SMM Evening Comments (Feb 17): Shanghai Nonferrous Metals Closed Mixed amid Uncertainties Haunting Russia-Ukraine Issue

SHANGHAI, Feb 17 (SMM) – Shanghai nonferrous metals closed mixed as uncertainties surrounding Russia-Ukraine issue were still the biggest concern of the market, which might impact the commodity market as well as the European economic development prospect.

Shanghai copper dipped 0.28%, aluminium added 0.29%, lead rose 1.01%, zinc lost 0.76%, tin and nickel were flat.

Copper: The most-traded SHFE 2203 copper closed down 0.28% or 200 yuan/mt at 71160 yuan/mt, with open interest down 5890 lots to 118893 lots.

On the macro front, US retail sales rose rapidly in January by 3.8%, the greatest increase in nearly 10 months, amounting more leads for US rate hike. Nonetheless, according to Fed meeting minutes, any tightening monetary policy decision shall be subject to independent economic data analysis at each meeting on the back of expanding impacts of inflation as well as a robust labour market. As such, the US dollar index dropped in light of ambiguous remarks from the Fed. In addition, the market raised the expectation that the Bank of England would raise the interest rate in March, and the strengthening sterling also weighed on US dollar.

In the afternoon trading, the uncertainties surrounding the Russia-Ukraine conflicts boosted risk aversion sentiment, SHFE copper dropped significantly.

Tonight, the market shall watch the US initial jobless claims last week, and the evolvement of Russia-Ukraine conflicts.

Aluminium: The most-traded SHFE 2203 aluminium closed up 0.29% or 65 yuan/mt to 22585 yuan/mt, with open interest down 9495 lots to 160667 lots.

In spot market, the social aluminium inventory across seven major markets in China rose 90,000 mt on a weekly basis as of February 17, while downstream aluminium billet dropped 2,900 mt. The market shall watch the changes of inventory.

Lead: The most-traded SHFE 2203 lead closed up 1.01% or 155 yuan/mt at 15490 yuan/mt, with open interest down 3909 lots to 26206 lots.

In the spot market, spot discounts expanded slightly, and mainstream secondary refined lead smelters mostly quoted in discounts of 275-350 yuan/mt over SMM #1 lead. Currently, most manufacturers have basically resumed the production, but the downstream was sluggish in demand and stood wait-and-see.

Zinc: The most-traded SHFE 2203 zinc closed down 0.76% or 190 yuan/mt at 24905 yuan/mt, with open interest down 7273 lots to 79704 lots.

On the macro front, the energy prices in Europe has been volatile amid uncertainties haunting the Russia-Ukraine issue, while the smelters in Europe will be highly impacted. On the other hand, the inflation caused by high energy prices in Europe has lifted the production costs, depressing downstream production. The geopolitical risks served as a bearish factor for European economic development.

The fundamentals in China saw no major imbalances, and were neutral in the near term.  

Tin: The most-traded SHFE 2203 tin closed down 0.03% or 100 yuan/mt at 332890 yuan/mt, with open interest up 1189 lots to 30224 lots.

On the fundamentals, the market transactions have not returned to pre-CNY holiday level, and was basically wait and see. SHFE warrants dropped 44 mt to 3,081 mt. According to WBMS, global tin market was in a supply surplus of 2,100 mt throughout 2021, while global refined tin output stood at 29,100 mt in December 2021, with the consumption at 30,500 mt.

Nickel: The most-traded SHFE 2203 nickel closed up 0.08% or 130 yuan/mt to 173010 yuan/mt, with open interest down 2730 lots to 118555 lots.

Geopolitical tensions will give rise to market expectations of inflation and rising demand for industrial goods, a bullish factor for non-ferrous products. While nickel exports from Russia will also be affected by the potential sanctions from the US on Russia.