SMM Evening Comments (Mar 9): Shanghai Nonferrous Metals Closed Mixed amid Cooling Market Sentiment

SHANGHAI, Mar 9 (SMM) – Shanghai nonferrous metals closed mixed as the market sentiment cooled down after deviation from rationality in the past few days.  

Shanghai copper dropped 1.09%, aluminium slumped 5.46%, lead fell 1.97%, zinc lost 3.31%, tin added 0.35%, and nickel soared 17%.

Copper: The most-traded SHFE 2204 copper closed down 1.09% or 800 yuan/mt at 72,720 yuan/mt, with open interest down 13,033 lots to 126，949 lots.

Copper sector cooled down after the temporary end to the “mad” LME nickel. The downstream actively restocked on dips. The inventory in Guangdong started to fall, and the inventory pivot is about to come.

On the fundamentals, domestic copper cathode output in February stood at 835,700 mt, up 2.1% month-on-month (MoM) and 1.7% year-on-year (YoY). And it is expected that China's copper cathode output will be 865,900 mt in March, an increase of 3.6% month on month and 0.6% year on year.

Tonight, the market shall watch the US Fed’s interest rate meeting as well as the geopolitical tensions between Russia and Ukraine.

Aluminium: The most-traded SHFE 2204 aluminium closed down 5.46% or 1,260 yuan/mt to 21,830 yuan/mt, with open interest down 13,140 lots to 174,810 lots.

SHFE aluminium dropped significantly to release the risks after easing supply concerns, and the downstream restocked on dips. Nonetheless, some buyers still chose to stay wait and see, and there were literally no transactions in some places. And it is important to tell whether the falling demand on high prices is temporary or eternal. Hence the market shall watch the recovery progress of downstream consumption.

On the fundamentals, China produced 2.95 million mt of aluminium in February (28 days), down 2.35% on the year. The daily output averaged 105,000 mt, up 1,900 mt/day on the month. The output totalled 6.15 million mt from January to February, a decrease of 3% on the year.

Lead: The most-traded SHFE 2204 lead closed down 1.97% or 310 yuan/mt at 15,410 yuan/mt, with open interest down 3,929 lots to 43,762 lots.

LME lead inventory was as low as around 40,000 mt, while domestic inventory was at the 100,000 mt level, which will have limited impact on the prices.

China refined lead output stood at 237,900 mt in February, down 13.5% MoM and 5.01% YoY. The output in January and February rose slightly by 0.24% YoY. The output of secondary lead in February stood at 320,300 mt, down 8.77% MoM and up 52.15% YoY.

Zinc: The most-traded SHFE 2204 zinc closed down 3.31% or 895 yuan/mt at 26,130 yuan/mt, with open interest down 21,428 lots to 94,398 lots.

High overseas natural gas and electricity prices were still at historical high, and zinc prices were dominated by estimated energy supply disruption and LME trade abnormalities.

On the fundamentals, China's refined zinc output stood at 458,400 mt in February, down 59,200 mt or 11.43% MoM and 2.72% YoY. From January to February 2022, the combined refined zinc output stood at 976,000 mt, a decrease of 3.7% year on year. And the output is expected to be 528,500 mt in March, a significant increase of 70,200 mt from February and up 6.37% or 31,700 mt YoY.

Tin: The most-traded SHFE 2205 tin closed up 0.35% or 1,250 yuan/mt at 356,880 yuan/mt, with open interest down 5,910 lots to 28,545 lots.

On the fundamentals, domestic warrants inventory rose steadily, evidencing the guess that the sellers were transferring their goods to SHFE warehouses amid shrinking downstream demand. The fundamentals saw little changes in light of stable supply and demand. Tin prices dropped after market sentiment cooled down, and are expected to hover at a high level amid a dynamic supply and demand balance.

Nickel: The most-traded SHFE 2204 nickel closed up 17% or 38,890 yuan/mt to 267,700 yuan/mt, with open interest down 31,060 lots to 114,596 lots.

The contracted touched limit up at 267,700 yuan/mt after opening. LME has started to tackle the wild growth of LME nickel through a series of measures. Nonetheless, SHFE nickel still carried strong upside momentum as LME nickel skyrocketed in the past few days.

In the spot market, there was still no quotation or transaction. The downstream also postponed their purchase amid high prices. Spot premiums rose today according to SMM research. The premiums of Jinchuan nickel and NORNICKEL nickel were flat over each other in extreme cases, and stood at 20,000-30,000 yuan/mt over SHFE 2204. For nickel briquette, there was not quotation or transaction either. But the supply was even tighter, resulting in high premiums of 30,000-40,000 yuan/mt.