SMM Evening Comments (Apr 22): Shanghai Nonferrous Metals Closed Mixed on Easing Pandemic in China

SHANGHAI, Apr 22 (SMM) – Shanghai nonferrous metals closed mixed as the COVID situation in China, especially east China, eased slightly evidenced by falling confirmed cases. The efficiency of transportation picked up fractionally, allowing more spots to circulate in the market. Companies in Shanghai are also preparing to resume work.

Shanghai copper rose 0.73%, aluminium added 0.3%, lead gained 0.8%, zinc shed 0.26%, tin slid 0.4%, and nickel jumped 1.33%.

Copper: The most-traded SHFE 2205 copper closed up 0.73% or 540 yuan/mt at 75,010 yuan/mt, with open interest down 3,876 lots to 122,400 lots.

On the macro front, it was reported that the EU will announce a total embargo on Russian oil at the end of this week. In addition, news of reduced oil production in and blocked exports from Libya also provided support for oil prices As such, international crude oil futures rebounded on Thursday, with both Brent and WTI gaining nearly 2%. The number of first-time jobless claims in the United States last week was 184,000, with an estimate of 180,000 and a previous reading of 185,000. Federal Reserve Chairman Jerome Powell said a 50 basis point rate hike will be discussed at the May meeting, and a slight acceleration in the pace of action by the FOMC would be appropriate.

In the spot market, the pressures on logistics and warehousing eased as the daily confirmed COVID cases in Shanghai dropped, improving market circulation. The premiums in Jiangsu dropped from 350 yuan/mt to 200-250 yuan/mt. Copper prices are likely to stabilise after the pandemic situation in Shanghai and surrounding areas mitigates, and the demand grows.

Aluminium: The most-traded SHFE 2206 aluminium closed up 0.3% or 65 yuan/mt to 21,920 yuan/mt, with open interest up 2,462 lots to 185,101 lots.

The contract moved rangebound today, and rose after falling today. The longs increased their positions slightly. The east market performed poorly today, and the spots were quoted with discounts. Spot discounts stood at 80-60 yuan/mt in morning trade in east China.

Lead: The most-traded SHFE 2206 lead closed up 0.8% or 125 yuan/mt at 15,725 yuan/mt, with open interest up 10,782 lots to 58,976 lots.

Longs increase their positions to test the momentum in light of falling TCs for overseas lead concentrate and rising secondary lead cost. As such, SHFE lead recorded for two straight days.

Zinc: The most-traded SHFE 2206 zinc closed down 0.26% or 75 yuan/mt at 28,445 yuan/mt, with open interest up 8,134 lots to 137,931 lots.

On the supply side, import window for ore remained closed, hence domestic supply for smelters was tight. On the consumption side, the terminal demand was suppressed by high zinc prices, and the transactions were thin. In the spot market, the total inventories of zinc ingot across seven markets stood at 283,600 mt, down 400 mt from Monday. Nonetheless, domestic inventory has not reached the pivot yet.

Tin: The most-traded SHFE 2205 tin closed down 0.4% or 1,360 yuan/mt at 336,300 yuan/mt, with open interest down 1,871 lots to 20,915 lots.

In the spot market, transactions were relatively stable, and imported tin had an advantage in prices with abundant supplies. SHFE warrants dropped 86 mt to 2,345 mt, and fell 585 mt in the past week.

Looking back to the past week, market transactions declined when tin prices were high. And more buyers chose to source from SHFE through delivery of spots. SHFE tin inventory fell 490 mt or 16% to 2,555 mt on a weekly basis.

Nickel: The most-traded SHFE 2205 nickel closed up 1.33% or 3,120 yuan/mt at 238,580 yuan/mt, with open interest down 1,440 lots to 45,477 lots.

On the supply side, pure nickel import losses and domestic production cuts of refined nickel manufacturers tightened the supply of pure nickel. Though SHFE nickel kept rising, the imports were still at a loss, which is unable to address supply tightness substantially. On the demand side, irrational LME nickel hike has pulled up the prices of raw materials for nickel sulphate, and some salt plants suspended the production for serous operation losses. As such, some salt plants had to sell their raw material stocks to contain the losses. Although some upstream material manufacturers have lowered the prices slightly, corresponding nickel salt was still at a loss. Nickel prices are unlikely to fall before pure nickel inventory rises palpably.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]