SMM Evening Comments (Feb 21): Shanghai Nonferrous Metals Closed Mixed amid Strong Risk Aversion Sentiment

SHANGHAI, Feb 21 (SMM) – Shanghai nonferrous metals closed mixed as the risk aversion sentiment was strong in the market on the back of uncertainties haunting the Russia-Ukraine issue.

Shanghai copper was flat, aluminium lost 0.64%, lead dropped 1.71%, zinc declined 1.17%, tin climbed 0.37%, and nickel hiked 1.56%.

Copper: The most-traded SHFE 2203 copper closed down 0.07% or 50 yuan/mt at 71460 yuan/mt, with open interest down 13214 lots to 104457 lots.

On the macro front, the Russia-Ukraine issue intensified, which sent US dollar index to highs. According to media, on Thursday evening, US Secretary of State Blinken has agreed to meet with Russian Foreign Minister Lavrov this week, easing the market sentiment. Meanwhile, crude oil prices dropped from the 7-year peak, but were still high as a whole.

In China, the central bank did not cut the interest rate further, and the LPR disclosed today was in line with market estimate, hence the market sentiment was stable.

On the fundamentals, LME copper inventory added 300 mt to 74,000 mt, which was still low, hence underpinning copper prices.

Tonight, the market shall watch the unadjusted reading of US Markit manufacturing PMI, the geopolitical issue as well as the US Fed’s speeches.

Aluminium: The most-traded SHFE 2203 aluminium closed down 0.64% or 145 yuan/mt to 22595 yuan/mt, with open interest down 15759 lots to 138618 lots.

In terms of inventory, SMM social aluminium ingot inventory added 42,000 mt from last Thursday to 1.08 million mt, with Wuxing (+19,000 mt), Gongyi (+15,000 mt) and Nanhai (+8,000 mt) contributing most of the increases. The inventories in Shanghai, Tianjin and Linyi were flat; while that in Chongqing dropped 1,000 mt. The downstream demand recovered seasonally. Nonetheless, the high aluminium prices suppressed addition demand next to rigid demand, and the recovery of demand in north China still needs time. The inventory decline may happen later than expected.

Lead: The most-traded SHFE 2203 lead closed down 0.71% or 110 yuan/mt at 15385 yuan/mt, with open interest down 4457 lots to 18606 lots.

The social inventory of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin rose 4,600 mt from Friday February 18 and 4,800 mt from Monday February 14 to 100,800 mt as of February 21.

On the fundamentals, primary lead smelters mostly quoted with discounts of 100-200 yuan/mt over SMM #1 lead, while secondary lead smelters shipped on market demand. Secondary refined lead smelters offered with discounts of 200-350 yuan/mt over SMM #1 lead. The downstream has basically resumed the production, but the lead-acid battery sector presented sluggish demand, and they were not interested in producing either.

Zinc: The most-traded SHFE 2203 zinc closed down 1.17% or 295 yuan/mt at 24845 yuan/mt, with open interest down 10459 lots to 60926 lots.

The downstream in-plant inventory was in the multi-year low, meaning that the social inventory will drop immediately after the recovery of terminal consumption/orders, which will shore up the downstream operating rates.

Total zinc inventories across seven Chinese markets stood at 268,900 mt as of February 21, up 5,800 mt from Friday February 18, and 14,600 mt from Monday February 14.

Tin: The most-traded SHFE 2203 tin closed up 0.37% or 1250 yuan/mt at 338500 yuan/mt, with open interest down 3176 lots to 27309 lots.

On the fundamentals, the downstream demand recovered slightly compared with last Friday after tin prices dropped slightly, and the upstream was also active in making offers. SHFE tin warrants dropped 32 mt to 2,763 mt today. SMM believes that tin prices will hover at a high level in the near term.

Nickel: The most-traded SHFE 2203 nickel closed up 1.56% or 2760 yuan/mt to 179530 yuan/mt, with open interest down 8440 lots to 114001 lots.

LME nickel inventory dropped 54 mt to 83,274 mt compared with last Friday, and nickel supply was still comparatively tight. Global refined tin supply dropped further, offering support to nickel prices.

The premiums of Jinchuan nickel and NORNICKEL nickel dropped since last week, and stood at 2,200 yuan/mt and 1,500 yuan/mt respectively as of today. Most traders were wait-and-see amid the high absolute prices of refined nickel.