SMM Morning Comments (Nov 25): Base Metals Closed Mostly with Losses on Poor Demand

Published: Nov 25, 2022 10:00

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LME and SHFE base metals closed mostly with losses overnight. The recent poor US economic readings as well as contained demand in China by spreading covid weighed on the base metals prices.

SHANGHAI, Nov 25 (SMM) – LME and SHFE base metals closed mostly with losses overnight. The recent poor US economic readings as well as contained demand in China by spreading covid weighed on the base metals prices.

LME copper fell 0.05%, aluminium lost 0.92%, lead added 0.49%, and zinc shed 0.09%.

SHFE copper gained 0.22%, aluminium lost 0.61%, lead slid 0.38%, and zinc shed 0.11%.

Copper: LME copper opened at $8,054/mt on Thursday and consolidated after climbing to $8,057.5/mt. At last, the contract closed at $8,023.5/mt, down 0.05%. Trading volume was 7,000 lots, and open interest stood at 244,000 lots.

SHFE 2301 copper contract opened at 64,850 yuan/mt overnight and hit the lowest and highest of 64,730 yuan/mt and 64,990 yuan/mt respectively. At last, it closed at 64,990 yuan/mt, up 0.22%. The trading volume was 68,000 lots, and open interest stood at 133,000 lots.

On the macro front, affected by the dovish monetary policy meeting of the US Fed in November and the recent poor performance of US economic data, the US dollar was on a downward trend and finally closed down by 0.26%.

On the fundamentals, the LME copper inventories fell 1,375 mt to 90,150 mt on November 24, and the total inventory remained low. Spot trading was weakened by the rise in copper prices. Downstream purchases were poor as the delivery of long-term orders was coming to an end. According to the SMM survey, due to the interference of the pandemic situation, financial problems amid the end-of-year factor and other issues, the terminal companies entered the off-season beforehand. Consumption in the market outlook will continue to be weak. Overall, the current contradiction between supply and demand was not obvious, but the terminal demand at the end of the year will not boom. The fundamentals have limited support for copper prices, and the upward space for the prices is limited.

Aluminium: The most-traded SHFE 2301 aluminium contract opened at 18,965 yuan/mt overnight and rose to 19,020 yuan/mt before closing at 18,850 yuan/mt, down 115 yuan/mt or 0.61%.

LME aluminium opened at $2,394/mt on Thursday and closed at $2,368/mt, down $22/mt or 0.92%.

Aluminium production in Sichuan and Guangxi gradually resumed. However, the pandemic-induced shipment delays allowed the domestic aluminium ingot social inventories to hit a new low. Downstream consumption was also affected by the pandemic. SHFE aluminium will move rangebound in the short term.

Lead: LME lead opened at $2,118/mt and grew 0.49% to $2,133.5/mt last Friday, after hitting the lowest point at $2,116.5/mt and the highest point at $2,147/mt. The open interest increased by 40 lots to 99,349 lots from the previous trading day.

The mos traded SHFE 2301 lead contract opened at 15,725 yuan/mt and dropped 0.38% to 15,675 yuan/m, after briefly hitting the highest point at 15,780 yuan/mt and the lowest point of 15,660 yuan/mt. The open interest decreased 189 lots to 90,486 lots from the previous trading day.

Zinc: LME zinc closed at $2,905.5/mt on Thursday, down $2.5/mt or 0.09%. The open interest fell 835 lots to 203,000 lots. The market was relatively bullish with dovish signals sent by US Fed officials as well as EU mulling over a cap on Russian oil at $65-70/mt.

The most traded SHFE 2301 zinc contract closed at 23,535 yuan/mt overnight, down 25 yuan/mt or 0.11%. The open interest added 2,597 lots to some 106,000 lots. On the fundamentals, the Zhugongtang Lead-Zinc Mine is expected to be put into production at the end of the month, and the annual lead and zinc concentrate capacity is likely to add 170,000 mt in metal content. On the consumption side, all the mainstream downstream sectors have kicked off the off-season, and the resurging pandemic across the country further contained downstream operation. In the spot market, the social inventory was relatively low, and the downstream restocking demand was muted after zinc price stopped falling.

Overnight: Energy crisis measures were put on hold for mid-December after some EU countries were unhappy with a proposed €275 per MWh gas price cap during Thursday's debate on price caps. EU governments will resume negotiations on a price cap on Russian seaborne oil on Thursday evening or Friday. The China Banking Regulatory Commission: The special loans for the "guaranteed delivery of buildings" has been put injected to the projects.

Tin: SHFE tin went up overnight, but fell back after rising to 186,000 yuan/mt. Longs and shorts continued to roll their positions onto distant-month contract. Affected by weak transactions in the spot market, the domestic tin inventory under warrants accumulated. LME tin inventory continued to fall. Overseas premiums remained low. Imported tin in the domestic market was quoted at discounts, and the import window was still closed. With little disturbance to supply and demand, it is expected that the short-term tin prices will move sideways.

Nickel: On the supply side, SHFE nickel remain rangebound, and the spot premiums in Shanghai stayed stable. The upstream shipments were sluggish. In terms of NPI, Indonesia steel mills may reduce their production, so the inflow of Indonesia NPI will continue to grow. However, the downstream consumption was poor, so news of Indonesian tariffs has a weak influence on NPI prices. On the demand side, according to SMM research, the agent volume of Delong cold-rolled and hot-rolled coils in the Wuxi market has decreased, and the spots were shipped to the Foshan market for delivery. The current spot supply in Wuxi can meet downstream demand. High nickel prices still suppressed the demand for pure nickel from the civil alloy companies. In general, the demand for pure nickel remained weak, which may 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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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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