SMM Evening Comments (Mar 11): Shanghai Nonferrous Metals Closed Mixed as Metals Are Finding the Way Back to Normal

SHANGHAI, Mar 11 (SMM) – Shanghai nonferrous metals closed mixed as the non-ferrous metals are finding their way back to normal after market dislocation.   

Shanghai copper added 0.42%, aluminium rose 2.56%, lead was flat, zinc gained 0.49%, tin added 0.6%, and nickel fell 9.64%.

Copper: The most-traded SHFE 2204 copper closed up 0.42% or 300 yuan/mt at 72,150 yuan/mt, with open interest down 4,800 lots to 111,552 lots.

On the macro front, the US non-farm payrolls in February delivered greatly better than expected results, and February CPI also recorded a new high in 40 years. The inflation prompted market participants to raise their bet on Fed’s rate hike. In addition, the negotiation between Russian and Ukrainian foreign ministers did not achieved any progress, and uncertainties from geopolitical tensions still exist. Oil prices fluctuated more violently amid contracted signals from UAE officers and voices centring Russia-Ukraine talks, and international crude prices dropped for two consecutive sessions.

Aluminium: The most-traded SHFE 2204 aluminium closed up 2.56% or 550 yuan/mt to 22,035 yuan/mt, with open interest down 6,988 lots to 160,879 lots.

Non-ferrous metals rallied slightly, but the investors were hesitant to enter the market. And the market shall watch how long and how great the price corrections would be.

Lead: The most-traded SHFE 2204 lead closed down 0.03% or 5 yuan/mt at 15,275 yuan/mt, with open interest down 5,230 lots to 36,483 lots.

In the spot market, the spot prices weakened further, and smelters rarely made quotations. The lead-acid battery companies, on the other hand, purchased on dips, and some purchasing demand was postponed until next week. There were also number of market participants staying wait-and-see for fear of further price declines. SHFE lead prices dropped in the past week to risk the support from the cost side, and goods holders held firm to the prices of secondary refined lead.

Zinc: The most-traded SHFE 2204 zinc closed up 0.49% or 125 yuan/mt at 25,560 yuan/mt, with open interest down 6,222 lots to 74,734 lots.

Though European electricity prices halved, high energy prices still suppressed the supply side. And natural gas prices were high amid stagnant Russia-Ukraine conflict. Overseas prices were still supported by the cost side.

Today, it is mentioned at the State Council's press conference that, China's economic growth rate target for 2022 is set 5.5% based on the actual national conditions, and stability at high level equals to progress. This shows that the country has strong positive expectations for the current market situation. Though the consumption side was sluggish as a whole, zinc prices may gain upside momentum if future demand picks up.

Tin: The most-traded SHFE 2205 tin closed up 0.6% or 2,060 yuan/mt at 343,500 yuan/mt, with open interest down 779 lots to 30,876 lots.

On the fundamentals, domestic warrants inventory kept falling, which is attributable to improving shipments. Imported goods were circulating in the spot market.

Nickel: The most-traded SHFE 2208 nickel closed down 9.64% or 20,870 yuan/mt at 195,610 yuan/mt, with open interest up 6,504 lots to 8,502 lots.

Overnight SHFE 2204 contract dropped to its limit down after opening and stood at 222,190 yuan/mt, a drop of 45,510 yuan/mt. The open interest and transaction volume dropped 3394 lots and 39026 lot respectively. Currently, the longs were eager to close their positions, and long capitals left the market intensively. LME nickel was still closed now, and limit up and down was set. Tsingshan announced that it had secured enough spots for delivery. All of these indicated that nickel prices would return to normal.