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SMM Morning Comments (Nov 22): Base Metals Closed with Losses on Continuously Rising US Dollar
Nov 22, 2022 10:00CST
Source:SMM
LME and SHFE base metals closed with losses overnight. On the macro front, due to the COVID-19 and concerns about the global economy, the US dollar index rebounded overnight and closed up 0.79%, which was bearish for metal prices.

SHANGHAI, Nov 22 (SMM) – LME and SHFE base metals closed with losses overnight. On the macro front, due to the COVID-19 and concerns about the global economy, the US dollar index rebounded overnight and closed up 0.79%, which was bearish for metal prices.

LME copper fell 1.75%, aluminium slid 1.45%, lead lost 2.29%, and zinc shed 3.52%.

SHFE copper fell 1.31%, aluminium slid 0.68%, lead lost 0.13%, and zinc shed 2.27%.

Copper: LME copper opened at $7,944.5/mt on Monday and dropped to a low of $7,858/mt after climbing to $7,970.5/mt. At last, the contract closed at $7,895/mt, down 1.75%. Trading volume was 16,000 lots, and open interest stood at 245,000 lots.

SHFE 2212 copper opened at 64,640 yuan/mt overnight and trended lower after hitting a high of 64,800 yuan/mt. At last, the contract fell to 64,260 yuan/mt, down 1.31%. Trading volume was 34,000 lots, and open interest stood at 128,000 lots.

On the macro front, due to the COVID-19 and concerns about the global economy, the US dollar index rebounded overnight and closed up 0.79%, which was bearish for copper prices.

In terms of fundamentals, affected by the outflow of warrants and the slight pick-up in downstream demand after the copper prices fell, SMM copper inventory across major Chinese markets stood at 121,700 mt as of Monday November 21, down 6,300 mt from last Friday, but up 45,200 mt from the same period last year when the data was 76,500 mt. LME inventory increased by another 1,500 mt yesterday, and the proportion of registered warrants rose while that of cancelled warrants continued to fall. In the terms of consumption, the decline in copper prices boosted downstream purchases on rigid demand, but the terminal consumption did not improve. Short-term copper prices will fluctuate with some downward potential as the bullish macro factors have paid off.

Aluminium: The most-traded SHFE 2212 aluminium contract opened at 18,900 yuan/mt overnight and rose to 18,990 yuan/mt before closing at 18,870 yuan/mt, down 130 yuan/mt or 0.68%.

LME aluminium opened at $2,406/mt on Monday and closed at $2,380/mt, a drop of $35/mt or 1.45%.

The production resumption process in Sichuan and Guangxi progressed steadily, while curtailment was carried out in other places, hence the overall operating aluminium capacity now stands at 40.45 million mt. On the demand side, SMM aluminium ingot social inventory fell again, but the consumption was till on rigid demand. In the short term, aluminium prices are likely to move rangebound amid rising supply and modest consumption.

Lead: Overnight, LME lead opened at $2,156/mt, and fell slightly during the Asian trading hours. During the European trading hours, LME lead hit the lowest point at $2,097.5/mt, and finally closed at $2,109/mt, down 2.29%. The open interest decreased 74 lots to 101,000 lots compared with the previous trading day.

The most-trade SHFE 2301 lead contract opened at 15,655 yuan/mt, and hit the lowest point at 15,615 yuan/mt at the beginning of the session, then rebounded to 15,815 yuan/mt as the number of long positions increased. The most-trade SHFE 2301 lead contract finally closed at 15,720 yuan/mt, down 0.13%. The open interest increased 4,338 lots to 90,291 lots compared with the previous trading day.

Zinc: LME zinc closed at $2,916/mt on Monday, down $106.5/mt or 3.52%. The open interest fell 383 lots to 203,000 lots. Overnight LME inventory lost 275 mt to 42,425 mt.

The most traded SHFE 2212 zinc contract closed at 23,655 yuan/mt overnight, down 675 yuan/mt or 2.27%. The open interest fell 6,352 lots to some 74,000 lots. On the consumption side, the boost enabled by loosening pandemic controls in China is worth attention as the confirmed covid cases have been rising recently, which is likely to shadow the short-term market outlook. In the spot market, the transactions still fell short despite falling zinc prices yesterday. The downstream players still purchased on rigid demand. On the whole, relatively low inventory will still offer some support to zinc prices.

Overnight, Fed's Daley says actual impact of rate hike may be greater than implied by target rate, which is expected to peak at about 5%. Chinese central bank will launch a 200 billion yuan loan support program for six commercial banks under the guidance of "guaranteed housing delivery".

Tin: On the fundamentals, domestic warrants inventory rose more slowly, and falling prices revived the spot market. LME inventory remained unchanged, so did the overseas premiums. The import window remained closed. In terms of the futures market, SHFE tin fell after rebounding, and hovered around the 180,000 yuan/mt mark, with the collective withdrawal of money. To sum up, the market is still relatively balanced in terms of supply and demand, and the SHFE contract is likely to stabilise with the left of money.

Nickel: On the supply side, affected by the news, SHFE 2212 nickel dropped to a low of 192,000 yuan/mt in the early trading yesterday. Although the spot premium rebounded slightly, the upstream shipments still improved. In terms of imported pure nickel, the price ratio bounced back to 7.94, narrowing the import losses. In terms of NPI, an NPI plant in south China is about to start maintenance for nearly ten months. Two NPI production lines will be overhauled in turn, and its monthly output will be reduced by nearly 7,000 mt in physical content. The supply surplus in the market will be slightly alleviated in the future. On the demand side, according to SMM research, many steel mills planned to overhaul due to the poor downstream demand, and the total stainless steel output may decrease month-on-month in November. Orders from the civil alloy producers were fewer. In general, the supply and demand are slightly weakened, which may not prop up nickel prices strongly.

[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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