SMM Evening Comments (Mar 25): Shanghai Nonferrous Metals Closed Mixed on Haunting Impact from COVID

SHANGHAI, Mar 25 (SMM) – Shanghai nonferrous metals closed mixed as the market has not yet improved as the trade, demand and logistics were still affected by the spreading COVID.  

Shanghai copper dropped 0.11%, aluminium fell 0.82%, lead gained 0.62%, zinc advanced 0.5%, tin lost 1.85%, and nickel jumped 12.72%.

Copper: The most-traded SHFE 2205 copper closed down 0.11% or 80 yuan/mt at 73,560 yuan/mt, with open interest up 54 lots to 153,934 lots.

On the macro front, crude oil prices retreated overnight after the EU failed to agree on a plan to boycott Russian crude oil and reports said that crude oil exports from the CPC Caspian Sea oil pipeline terminal may partially resume on Thursday. Also released yesterday were strong US initial jobless claims for last week and the preliminary manufacturing PMI for March, which strengthened the US dollar again. The strong US economic data and high inflation reinforced market expectations for the Federal Reserve to increase interest rates.

In terms of spot, March is coming to an end, but the impact of the pandemic on the Jiangsu, Zhejiang and Shanghai has not abated. Almost every sector, including trade, downstream production and consumption, and logistics and transport are greatly hindered, the market is difficult to see great purchase demand. As such, the traders actively sold off.

Looking forward, copper prices will remain high amid low inventory though the energy issue eased for the time being, the bullishness cooled, and commodity prices pressured. On the other hand, due to lucrative export profits, smelters exported one after another, and the sources mainly flowed into bonded warehouses, with a small amount of goods sent overseas. LME copper stocks continued to accumulate slightly, LME cash to three month structure also turned from backwardation to contango. At present, the delivery is mainly affected by transport problems, but with the arrival of goods, SHFE/LME price ratio may improve.

Aluminium: The most-traded SHFE 2205 aluminium closed down 0.82% or 190 yuan/mt to 23,090 yuan/mt, with open interest up 352 lots to 242,986 lots.

On the supply side, domestic aluminium capacity accelerated its recovery of production, and the pandemic further suppressed the logistics efficiency. On the demand side, some downstream processing companies were impacted by the pandemic, which later constrained the demand.

Lead: The most-traded SHFE 2205 lead closed up 0.62% or 95 yuan/mt at 15,445 yuan/mt, with open interest up 6 lots to 56,735 lots.

In the spot market, market transactions were thin amid pandemic and low transport efficiency. Primary lead smelters lowered their premiums slightly. For secondary lead, the raw materials inventory dropped further for lack of sources, containing the production of secondary refined lead, and some smelters may have to curtail or suspend the production. Regional demand picked up as cross-region transportation was restricted.

Zinc: The most-traded SHFE 2205 zinc closed up 0.5% or 130 yuan/mt at 26,380 yuan/mt, with open interest up 1,557 lots to 101,217 lots.

On the fundamentals, TCs of imported zinc concentrate rose quickly, and overseas mine supply imbalance eased. In China, output in March is expected to rise MoM, but domestic TCs remained low, indicating limited increase. Downstream demand stood muted amid resurging pandemic.

Tin: The most-traded SHFE 2205 tin closed down 1.85% or 6,520 yuan/mt at 345,980 yuan/mt, with open interest down 3,198 lots to 33,776 lots.

In the sport market, spot prices dropped 6,750 yuan/mt amid falling futures prices, and downstream demand picked up from yesterday when spot prices surged. Nonetheless, downstream buyers were cautious as a whole. With the spreading COVID, shipments of refined tin to Shanghai dropped, and some were re-directed to Guangdong.

SHFE tin warrants rose 30 mt to 1,945 mt, and dropped 153 mt in the past week. SMM refined tin social inventory dropped 551 mt in the past week to 2,650 mt.

Nickel: The most-traded SHFE 2204 nickel closed up 12.72% or 29,820 yuan/mt at 264,200 yuan/mt, with open interest down 4,000 lots to 39,636 lots.

The money game around LME nickel has not yet ended, and abnormal changes are expected in the near term. The stainless steel and new energy sectors are weak in both supply and demand. The prices of precursors also rose on surging raw material prices, and the demand was sluggish. NPI prices are firm amid rising nickel ore prices driven by LME nickel.