SMM Evening Comments (Mar 15): Shanghai Nonferrous Metals Closed Mostly with Losses amid Broad Market Corrections

SHANGHAI, Mar 15 (SMM) – Shanghai nonferrous metals closed mostly with losses as the non-ferrous metal prices have been correcting, while the short-term demand has also been affected by resurging COVID pandemic in China.

Shanghai copper lost 0.9%, aluminium fell 1.44%, lead declined 1.11%, zinc retreated 0.57%, tin slid 3.91%, and nickel added 4.67%.

Copper: The most-traded SHFE 2204 copper closed down 0. 9% or 650 yuan/mt at 71,360 yuan/mt, with open interest down 1,542 lots to 110,054 lots.

In the spot market, with resurging pandemic in Jiangsu, Shenzhen, Shandong, etc., and the consumption side has been greatly affected. Some enterprises reported difficulties in receiving and making shipments. The supply of copper scrap was tight under the new VAT policy. And the production of copper cathode was also affected.

Aluminium: The most-traded SHFE 2204 aluminium closed down 1.44% or 315 yuan/mt to 21,590 yuan/mt, with open interest down 10,016 lots to 140,295 lots.

The contract closed the day with losses as investors sold their positions after 2:30 pm Beijing time. In the spot market, the domestic transportation has been influenced to some extent amid deteriorating pandemic across China. But the production activities were not greatly impacted. On the demand side, the shipments from the warehouses grew significantly last week, and the inventory recorded palpable losses, indicating recovering demand.

Lead: The most-traded SHFE 2204 lead closed down 1.11% or 170 yuan/mt at 15,085 yuan/mt, with open interest down 2,492 lots to 28,172 lots.

In the spot market, the smelters maintained their offers in small premiums or flat over the benchmark prices, and the overall transactions were thin. For secondary lea, the cost of raw material rose amid hindered transportation across the country due to pandemic, and secondary refined lead saw less shipments; the goods holders were also reluctant to sell. The market was wait-and-see on the whole.

Zinc: The most-traded SHFE 2204 zinc closed down 0.57% or 145 yuan/mt at 25,270 yuan/mt, with open interest down 6,882 lots to 63,859 lots.

On the fundamentals, domestic truck drivers were required to carry a negative nucleic acid testing result to work, hence the downstream processing sector placed increasingly less orders amid logistics problems, and relied on raw material stocks at the moment or purchased on rigid demand.

Though spot prices dropped recently, the social inventory has not started the down cycle yet, and the market confidence on the consumption end waned. And the bears took the upper hand.

On the macro front, the bearish sentiment was stronger ahead of the Fed’s rate hike. And zinc prices are unlikely to fall greatly in the short term owing to support from the cost side and lingering worries over supply tightness, though Russia-Ukraine tension has been easing.

Tin: The most-traded SHFE 2205 tin closed down 3.91% or 13,120 yuan/mt at 322,840 yuan/mt, with open interest up 595 lots to 30,258 lots.

On the fundamentals, spot supplies have been tight in the market, and warrants inventory dropped palpably, indicating sound shipments. The resurging pandemic still depressed the demand, but market participants were optimistic about future demand.

Nickel: The most-traded SHFE 2204 nickel closed up 4.67% or 9,660 yuan/mt at 216,490 yuan/mt, with open interest down 9,194 lots to 66,218 lots.

SHFE nickel prices rose as a whole as LME nickel is still closed. According to SMM research, pure nickel downstream sectors have been relatively prosper, and precursor and stainless still mills both resumed the production in March. Raw material supply was still tight at present, including nickel briquette and NORNICKEL nickel.

LME is about the release the limit on intraday price increase/decrease at 8:00 am Beijing Time, March 16, which will be no lower than 5% (different from previous suggestion of 10%). Currently, SHFE and LME nickel spread was still around 100,000 yuan/mt. In light of the to-be-disclosed limit up/down for LME nickel, the spread is unlikely to recover in the near future.