SMM Evening Comments (Nov 28): Shanghai Nonferrous Metals Closed with Loses on Spreading COVID

SHANGHAI, Nov 28 (SMM) – Shanghai nonferrous metals closed all with the losses as the renewed pandemic outbreak across the country weighed on the market sentiment.

Shanghai copper shed 1.37%, aluminium fell 1.08%, lead slid 0.45%, zinc lost 0.15%, tin dropped 1.27%, and nickel declined 2.78%.

Copper: The most-traded SHFE 2301 copper closed down 1.37% or 890 yuan/mt at 64,130 yuan/mt, with open interest down 885 lots to 147,823 lots.

On the macro front: (1) On 25 November, the Chinese central bank decided to lower the reserve requirement ratio for financial institutions by 0.25 percentage points on 5 December 2022, which will release a total of about 500 billion yuan of long-term funds. (bullish ☆). (2) The annual rate of Chinese above-scale industrial enterprise profit was -3% in January-October, against a previous reading of -2.3%. (Bearish ☆)

In the spot market, rising pandemic risks hurt the spot market in Shanghai to some extent, and the market turned even quieter approaching the end of the month. Nonetheless, some market players with demand for front-month invoices were active. The market players shall watch the delayed arrivals of some imported sources as well as its impact on the spot premiums.

Aluminium: The most-traded SHFE 2301 aluminium closed down 1.08% or 205 yuan/mt at 18,690 yuan/mt, with open interest down 5,812 lots to 202,498 lots.

In the spot market, spot cargoes in east China were in premiums of 80 yuan/mt over SHFE 2212, up 10 yuan/mt from last Friday. The transactions in Wuxi were made close to the average price of SMM 100 aluminium ingot. The premiums/discounts changed little with the beginning of December long-term orders, and the premiums are likely to narrow in the follow-up period.

Lead: The most-traded SHFE 2301 lead closed down 0.45% or 70 yuan/mt at 15,595 yuan/mt, with open interest down 2,250 lots to 81,800 lots.

Downstream orders slid slightly with base metals futures contracted closed the day in the negative zone, and the spot cargoes were quoted with narrow discounts. The pandemic situation is worth attention, as the transportation of raw materials and delivery of finished products have been delayed. Falling social inventory underpinned HSFE lead, but the in-plant inventory held by the smelters rose to some extent.

Zinc: The most-traded SHFE 2301 zinc closed down 0.15% or 35 yuan/mt at 23,565 yuan/mt, with open interest down 186 lots to 108,316 lots.

The downstream operating rates fell recently, and the market was generally pessimistic over follow-up consumption. SMM zinc ingot social inventory across seven markets in China stood at 54,500 mt, which offered certain support to zinc price.

Tin: The most-traded SHFE 2212 tin closed down 1.27% or 2,350 yuan/mt at 182,060 yuan/mt, with open interest down 8,442 lots to 18,551 lots.

In the spot market, the quotes offered by the smelters were stable in early trade, and the spread among smelters narrowed. The premiums offered by the traders changed little, and rising SHFE tin did not bring significant impact on the premiums. Market transactions were relatively poor, but the sales of imported tin were moderate. The downstream players still purchases on rigid demand, with some reporting no purchasing intensions.

Nickel: The most-traded SHFE 2212 nickel closed down 2.78% or 5,530 yuan/mt at 193,250 yuan/mt, with open interest down 13,206 lots to 27,316 lots.

On the supply side, spot premiums in Shanghai were stable, but the shipments on the supply side were not smooth. For NPI, the downstream demand remained poor, and the market prices kept falling. On the demand side, the inventory in Wuxi kept falling slightly, but is likely to accumulate with the expected arrivals of 200-series stainless steel in large amount. In terms of alloy, the high nickel prices have contained downstream demand. To sum up, pure nickel was still weak in supply and demand, and the prices are likely to remain volatile in the near term.

[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.]