SMM Evening Comments (Mar 1): Shanghai Nonferrous Metals Most Closed with Gains amid Easing Market Sentiment

SHANGHAI, Mar 1 (SMM) – Shanghai nonferrous metals mostly closed with gains as the market sentiment eased on Russia-Ukraine talks though it did not reach desired results.  

Shanghai copper added 0.3%, aluminium rose 0.42%, lead jumped 0.32%, zinc advanced 1.12%, tin climbed 1.69%, and nickel lost 0.04%.

Copper: The most-traded SHFE 2204 copper closed up 0.3% or 210 yuan/mt at 71,050 yuan/mt, with open interest down 215 lots to 133,338 lots.

On the macro front, US dollar dropped after opening high yesterday, and recorded a gain of 0.18% as the Russia-Ukraine talks eased market sentiment. However, the talk did not achieve the desired result and Ukraine will assess the Russian position and conditions before determining how to proceed with the second round of negotiations. US dollar index kept falling slightly with easing market sentiment, supporting SHFE copper.

In terms of oil, as SWIFT has removed some Russian banks from its system and the Western world is taking more sanctions on Russia, Russia’s exports of oil may be greatly affected, which supported copper prices.

In China, the official manufacturing PMI in January released today was 0.1 point higher than estimate, and Cixin manufacturing PMI topped the estimate by 1.3 points, serving as a bullish factor for copper prices.

Tonight, the market shall watch the final reading of February Markit manufacturing PMI in eurozone and the US, as well as the February ISM manufacturing PMI in the US.

Aluminium: The most-traded SHFE 2204 aluminium closed up 0.42% or 95 yuan/mt to 22,730 yuan/mt, with open interest up 93 lots to 219,263 lots.

On the supply side, aluminium smelters in Yunnan, Guangxi and Guizhou gradually resumed the production, and the output has been rising. But the gross total was still lower than in the same period last year. In addition, the import window remained closed.

On the demand side, the downstream consumption has been recovering recently, and the social aluminium ingot inventory rose more slowly, while aluminium billet inventory has started to fall.

Lead: The most-traded SHFE 2204 lead closed up 0.32% or 50 yuan/mt at 15,585 yuan/mt, with open interest down 308 lots to 56,178 lots.

In the spot market, primary lead smelters basically maintained the discounts unchanged, while real transactions were thin. The market mainly traded under long-term orders. Some downstream companies are expected to restock through small orders in mid or late March as they have been bearish on lead prices.

Lead-acid battery scrap is quoted with taxes starting from today, and the procurement costs of secondary refined lead smelters rose, hence the demand was low in the initial stage. Secondary refined lead smelters were cautious in making shipments, and quoted with discounts of 225-300 yuan/mt over SMM #1 lead.

The spot market was still muted today. Lead brand of Tongguan in Shanghai was offered between 15,500-15,530 yuan/mt, or in discounts of 30-0 yuan/mt over SHFE 2203. Brands of Jijin, Jiangtong, Tongguan and Mulun in Zhejiang and Jiangsu were offered at 15,490-15,530 yuan/mt or in discounts of 40-0 yuan/mt over SHFE 2203. The downstream, however, was still wait-and-see.

Zinc: The most-traded SHFE 2204 zinc closed up 1.12% or 280 yuan/mt at 25,185 yuan/mt, with open interest down 5,920 lots to 121,830 lots.

Though energy prices in Europe surged recently, the high electricity prices were unsustainable as the heating season is about to end. Currently, high energy costs across the industry that result in production cuts and macro demand in China are the determining factors for zinc prices. The market shall watch the recovery of downstream participants as well as the changes of social inventory.

Tin: The most-traded SHFE 2205 tin closed up 1.69% or 5,670 yuan/mt at 341,460 yuan/mt, with open interest up 4,929 lots to 39,469 lots.

On the fundamentals, the spot market was still sluggish, and intraday spot prices were raised trailing the rising futures prices. The existing transactions were basically made on rigid downstream demand, but the high prices still largely suppressed the demand. SHFE warrants added 51 mt to 2,764 mt today.

Nickel: The most-traded SHFE 2204 nickel closed down 0.04% or 70 yuan/mt to 176,000 yuan/mt, with open interest down 7,696 lots to 135,529 lots.

Nickel prices dropped recently after surging as the Russia-Ukraine conflicts have paid off after the war began. In addition, the import window was closed as LME nickel skyrocketed on geopolitical tensions. Nonetheless, NORNICKEL nickel is expected to flow into China in light of US and Western sanctions on Russia. The market shall watch the production of NPI and nickel matte in Indonesia in March.

In addition, the falling stainless steel prices dragged on SHFE nickel, and the demand for nickel is unlikely to pick up recently amid environmental protection measures.