SMM Evening Comments (Mar 18): Shanghai Nonferrous Metals Mostly Closed in the Positive Territory on Disturbed Supplies on Repeating COVID

SHANGHAI, Mar 18 (SMM) – Shanghai nonferrous metals mostly closed with gains today with nickel being the only exception, but nickel still had strong support. While the market supply has been tightened due to repeating COVID that disturbed the logistics to some extent.

Shanghai copper rose 0.77%, aluminium added 3.26%, lead jumped 0.46%, zinc advanced 0.63%, tin advanced 3.69%, and nickel fell 0.82%.

Copper: The most-traded SHFE 2204 copper closed up 0.77% or 560 yuan/mt at 72,830 yuan/mt, with open interest down 3,279 lots to 99,282 lots.

On the macro front, Bank of England raise the benchmark interest rate by 25 basis points to pre-pandemic level, and warned that if energy prices remain high, inflation could reach double-digit level by the end of the year. Knot, European Central Bank Governor, also suggested the possibility of raising the rate twice this year. President Xi Jinping will have a conference call with Mr. Joe Biden concerning Sino-US relationship as well as other issues with key concern on March 18 as scheduled.

Aluminium: The most-traded SHFE 2205 aluminium closed up 3.26% or 720 yuan/mt to 22,830 yuan/mt, with open interest up 34,350 lots to 216,466 lots.

Aluminium prices rose on low inventory which has been falling. The recently resurging pandemic also disturbed the logistics in Shandong.

On the fundamentals, downstream demand was suppressed by high prices. On the supply side, new capacities are being put into production intensively.

Lead: The most-traded SHFE 2205 lead closed up 0.46% or 70 yuan/mt at 15,265 yuan/mt, with open interest up 2,405 lots to 57,815 lots.

Downstream companies mostly purchased on demand amid low lead prices in the past week, while secondary lead prices were even once higher than that of primary lead due to tight supplies, in which case downstream rigid demand flowed back to primary lead. In addition, repeating pandemic disturbed the logistics of lead ingot, tightening the supplies to some extent.

Zinc: The most-traded SHFE 2205 zinc closed up 0.63% or 160 yuan/mt at 25,545 yuan/mt, with open interest up 3,944 lots to 84,271 lots.

On the fundamentals, the consumption side was sluggish due to falling terminal orders, and the situation deteriorated amid disturbed transportation and work from home. In the spot market, social inventory across seven regions dropped 9,500 mt from a week ago due to delayed shipments on spreading COVID, and relatively sound transactions in the first half of the week.

Tin: The most-traded SHFE 2205 tin closed up 3.69% or 12,090 yuan/mt at 339,900 yuan/mt, with open interest up 3,115 lots to 32,613 lots.

In the spot market, most upstream companies quoted mostly with premiums of 8,000-10,000 yuan/mt over SHFE 2205 in morning trade, and held firm to the prices. But the premiums dropped to some extend amid falling SHFE tin prices in intraday trading. And upstream participants’ willingness to hold prices firm also weakened marginally after the prices reached desired level.

SHFE warrants inventory dropped 168 mt to 2,098 mt, down 550 mt or 20.77% in the past week. According to SMM research, refined tin social inventory dropped 1,630 mt to 3,201 mt, down 33.74% on a weekly basis. Both inventories recorded low after the Chinese New Year, underpinning tin prices.

Nickel: The most-traded SHFE 2204 nickel closed down 0.82% or 1,810 yuan/mt at 219,620 yuan/mt, with open interest down 3,816 lots to 53,010 lots.

On the fundamentals, NORNICKEL nickel, Sumitomo, NIKKELVERK nickel as well as nickel briquette could not declare customs due to great import losses, tightening the supply of pure nickel. For NPI, the prices gained strong support amid rising nickel ore prices.

On the demand side, downstream demand was suppressed by high pure nickel prices, and is waiting for the prices to return to normal. According to SMM research, both nickel sulphate and precursor plants were curtailing their production.

In terms of stainless steel, spot transactions and logistics were both affected by the spreading pandemic.