SMM Evening Comments (Dec 9): Shanghai Nonferrous Metals Closed with Gains amid Boosted Market Confidence

SHANGHAI, Dec 8 (SMM) – Shanghai nonferrous metals closed with gains in day trading. On the macro front, the domestic pandemic prevention and control measures loosened further under the newly issued “10 Measures”, and it is emphasised at this week's Political Bureau meeting to “maintain stable growth”, enhancing the expectations for economic restoration.

Shanghai copper rose 1.67%, aluminium added 0.36%, lead gained 0.51%, zinc jumped 0.71%, tin advanced 1.41%, and nickel climbed 3.22%.

Copper: The most-traded SHFE 2301 copper closed up 1.67% or 1,100 yuan/mt at 67,120 yuan/mt, with open interest up 3,699 lots to 148,592 lots.

On the macro front, the US dollar index continued to weaken overnight, boosting copper prices. This week, the domestic pandemic prevention and control measures loosened further under the newly issued “10 Measures”, and it is emphasised at this week's Political Bureau meeting to “maintain stable growth”, enhancing the expectations for economic restoration.

In the spot market, SHFE 2212 gained nearly 1.07% today, weighing on downstream purchases and consumption, and the spot market was dominated by the traders trying to force down the prices. Spot premiums in Shanghai dropped for two consecutive days, especially when some traders were looking for low-priced sources. The spot premiums are expected to be subject to the SHFE front-month and next-month spread again next week as SHFE 2212 is about to be delivered.

Aluminium: The most-traded SHFE 2301 aluminium closed up 0.36% or 70 yuan/mt at 19,260 yuan/mt, with open interest down 4,364 lots to 203,554 lots.

On the supply side, the domestic operating aluminium capacity continued to rise in December, driven by restarts in Sichuan and Guangxi, as well as release of new capacity in Inner Mongolia and Gansu. And because of winter and approaching New Year’s Day, aluminium smelters raised the proportion of ingots. On the demand side, the downstream consumption was poor in the traditional off-season. Some aluminium processing plants plan to close early for the Chinese New Year. Therefore, aluminium ingot inventory, albeit still at a low level, may accumulate in the future, putting aluminium prices at risk of pulling back.

Lead: The most-traded SHFE 2301 lead closed up 0.51% or 80 yuan/mt at 15,810 yuan/mt, with open interest down 2,551 lots to 68,615 lots.

The cargo holders were lacklustre in making shipments amid wide spread between futures and spot prices, and there were few quotes heard in the spot market. The downstream players mainly purchased with long-term orders. The secondary refined zinc output is expected to fall to 292,100 mt in December as some secondary smelters reduced or stopped the production. SHFE lead is likely to be rangebound should there be no major events on the macro front.

Zinc: The most-traded SHFE 2301 zinc closed up 0.71% or 175 yuan/mt at 24,965 yuan/mt, with open interest up 152 lots to 119,678 lots.

SHFE zinc was relatively strong today with the active involvement of longs. SMM zinc ingot social inventory across seven markets in China totalled 53,700 mt as of Friday December 9, down 800 mt from this Monday, alluding lingering supply tightness in the spot market.

Tin: The most-traded SHFE 2301 tin closed up 1.41% or 2,770 yuan/mt at 198,650 yuan/mt, with open interest up 6,165 lots to 53,920 lots.

In the spot market, some smelters were not interest in making quotes in early trade, but the shipments of mainstream smelters were smooth. The spot premiums/discounts offered by the traders were low, and the market transactions were again weighed on by high prices. Some traders failed to clinch a deal by noon time. The downstream players still mainly purchased on rigid demand.

Nickel: The most-traded SHFE 2301 nickel closed up 3.22% or 6,920 yuan/mt at 221,520 yuan/mt, with open interest down 3,267 lots to 88,895 lots.

In the spot market, Jinchuan nickel was in premiums of 7,700-8,000 yuan/mt, with an average of 7,850 yuan/mt, up 100 yuan/mt from the previous trading day. NORNICKEL nickel was in premiums of 5,700-6,000 yuan/mt, with an average of 5,850 yuan/mt, down 50 yuan/mt on a daily basis. The import losses now were as high as 31,000 yuan/mt, and there were few transactions in the market amid scarce supply. For nickel briquette, the prices stood between 219,000-220,900 yuan/mt, down 100 yuan/mt from the previous trading day.

[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.]