SMM Evening Comments (Dec 16): Shanghai Nonferrous Metals Closed Mostly with Losses amid Bearish Sentiment

SHANGHAI, Dec 16 (SMM) – Shanghai nonferrous metals closed mostly with losses as the market sentiment was relatively bearish. On the macro front, the weak performance of domestic economic data in November put the market under pressure. Following yesterday's Federal Reserve "dot plot" that the next year's terminal interest rate is lifted to 5.1%, the European Central Bank’s attitude is also hawkish overnight, denting the investors’ risk appetite. The U.S. stocks plunged, the dollar index rebounded sharply.

Shanghai copper fell 1.14%, aluminium dropped 0.24%, lead gained 0.45%, zinc lost 1.47%, tin shed 1.25%, and nickel lost 0.68%.

Copper: The most-traded SHFE 2301 copper closed down 1.14% or 750 yuan/mt at 65,260 yuan/mt, with open interest down 7,863 lots to 130,399 lots.

In the spot market, the spot premiums rose after opening low for several reasons. First, the social inventory in Shanghai dropped significantly this week. Secondly, most state-owned and large-sized market players have kicked off their annual settlement, and will not initiate transactions. Thirdly, market worries aggravated on spiked confirmed COVID cases after the control measures were relaxed.

Aluminium: The most-traded SHFE 2301 aluminium closed down 0.24% or 45 yuan/mt at 18,740 yuan/mt, with open interest down 7,505 lots to 140,136 lots.

Europe and the United States raised interest rates, with further hikes expected in the future. China is striving to expand domestic demand, but consumption turned sluggish as the number of people infected with COVID surged. 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. Social inventory fell thanks to fewer arrivals and increased shipments to downstream buyers rather than social warehouses, which 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 up 0.45% or 70 yuan/mt at 15,550 yuan/mt, with open interest down 8,373 lots to 52,576 lots.

In the spot market, cargoes available in the spot market were limited, and most downstream players purchased on demand, and favoured sources from smelters under long-term orders. Transactions in the spot market were muted.

Zinc: The most-traded SHFE 2301 zinc closed down 1.47% or 360 yuan/mt at 24,090 yuan/mt, with open interest down 11,139 lots to 80,848 lots.

On the fundamentals, the supply rose while the demand is likely to weaken, but the inventory accumulation was less than expected. The market was partly contained by the high zinc prices.

Tin: The most-traded SHFE 2301 tin closed down 1.25% or 2,420 yuan/mt at 191,110 yuan/mt, with open interest up 7,193 lots to 50,566 lots.

In the spot market, some smelters held the prices firm, while some lowered the offers along with dropping SHFE tin. The premiums/discounts offered by the traders rebounded slightly, and falling prices boosted the market transactions to some extent. The downstream players still purchases on rigid demand.

Nickel: The most-traded SHFE 2301 nickel closed down 0.68% or 1,480 yuan/mt at 215,610 yuan/mt, with open interest up 2,888 lots to 73,807 lots.

In the spot market, Jinchuan nickel was in premiums of 8,000-8,500 yuan/mt, with an average of 8,250 yuan/mt, up 400 yuan/mt on a daily basis. NORNICKEL nickel was in premiums of 6,000-6,500 yuan/mt, with an average of 6,250 yuan/mt, up 100 yuan/mt from the previous trading day. As the import window remained closed, the supply in the spot market remained tight, fuelling a rebound in the spot premiums. But the transactions in the spot market were still quiet. For nickel briquette, the prices stood between 218,800-219,500 yuan/mt, up 150 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.]