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SMM Morning Comments (Feb 18): SHFE Base Metals Mostly Edged Up Overnight on Lower Inventories

iconFeb 18, 2022 10:28
Shanghai base metals mostly closed with gains overnight on lower inventories. Their counterparts on LME closed mixed on Thursday.

SHANGHAI, Feb 18 (SMM) – Shanghai base metals mostly closed with gains overnight on lower inventories. Their counterparts on LME closed mixed on Thursday.

LME copper fell 0.33%, aluminium rose 0.26%, lead dropped 0.6%, and zinc gained 1.06%.

SHFE copper dropped 0.18%, aluminium increased 0.82%, lead gained 0.87%, zinc advanced 0.72%, and nickel rose 3,380 yuan/mt.

Copper: LME copper prices opened at $9,945/mt in the overnight trading, then fell after reaching a high level of $9,982/mt. At last, the prices closed at $9,922.5/mt, down 0.33%. Trading volumes stood at 11,000 lots and open interest stood at 255,000 lots.

SHFE 2203 copper contract opened at 71,250 yuan/mt in overnight trading, then fell after reaching a high level of 71,490 yuan/mt. At last, the prices closed at 71,230 yuan/mt, down 0.18%. The open interest reached 117,000 lots.

In terms of macroeconomics, the mild minutes of the US Fed meeting in January and the US economic data released yesterday did not boost the US dollar. The renewed tension in Russia and Ukraine and the news that Russia expelled US Ambassador increased the risk aversion in the market, and the copper prices continued to fluctuate at a high level.

In terms of spot, the future prices of copper fluctuated at a high level, suppressing downstream consumption. And there could not see a large amount of buying even though the holders lowered the premiums and discounts. During this period, the warrants flowed out and the premiums and discounts were suppressed. It is expected that the premiums will continue to decrease if the downstream is slack. LME copper will trade between $9,900-10,000/mt today; SHFE copper prices are expected to move between 71,000-71,600 yuan/mt. Spot premiums are likely to fluctuate between 80-160 yuan/mt.

Auminium: LME aluminium opened at $3,250/mt on Thursday and closed at $3,258/mt, an increase of $8.5/mt or 0.26%.

Overnight, the most-traded SHFE 2203 aluminium contract opened at 22,620 yuan/mt, and hit a low of 22,570 yuan/mt before closing at 22,770 yuan/mt, up 185 yuan/mt or 0.82%.

Domestic aluminium ingot social inventory stood at 1.039 million mt as of February 17, up 90,000 mt from last Thursday. The growth was mainly contributed by Wuxi, Gongyi and Nanhai.

Lead: Three-month LME lead opened at $2,344/mt on Thursday and congested around $2,330/mt. Then it dropped to $2,320.5/mt amid panic sentiments caused by the growing geopolitics tension. It tested $2,350/mt and closed at $2,335/mt, down 0.6%. The lead stocks across LME-listed warehouses dropped by 825 mt to 48,175 mt.

The most traded SHFE 2204 lead contract opened at 15,435 yuan/mt, and was boosted to the highest level at 15,595 yuan/mt by the impact of value added tax on the battery scrap. It closed 0.87% higher at 155,950 yuan/mt. The open interest increased by 4,521 lots to 43,479 lots. The warrants inventory on SHFE decreased by 1,893 mt to 81,924 mt.

Zinc: Overnight, Biden once again exaggerated the risk of war between Russia and Ukraine. Russia expelled the U.S. deputy ambassador, and both Russia and Ukraine condemned the other for starting war. Project of transferring data processing in east China to western areas has been conducted in a full range. Hawkish Fed senior official Bullard said that inflation is out of control, in need of urgent actions.

LME zinc price saw a small decline on Thursday and then rebounded after reaching a lower level. Later, its price rose and ended up with $3,618.5/mt, up 1.06% that is $38/mt. LME zinc inventory decreased by 875 mt to 148,475 mt. On the whole, the condition in Russia and Ukraine areas has been a market focus affected by macro geopolitics. In fact, the tension in this area may benefit European economy development on the macro level. Zinc prices will continue to fluctuate. LME zinc is expected to move between $3,610-3,660/mt.

SHFE zinc hit a high level in the overnight trading and rose to a high of 25,255 yuan/mt. Later, its price fell back and ended up 25,100 yuan/mt, up 180 yuan/mt or 0.72%. The prices are more affected by the macroeconomics than the fundamentals considering the contractions between supply and demand is limited. The SHFE zinc is expected to trade between 25,000-25,500 yuan/mt today, and spot premiums for domestic Shuangyan zinc will be seen at 50-60 yuan/mt.

Nickel: SHFE nickel prices opened at a high level in overnight trading. The prices once reached to the highest point of 178,000 yuan/mt, then fluctuated around 176,300 yuan/mt. At last, the prices closed at 176,390 yuan/mt, up 3,380 yuan/mt than previous trading day. The open interest decreased by 3,458 lots to 115,000 lots. The futures contract prices continued to rise. From the perspective of pure nickel fundamentals, on the supply side, the spot market of pure nickel increased partly, which slightly reduced the spot premiums. But it was still at a high level. SMM expects that pure nickel will continue to destock before the increase of high matte nickel. On the demand side, the output of downstream precursors and stainless steel enterprises gradually recovered, but at present, the spot of nickel sulphate and NPI were tight and the prices were high. Thus, the raw material price is expected to remain strong. The nickel prices also will be high in terms of basic supply and demand.

Tin: SHFE tin rallied slightly in overnight trading. Inventory under warrants continued to fall slightly. Sales in the spot market remained poor. SHFE will is expected to hover at highs amid weak supply and demand.

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