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SMM Morning Comments (Nov 14): Base Metals Closed with Gains on Slumping US Dollar
Nov 14, 2022 10:00CST
Source:SMM
LME and SHFE base metals closed mostly with gains on slumping US dollar index last Friday, which dipped 4% last week, hitting a new low in nearly three months.

SHANGHAI, Nov 14 (SMM) – LME and SHFE base metals closed mostly with gains on slumping US dollar index last Friday, which dipped 4% last week, hitting a new low in nearly three months.

LME copper added 3.97%, aluminium rose 5.81%, lead gained 3.13%, and zinc jumped 5.19%.

SHFE copper added 0.12%, aluminium rose 1.28%, lead gained 1.03%, and zinc jumped 0.4%.

Copper: LME copper opened at $8,462.5/mt last Friday and grew after falling to below $8,416/mt. At last, it closed at $8,593/mt, up 3.97%. The trading volume was 19,000 lots, and open interest stood at 245,000 lots.

SHFE 2212 copper contract opened at 66,550 yuan/mt last Friday night and edged higher to 68,420 yuan/mt. At last, it closed at 67,680 yuan/mt, up 0.12%. Trading volume was 93,000 lots, and open interest stood at 191,000 lots.

On the macro front, the US dollar index continued to fall, dipping 4% last week, hitting a new low in nearly three months. According to the LME announcement, there will be no restrictions on Russia copper transactions and inventories, but the data will be released regularly. In terms of crude oil, with the plunge of the US dollar, both US oil and Brent Crude rose by more than 2% last Friday, which was bullish for copper prices.

On the fundamentals, as of November 11, SMM copper inventory in major Chinese Markets added 2,500 mt 104,700 mt from last Monday due to the increase in imported copper and the weak downstream consumption amid high copper prices. On the demand side, the supply of deliverable goods was tight, and the demand was also poor owing to the high futures prices and the renewed COVID-19. Copper prices are expected to remain rangebound with some upward potential as the US index continued to decline.

Aluminium: The most-traded SHFE 2212 aluminium contract opened at 18,920 yuan/mt at last Friday’s night session, with its low and high at 18,795 yuan/mt and 19,130 yuan/mt before closing at 18,965 yuan/mt, up 240 yuan/mt or 1.28%.

LME aluminium opened at $2,325/mt last Friday, with its high and low at $2,486.5/mt and $2,325/mt respectively before closing at $2,460.5/mt, an increase of $135/mt or 5.81%.

The production resumptions in Guangxi, and commissioning of new capacity in Guizhou and Inner Mongolia are still less than expected, hence the supply pressure has eased. The domestic downstream consumption remains weak. SHFE aluminium is expected to rise in the short term on positive macro front.

Lead: LME lead opened at $2,097.5/mt overnight and rose 3.13% or $65.5/mt to $2,159.5/mt, after hitting the lowest point at $2,088/mt and the highest point at $2,197/mt.

The most-traded SHFE 2212 lead contract opened at 15,720 yuan/mt and grew 160 yuan/mt or 1.03% to 15,735 yuan/mt, after briefly hitting the lowest point at 15,560 yuan/mt and the highest point at 15,765 yuan/mt.

Zinc: LME zinc closed at $3,029/mt on Friday, up $149.5/mt or 5.19%. The open interest added 3,427 lots to 202,000 lots. Overnight LME inventory fell 75 mt to 42,975 mt, down 0.17%.

The most traded SHFE 2212 zinc contract closed at 23,885 yuan/mt last Friday night, up 95 yuan/mt or 0.4%. The open interest added 412 lots to 96,765 lots. On the supply side, the TCs of zinc concentrate continued to rise, and the zinc ingot supply is likely to pick up. On the consumption side, the galvanising operating rates rose with rebounding steel prices, but some manufacturers were still bearish on future prices, hence they digested their finished products inventory actively. On the whole, as the macro sentiment picked up and the inventory remained low, zinc prices will carry momentum.

Tin: SHFE tin hovered narrowly around 180,000 yuan/mt at last Friday’s night session. The open interest declined with the outflows of capital. Last week, the domestic tin ingot social inventory accumulated again as delivery of the SHFE2211 tin contract is approaching. Transactions in the spot market were relatively weak. LME tin inventories continued to decrease last week. Overseas premiums rose significantly. Import window is about to close. In view of expected decline in tin imports and cautious sentiment, it is expected that the short-term tin prices will fluctuate widely.

Nickel: On the macro front, US CPI data for October released by the US Department of Labor on the evening of November 10 was 7.7%, lower than the forecast value of 8% and also lower than the previous value of 8.2%. The sharp drop in US CPI data boomed the global market, and nonferrous metal prices grew. Boosted by the strong fundamentals of pure nickel, the Indonesian tariffs and the undecided LME sanctions against Russia metals, nickel futures prices soared by 5.3% in the early trading of last Friday. On the fundamentals, spot pure nickel prices bounced back to 200,000 yuan/mt, while the upstream companies’ shipments were hindered by the higher futures prices. Spot imports still suffered losses based on the domestic and overseas futures prices. In terms of NPI, the plants’ will to quote high prices was weakened by the poor downstream demand. On the demand side, according to SMM research, due to the steel mills’ efforts to shore up the prices of #304 stainless steel in the Wuxi market, the spot quotations were slightly raised, which were still lower than the mills’ expectations. In terms of alloys, demand for pure nickel from civil alloy producers decreased again amid the off-season and the high nickel prices. Supply and demand of nickel remained weak, but the macro factors and news front cast a greater impact on the futures prices, thus the short-term nickel prices may fluctuate sharply. SHFE 2212 nickel is expected to move between 190,000-210,000 yuan/mt this week. At present, the LME nickel prices have not yet returned to the fundamentals, and the prices may fluctuate. When the prices return to normal, SMM will resume the price forecast of LME nickel.

[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.]


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