SMM Evening Comments (Mar 10): Shanghai Nonferrous Metals All Closed with Losses after LME and SHFE Nickel Trade Suspended

SHANGHAI, Mar 10 (SMM) – Shanghai nonferrous metals closed all with losses after LME and SHFE both suspended the trade of nickel contract. Non-ferrous metals all dropped on the announcement, with some even hit limit down.  

Shanghai copper dropped 1.11%, aluminium slid 0.93%, lead fell 2.25%, zinc lost 3.04%, tin slumped 9.2%.

Copper: The most-traded SHFE 2204 copper closed down 1.11% or 810 yuan/mt at 71,940 yuan/mt, with open interest down 10,597 lots to 116,352 lots.

On the macro front, the negotiation intension delivered by the Ukraine eased the on-going tensions, but it needs time to tell whether the negotiation could progress smoothly. Meanwhile, with subdued risk aversion sentiment, the market will put their focus on inflation. And it is almost a sure thing hat the US Fed would raise the rate by 25 bp in March, while the possibility of 50 bp is zero.

On the fundamentals, the spot premiums of copper cathode in Shanghai were 140-180 yuan/mt over SHFE 2203 or an average of 160 yuan/mt, up 10 yuan/mt from a day ago, indicating improving downstream consumption. And the import window showed signs of opening.

Tonight, the market shall watch the annualised rate of US CPI.

Aluminium: The most-traded SHFE 2204 aluminium closed down 0.93% or 205 yuan/mt to 21,735 yuan/mt, with open interest down 6,943 lots to 167,867 lots.

On the fundamentals, the domestic aluminium ingot social inventory totalled 1.14 million mt as of March 10, up 22,000 mt from a week ago. Wuxi (+16,000 mt) and Nanhai (+8,000 mt) were the major contributors to the overall increase.

The domestic aluminium billet inventory stood at 225,000 mt on March 10, a drop of 16,500 mt or 6.83% from a week ago. The overall decline was mainly contributed by Foshan (down 14,100 mt or 11.95%), Wuxi (down 2,000 mt or 3.28%) and Huzhou (down 2,000 mt or 6.9%).

The falling inventory showed that the downstream demand was picking up after the prices dropped for three days in a row, and the fundamentals were also in a healthy state.

Lead: The most-traded SHFE 2204 lead closed down 2.25% or 350 yuan/mt at 15,185 yuan/mt, with open interest down 2,049 lots to 41,713 lots.

The supply of primary and secondary lead was relatively stable. The operating rates of downstream lead-acid battery plants rose amid production resumption, but the terminal demand was sluggish, and the battery renewal demand of ordinary automobile and electric vehicle was modest. Domestic inventory kept rising on sluggish demand.

Zinc: The most-traded SHFE 2204 zinc closed down 3.04% or 800 yuan/mt at 25,555 yuan/mt, with open interest down 13,442 lots to 80,956 lots.

Non-ferrous metals also dropped after LME and SHFE both announced to suspend the trade of nickel contracts, with some even hit limit down. LME and SHFE zinc gave up previous gains.

On the macro front, though the European situation was still ambiguous, natural gas prices, a key factor determining the smelting costs in Europe, already dropped, mainly the Europe and the US differed severely toward sanctions on Russia, with some European countries delivering opposite voices. While Russia has been increasingly touch, and even declared it would leave European Commission.

In China, the traders actively made shipments when prices fell for two straight days, and the downstream also restocked on dips. Nonetheless, the downstream demand was recovering slowly amid Winter Olympics, resurging pandemic, etc., especially the real estate sector. It still takes time before the infrastructure sector could release its demand for zinc.

Tin: The most-traded SHFE 2205 tin closed down 9.2% or 34,200 yuan/mt at 337,500 yuan/mt, with open interest down 3,110 lots to 31,655 lots.

SHFE tin dropped to its limit down today, and then bottomed out to test 350,000 yuan/mt but failed. The contract kept falling in the afternoon trade. On the money side, the longs and shorts entered the futures market again, but mainly to test market moves as new positions were at a low level.

On the fundamentals, domestic warrants inventory dropped slightly, which might be the result for improving shipments in the spot market. The supply and demand were still stable recently.

Nickel: The trading of most-traded SHFE 2204 nickel was suspended today.