SMM Evening Comments (Mar 4): Shanghai Nonferrous Metals Most Closed Mixed amid Contained US Dollar Index

SHANGHAI, Mar 4 (SMM) – Shanghai nonferrous metals closed mixed as market data indicated that the US Fed would be more prudent in taking actions, containing the growth of US dollar index.   

Shanghai copper added 2.13%, aluminium rose 3.71%, lead lost 0.8%, zinc advanced 2.61%, tin climbed 0.8%, and nickel jumped 5.01%.

Copper: The most-traded SHFE 2204 copper closed up 0.41% or 300 yuan/mt at 72,890 yuan/mt, with open interest down 953 lots to 149,833 lots.

On the macro front, US Fed Chair Powell re-iterated that a rate hike is highly possible in March, and US dollar index rose. However, the military action taken by Russia against Ukraine has brought double risks toward inflation and economy. In addition, US ISM services PMI (purchasing managers’ index) dropped to a low in the past year, orders index was sluggish, and the initial jobless claims last week dropped more than expected, all indicating that the US Fed may be more “prudent” in taking any actions. As such, US dollar index rose only limitedly. On the fundamentals, LME copper inventory dropped to 71,000 mt yesterday, nearly a two-year low, underpinning copper prices.

Tonight, the market shall watch US non-farm payrolls and unemployment rate in February.

Aluminium: The most-traded SHFE 2204 aluminium closed up 0.26% or 60 yuan/mt to 23,570 yuan/mt, with open interest down 7,723 lots to 237,749 lots.

On the macro front, the European energy prices continued to rise, and the concerns over production cuts in Europe heightened, pulling up LME prices, but SHFE aluminium lacked upside momentum, and began to fall. The transactions of SHFE aluminium have again been dominated by the fundamentals.

Lead: The most-traded SHFE 2204 lead closed down 0.39% or 60 yuan/mt at 15,480 yuan/mt, with open interest down 2,806 lots to 55,993 lots.

Social inventories of lead ingots across Shanghai, Guangdong, Zhejiang, Jiangsu and Tianjin increased 7,700 mt from February 25 and 3,400 mt from February 28 to 106,800 mt as of March 4.

Zinc: The most-traded SHFE 2204 zinc closed down 0.73% or 190 yuan/mt at 25,870 yuan/mt, with open interest down 1,395 lots to 127,091 lots.

Market sentiment eased to some point as the second round of Russia-Ukraine talk was more productive than the first one, especially when more and more countries declared neutrality toward this geopolitical tension.

On the fundamentals, as of March 4, the zinc ingot inventory across the seven major regions in China totalled 284,200 mt, up 700 mt from Monday February 28 and up 7,800 mt from last Friday February 25, according to SMM data.

Tin: The most-traded SHFE 2205 tin closed up 0.18% or 630 yuan/mt at 342,330 yuan/mt, with open interest up 166 lots to 37,938 lots.

On the fundamentals, the spot market was still cool, and high tin prices have clearly depressed downstream demand. According to upstream smelters and traders, the shipments of spots were also less satisfactory this week, which might be a result of high tin prices. In addition, imported refined tin prices have been lower compared with domestic products, further restricting the transactions of some domestic products. SHFE warrants inventory dropped 15 mt to 2,736 mt today, and fell 19 mt in the past week. Social inventory added 191 mt to 4,121 mt, according to SMM research, which will pressure tin prices to some extent.

Nickel: The most-traded SHFE 2204 nickel closed up 3.51% or 6,340 yuan/mt to 187,190 yuan/mt, with open interest up 1,320 lots to 153,359 lots.

SHFE nickel underperformed LME nickel again. On the fundamentals, the production of MHP and nickel matte in Indonesia is still the focus of market. The supply of pure nickel was still tight. LME nickel performed strongly recently as NORNICKEL nickel was sanctioned.