SMM Evening Comments (Dec 15): Shanghai Nonferrous Metals Closed with Losses with US Fed Turning Hawkish

SHANGHAI, Dec 15 (SMM) – Shanghai nonferrous metals closed all with losses as the hawkish rhetoric delivered by the US Fed overnight dented the market sentiment.

Shanghai copper fell 0.81%, aluminium was flat, lead slid 0.68%, zinc lost 1.05%, tin shed 1.22%, and nickel lost 0.9%.

Copper: The most-traded SHFE 2301 copper closed down 0.81% or 540 yuan/mt at 65,980 yuan/mt, with open interest down 4,572 lots to 138,262 lots.

On the macro front, the US Federal Reserve slowed the pace of interest rate hikes as expected overnight, and raised the rates by 50 basis points. But the "dot plot" showed that the target rate of next year was lifted to 5.1%, more than the market expected. The Fed Chairman Powell’s expression regarding the rising inflation risks worried the market players again.

In the spot market, most market players have completed their annual guidance in the last settling session for annual long-term orders, hence the market was relatively quiet as a whole. For those which wished to polish the performance at year-end, there are still opportunities in the last two trading weeks in 2022.

Aluminium: The most-traded SHFE 2301 aluminium closed flat at 18,800 yuan/mt, with open interest down 968 lots to 147,641 lots.

Last night, the US Fed raised interest rates by 50 basis points, which was in line with market expectations. The overall performance of aluminium prices was dominated by fundamentals. On the supply side, smelters in Guizhou may face production cuts of nearly 30%. On the demand side, despite looser pandemic controls, the downstream consumption was poor in the traditional off-season. Some aluminium processing plants plan to close early for the Chinese New Year. Low social inventory will support aluminium prices. SHFE aluminium is expected to fluctuate widely in the term. SMM will closely watch changes in downstream operating rates and social inventory.

Lead: The most-traded SHFE 2301 lead closed down 0.68% or 105 yuan/mt at 15,445 yuan/mt, with open interest down 4,704 lots to 60,949 lots.

In the spot market, sources of deliverable brands in the market were scarce, and some traders have begun to pre-sell cargoes to be sent next week. The quotes were relatively firm, while downstream players purchased on dips and were more active in making inquiries. Nonetheless, sources from smelters were more popular. The trading market was active, but the actual transaction volume was limited.

Zinc: The most-traded SHFE 2301 zinc closed down 1.05% or 260 yuan/mt at 24,565 yuan/mt, with open interest down 12,204 lots to 91,987 lots.

The market returned to the fundamentals after US Fed announced the December rate resolution. SHFE zinc fell amid expectations of rising supply and poor spot transactions under high zinc prices.

Tin: The most-traded SHFE 2301 tin closed down 1.22% or 2,390 yuan/mt at 194,000 yuan/mt, with open interest down 4,719 lots to 43,373 lots.

In the spot market, SHFE tin dropped palpably after opening in the morning, and the downstream purchases were robust. SHFE warrants inventory fell 46 mt to 5,454 mt today.

Nickel: The most-traded SHFE 2301 nickel closed down 0.9% or 1,980 yuan/mt at 217,450 yuan/mt, with open interest down 6,893 lots to 70,919 lots.

In the spot market, Jinchuan nickel was in premiums of 7,500-8,200 yuan/mt, with an average of 7,850 yuan/mt, up 100 yuan/mt on a daily basis. NORNICKEL nickel was in premiums of 6,000-6,300 yuan/mt, with an average of 6,150 yuan/mt, flat from the previous trading day. The sources in the spot market were still tight as the import window remained closed, while the premiums did not show signs of falling. The transactions in the spot market were muted. For nickel briquette, the prices stood between 218,700-219,300 yuan/mt, down 1,300 yuan/mt from a day ago.

[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.]