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SMM Morning Comments (Nov 17): Base Metals Closed with Losses on Falling Crude Prices
Nov 17, 2022 10:00CST
LME and SHFE base metals closed with losses as the overnight crude oil prices recorded losses overnight, with WTI falling 1.84% and Brent dropping 1.3%.

SHANGHAI, Nov 17 (SMM) – LME and SHFE base metals closed with losses as the overnight crude oil prices recorded losses overnight, with WTI falling 1.84% and Brent dropping 1.3%.

LME copper fell 1.47%, aluminium lost 2.02%, lead slid 1.64%, and zinc shed 1.91%.

SHFE copper fell 0.49%, aluminium lost 0.48%, lead slid 1.45%, and zinc shed 0.7%.

Copper: LME copper opened at $8,375/mt on Wednesday and moved all the way down to a low of $8,253/mt. At last, the contract closed at $8,262/mt, down 1.47%. The trading volume was 14,000 lots, and open interest stood at 264,000 lots.

SHFE 2212 contract opened at 66,170 yuan/mt overnight and once hit the lowest of 66,230 yuan/mt. At last, it closed at 66,360 yuan/mt, down 0.49%. The trading volume was 113,000 lots, and open interest stood at 177,000 lots.

On the macro front, the disclosed US retail sales last night were better than expected, but November NAHM housing market index and October industry output monthly rate both fell short. Overnight US dollar index fell 0.24%. In terms of oil prices, US WTI crude fell 1.84% and Brent fell 1.3%, weighing on copper prices.

On the fundamentals, LME copper inventory lost 300 mt to 89,675 mt. In China, as the import window was closed, the imports were limited. The consumption side recovered slightly with the pandemic situation easing in north China. But it is worth attention as whether the copper price could fall constantly. In the spot market, the sources available in the spot market were tight, and market participants were mostly the traders; while downstream players awaited the outflow of warrants. SHFE copper price is likely to lose momentum amid demand worries.

Aluminium: Overnight, the most-traded SHFE 2212 aluminium contract opened at 18,870 yuan/mt, with its low and high at 18,715 yuan/mt and 18,900 yuan/mt before closing at 18,820 yuan/mt, down 90 yuan/mt or 0.48%.

LME aluminium opened at $2,440/mt on Wednesday, with its high and low at $2,459/mt and $2,385/mt respectively before closing at $2,403/mt, a drop of $49.5/mt or 2.02%.

On the backdrop of easing macro sentiment, the demand side was boosted to some extent with relaxing domestic pandemic control as well as supporting real estate policies. SHFE aluminium is likely to carry momentum in the near term. In addition, some major consuming areas were in short supply with cargoes still in transport. Concentrated arrivals of aluminium ingot and billet can be expected with the restoration of transportation in north-west China.

Lead: LME lead opened at $2,203/mt on Wednesday, and the fell after meeting resistance at the daily moving average in Asian trading hours. The contract rebounded slightly to $2,215/mt in European trading houses, but fell again to $2,140.5/mt with the rebounding of US dollar index. The contract closed at $2,160/mt, down $36/mt or 1.64%.

The most-traded SHFE 2212 contract opened at 15,890 yuan/mt overnight, and stabilized after falling to 15,700 yuan/mt. The contract then fell to a low of 15,670 yuan/mt briefly before closing at 15,685 yuan/mt, down 230 yuan/mt or 1.45%.

Zinc: LME zinc closed at $3,056/mt on Wednesday, down $59.5/mt or 1.91%. The open interest rose 11,588 lots to 214,000 lots. Overnight LME inventory lost 325 mt to 42,800 mt, down 0.75%.

The most traded SHFE 2212 zinc contract closed at 24,190 yuan/mt overnight, down 170 yuan/mt or 0.7%. The open interest lost 2,800 lots to 86,492 lots. On the supply side, some imported zinc ingot arrived after the import window opened last month. On the consumption side, some manufacturers in Hebei and Shandong are required to half their production due to heavy air pollution alert during November 17-20. In the spot market, the spot premiums fell again with improving market shipments, but the transactions were lacklustre. On the whole, the market sentiment cooled down from optimism earlier, and the contract lacks strong upside momentum.

Overnight, US retail sales rose by 1.3% YoY in October, exceeding expectations. Goldman Sachs raised the Fed's terminal rate estimate to a 5%-5.25% range. Polish President: missiles falling into Polish territory were likely an "accident" of the Ukrainian air defense system. Trump officially announced his candidacy for the U.S. presidency again. US Fed governor said he was open to the possibility of a 50 basis point rate hike next month. UK CPI rose 11.1% year-on-year in October. Yi Gang met with US Treasury Secretary Yellen. China's central bank released its third quarter monetary policy implementation report.

Tin: On the fundamentals, SHFE warrants inventory kept rising with the delivery of SHFE 2211. LME tin inventory remained unchanged, and the overseas premiums fell slightly. SHFE/LME price ratio fell quickly, weighing on the import profits. In terms of the futures market, the most-traded SHFE tin contract fell after testing the high, and closed the session at around 184,000 yuan/mt. The capitals left the market in a centralised way, especially the longs. To sum up, the overall import market remained stable despite expectations of contracting imports. The upside momentum weakened with the left of capitals, and the SHFE contract is likely to be pressured in the near term.

Nickel: On the supply side, SHFE/LME price ratio fell to around 7.04, and pure nickel imports suffered great losses. In China, the shipments were pure nickel were not smooth amid high nickel prices. For NPI, the in-plant finished product inventory held by NPI plants rose with sluggish downstream demand in the stainless steel sector, and the prices fell slightly. On the demand side, some steel mills will reduce the production slightly in November, according to SMM research. In addition, as the Indonesian export tariffs on NPI are not finalized yet, the cost of stainless steel is likely to remain firm. However, the downstream demand for stainless steel could hardly revive. In the alloy sector, the orders for civil use fell short. To sum up, weak supply and demand are unable to support high nickel price, while it is subject to great fluctuations with uncertainties centering the Indonesian export tariffs.

[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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