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SMM Morning Comments (Dec 2): Base Metals Closed Mostly with Gains on Better Market Sentiment
Dec 2, 2022 10:00CST
Source:SMM
LME and SHFE base metals closed mostly with gains overnight. Recently, the dollar has continued to fall on signs that inflation is slowing and the Fed may slow down the pace of rate hikes, which was bullish for metal prices.

SHANGHAI, Dec 2 (SMM) – LME and SHFE base metals closed mostly with gains overnight. Recently, the dollar has continued to fall on signs that inflation is slowing and the Fed may slow down the pace of rate hikes, which was bullish for metal prices.

LME copper gained 0.91%, aluminium fell 0.64%, lead jumped 0.14%, and zinc advanced 0.94%.

SHFE copper gained 0.35%, aluminium added 0.26%, lead inched down 0.03%, and zinc fell 0.2%.

Copper: LME copper opened at $8,259.5/mt on Thursday, hitting the lowest and highest of $8,220/mt and $8,408/mt respectively. At last, the contract closed at $8,360/mt, up 0.91%. The trading volume was 19,000 lots, and open interest stood at 241,000 lots.

SHFE 2301 copper opened at 65,520 yuan/mt overnight and once climbed to 65,960 yuan/mt. At last, it closed at 65,850 yuan/mt, up 0.35%. The trading volume was 33,000 lots, and open interest stood at 148,000 lots.

On the macro front, the US dollar index fell by about 5% in November, the largest monthly drop since July 2010 and the second consecutive month of decline. Recently, the dollar has continued to fall on signs that inflation is slowing and the Fed may slow down the pace of rate hikes, which was bullish for copper prices.

On the fundamentals, the LME inventories fell 1,425 mt to 88,275 mt on December 1. The overall global inventories were falling and saw no growth in arrivals. In China, the inventory in Guangdong increased significantly again. The current inventory has nearly doubled compared to last Thursday. On the demand side, as the US Fed released a signal to slow down rate hikes, copper prices rose, which aroused a stronger wait-and-see sentiment among downstream companies. And the export window opened yesterday, providing export opportunities for smelters, and holders held their prices firm. Spot trading was slack, and the transactions were manipulated by traders. Copper prices may remain rangebound with some upward potential with the support of macro sentiment.

Aluminium: The most-traded SHFE 2301 aluminium contract opened at 19,070 yuan/mt overnight and rose to 19,220 yuan/mt before closing at 19,175 yuan/mt, up 50 yuan/mt or 0.26%.

LME aluminium opened at $2,491.5/mt on Thursday and closed at $2,475/mt, down $16/mt or 0.64%.

On the supply side, the domestic operating capacity continued to increase slightly. On the demand side, orders in aluminium processing sectors were poor in the traditional off-season. Although relaxed pandemic controls boosted market sentiment, relatively poor fundamentals will prevent aluminium prices from rising. Thus, the short-term aluminium prices may move rangebound.

Lead: Yesterday, LME 3M lead contract rose rapidly after the opening, and then hovered sideways. During the session, the prices rose quickly again, then fell back slowly and finally closed at $2,182/mt, up 0.14%.

Last night, the SHFE 2301 lead contract quickly bottomed out after the opening and then hovered sideways. The SHFE 2301 lead contract fell slightly in the session, then rebounded rapidly and closed at 15,750 yuan/mt, a slight decrease of 0.03%.

Zinc: LME zinc closed at $3,063/mt on Thursday, up $28.5/mt or 0.94%. The open interest fell 1,990 lots to 201,000 lots. LME zinc inventory fell 75 mt to 41,225 mt.

The most traded SHFE 2301 zinc contract closed at 24,450 yuan/mt overnight, down 50 yuan/mt or 0.2%. The open interest fell 1,161 lots to some 122,000 lots. On the fundamentals, the social inventory has been falling still, and the market circulation of cargoes was at a low level amid low social inventory. Nonetheless, boosted by the dovish Fed and bulls in the real estate, SHFE zinc will remain rangebound.

Overnight, People's Daily: covid lockdown should be removed immediately once the condition allows. Chinese November Caixin manufacturing PMI was 49.4, with corporate optimism index at the highest in three months. The US November ISM manufacturing index and Markit manufacturing PMI fell into contraction territory for the first time in two-and-a-half years. The US Federal Reserve highlighted slower inflation indicators, and the year-on-year growth of October core PCE price index fell slightly to 5%, while the MoM growth slowed beyond expectations to 0.2%. The Fed's third-in-command: the inflation showed signs of improvement, but the Fed still needs to raise the rates as the rates still have some way to go to reach sufficiently restrictive levels. The Fed governor: rate hikes will continue but will soon slow down, and the peak levels may be higher than expected.

Tin: Overnight, SHFE tin rallied rapidly after opening lower, and closed at 180,000 yuan/mt. The open interest of the most-traded SHFE tin contract declined. The domestic tin inventory under SHFE warrants continued to increase. Trades in the spot market were poor, causing spot discounts to expand. LME tin inventory fell again. Overseas premiums rose. The import window remained closed. SHFE tin will hover sideways amid stable fundamentals and cautious sentiment.

Nickel: On the supply side, spot imports of pure nickel suffered losses, tightening the pure nickel supply in China. NPI inventory grew sharply, but the NPI plants mainly held a wait-and-see sentiment amid the high costs. On the demand side, a steel mill in south China plans to conduct annual maintenance from December 15, 2022, to January 29, 2023. During this period, its cold-rolled-based production lines will be suspended, and the market supply of cold-rolled may further decrease. The rigid demand for pure nickel from military alloy companies still existed, but the demand from the civil alloy sector remained poor. To sum up, the supply of pure nickel was tight, so nickel prices will remain rangebound.

[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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