SMM Evening Comments (Mar 8): Shanghai Nonferrous Metals Closed Mixed with Nickel Going “Mad”

SHANGHAI, Mar 8 (SMM) – Shanghai nonferrous metals closed mixed. Most metals went up amid skyrocketing nickel prices on supply concerns in light of on-going Russia-Ukraine conflicts and subsequent sanctions, and intraday LME nickel even recorded a gain of nearly 100%.

Shanghai copper dropped 0.47%, aluminium fell 3.04%, lead gained 1.95%, zinc advanced 7.06%, tin surged 12%, and nickel soared 15%.

Copper: The most-traded SHFE 2204 copper closed down 0.47% or 350 yuan/mt at 74,000 yuan/mt, with open interest down 16,347 lots to 139,982 lots.

In the spot market, the market transactions were active, and downstream players mostly recognised the price level of 72,000 yuan/mt. In addition, some market participants feared that copper prices may rise as well following surging nickel prices, and restocked actively, sending up spot premiums to 80 yuan/mt. The imports losses also narrowed to around 890 yuan/mt.

Aluminium: The most-traded SHFE 2204 aluminium closed down 3.04% or 725 yuan/mt to 23,105 yuan/mt, with open interest down 43,861 lots to 187,950 lots.

The downstream consumption grew more slowly today amid ambiguous overseas situation, high energy prices and high spot aluminium prices in China. Aluminium ingot inventory kept rising. The resumption of production in Yunnan was higher than expected. As such, the longs closed their positions and left the market. LME aluminium dropped further after the Asian session closed. Overnight SHFE aluminium is expected to fall further.

Lead: The most-traded SHFE 2204 lead closed up 1.95% or 305 yuan/mt at 15,970 yuan/mt, with open interest down 1,973 lots to 47,691 lots.

In the spot market, the smelters held firm to the prices as spot prices fell today. The downstream consumption has not picked up yet, and purchased mainly under long-term orders when the prices fell quickly, and had strong risk aversion demand. In the European trade hours, LME lead almost gave up all the gains. Tonight the market shall watch of overnight SHFE lead could maintain the intraday gains.

Zinc: The most-traded SHFE 2204 zinc closed up 7.06% or 1,860 yuan/mt at 28,195 yuan/mt, with open interest down 11,449 lots to 115,826 lots.

On the macro front, nickel futures saw an epic-like wresting between long and short squeeze. The capital front encountered some financial issues after nickel prices skyrocketed, which might be the reason for surging zinc prices. In addition, natural gas prices rose on European energy crisis, and the market was extremely worried about the supply from smelters in Europe. Though the export window is wide open amid extremely low SHFE/LME price ratio, the overly low inventory across LME warehouses in Europe has made the longs fearless, hence zinc futures was able to break the resistance and hit limit up again though it was already at a high level in a heated market.

Tin: The most-traded SHFE 2205 tin closed up 12% or 41,930 yuan/mt at 391,400 yuan/mt, with open interest down 5,820 lots to 34,455 lots.

On the fundamentals, domestic warrants rose slightly, and the shipments in the spot market were moderate when prices dropped in morning trade. However, rising tin prices in the afternoon trade suppressed the transactions again, and some downstream players had stopped taking orders. The supply and demand were still weak, and the repeating COVID in Myanmar kept disturbing the supply side.

Nickel: The most-traded SHFE 2204 nickel closed up 15% or 29,840 yuan/mt to 228,810 yuan/mt, with open interest down 12,286 lots to 145,656 lots.

SHFE 2204 nickel hit limit up after opening, while LME nickel extended yesterday’s upside momentum, and once recorded a gain of 100% to around $10,000/mt. The market was deeply concerned about the supply of pure nickel amid the sanctions on Russia as well as falling nickel inventory.

In the spot market, there were currently no quotations and transactions, and the downstream also stood wait-and-see amid high prices. According to SMM research, the premiums were raised today. Jinchuan nickel was flat over NORNICKEL nickel in extreme cases, and in premiums of 10,000-15,000 yuan/mt. Nickel briquette also saw no quotations and transactions, but the supply was even tighter, leading to premiums of 15,000-20,000 yuan/mt.