SHANGHAI, Nov 16 (SMM) – LME and SHFE base metals closed mostly with losses as the market was again worried about the demand side. US PPI annual rate for October announced yesterday dropped, which further enhanced market expectations for the US Fed to slow down the rate hikes in December. The US dollar fell 0.3% overnight.

LME copper fell 0.35%, aluminium lost 0.71%, lead gained 0.46%, and zinc shed 0.14%.

SHFE copper fell 0.55%, aluminium rose 0.37%, lead slid 0.41%, and zinc shed 0.14%.

Copper: LME copper opened at $8,409/mt on Tuesday and fluctuated widely after dropping to $8,331/mt. At last, the contract closed at $8,385.5/mt, down 0.35%. The trading volume was 18,000 lots, and open interest stood at 252,000 lots.

SHFE 2212 contract opened at 66,870 yuan/mt overnight and once hit the highest and lowest of 67,120 yuan/mt and 66,350 yuan/mt respectively. At last, it closed at 66,460 yuan/mt, down 0.55%. The trading volume was 60,000 lots, and open interest stood at 171,000 lots.

On the macro front, the US CPI inflation data for October released last week was lower than expected, and the PPI annual rate for October announced yesterday dropped, which further enhanced market expectations for the US Fed to slow down the rate hikes in December. The US dollar fell 0.3% overnight.

In terms of fundamentals, LME copper stocks increased for the second day in a row, adding 3,175 mt to 89,975 mt. In China, shipments from smelters increased near the delivery of SHFE 2211 copper. Domestic and overseas inventories both rebounded. In the spot market, cargo holders intended to raise their quotes amid the falling copper prices and the narrowing spread between the front-month and next-month contracts, but downstream companies were less willing to restock, thus the market trading was sluggish. Terminal companies only purchased on rigid demand as the copper prices still stood high despite the previous falls. Copper prices will remain rangebound as the market is worried about the demand.

Aluminium: Overnight, the most-traded SHFE 2212 aluminium contract opened at 18,850 yuan/mt, with its low and high at 18,850 yuan/mt and 19,085 yuan/mt before closing at 18,900 yuan/mt, up 70 yuan/mt or 0.37%.

LME aluminium opened at $2,438/mt on Tuesday, with its high and low at $2,478/mt and $2,422/mt respectively before closing at $2,435/mt, a drop of $17.5/mt or 0.71%.

New aluminium capacity in China was commissioned at a slower pace than expected, while overseas smelters maintained output cuts. Domestic downstream consumption remained weak.  Driven by expectations for slower US interest rate hikes, adjustments to domestic pandemic prevention and control policies, as well as stimulus policies in the real estate industry, SHFE aluminium will still have potential to rise.

Lead: LME lead opened at $2,175/mt and grew $10/mt or 0.46% to $2,186/mt last night, after hitting the lowest point at $2,173.5/mt and the highest point at $2,223/mt.

The most traded SHFE 2212 lead contract opened at 15,890 yuan/mt and fell 0.41% or 65 yuan/mt to 15,880 yuan/mt overnight, after hitting the highest point of 16,035 yuan/mt and the lowest point of 15,820 yuan/mt.

Zinc: LME zinc closed at $3,115.5/mt on Tuesday, down $4.5/mt or 0.14%. The open interest fell 2,056 lots to 202,000 lots. Overnight LME inventory rose 225 mt to 43,125 mt, up 0.52%.

The most traded SHFE 2212 zinc contract closed at 24,260 yuan/mt overnight, down 35 yuan/mt or 0.14%. The open interest lost 3,702 lots to 91,555 lots. On the supply side, SHFE/LME price ratio fell, and the import losses of refined zinc expanded. On the consumption side, the operating rates of zinc oxide producers have not yet improved, while the profitability has been hurt by high zinc slag and zinc ingot prices. On the whole, SHFE zinc was supported by low inventory, high profit margins and high TCs, but the consumption expectation is worth attention.

Overnight, an explosion in a Polish border village killed two people, and Russia denied it was caused by its stray bullets. US producer price gains slowed for the fourth consecutive month in October, possibly causing the Fed to slow the pace of aggressive rate hikes. The foreign investors reduced their holdings of 34 billion yuan in bonds in October, with a cumulative reduction of $595.9 billion in nine months.

Tin: Overnight, SHFE tin opened higher and closed at around 188,000 yuan/mt. Large amounts of capital flowed out of the market. Domestic tin inventory increased significantly due to delivery of SHFE 2211 tin contract. Spot discounts expanded. LME tin inventories increased slightly. Overseas premiums rose again, thus import profit may decline. Given stable supply-demand balance, poor spot market and capital outflows, SHFE tin may pull back.

Nickel: Spot import losses expanded to around 23,000 yuan/mt affected by the price difference between the domestic and overseas futures prices. A small number of NPI factories failed to ship their finished goods successfully. NPI plants held their prices firm and were less willing to ship amid the rising prices of nickel ore and auxiliary materials. On the demand side, according to SMM research, the overall social inventory remained low, and the market witnessed a slight shortage of some brands and specifications. Market supply of Indonesia stainless steel was ample, because the downstream pick-up was not smooth, resulting in high costs of cargo holders and low inventories. The rigid demand for pure nickel from military alloy companies still existed, but the demand from the civil alloy sector decreased. To sum up, the current supply and demand of pure nickel remain weak, and the policy of Indonesia's export tariff has not taken effect. Nickel prices will fluctuate wildly.

[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.]