132744 lots.

LME nickel inventory dropped by 1,122 mt, the lowest since December 2019. SHFE nickel inventory has also been falling by five straight weeks. SMM high-grade NPI prices rose, and the post-holiday NPI market is still recovering. The demand from the steel mills is also picking up, but the market transactions were still low.