SMM Evening Comments (Dec 19): Shanghai Nonferrous Metals Closed with Losses as Hawkish Fed Weighed

Published: Dec 19, 2022 18:00

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On the macro front, the US Powell's unexpectedly hawkish stance has increased market concerns about the US economy falling into recession, with overseas central banks following suit in raising interest rates and tightening market liquidity. In China, the Central Economic Work Conference pointed out that the recent focus is on the overall improvement of economy.

SHANGHAI, Dec 19 (SMM) – Shanghai nonferrous metals closed mostly with losses on bearish market sentiment. On the macro front, the US Powell's unexpectedly hawkish stance has increased market concerns about the US economy falling into recession, with overseas central banks following suit in raising interest rates and tightening market liquidity. In China, the Central Economic Work Conference pointed out that the recent focus is on the overall improvement of economy.

Shanghai copper fell 0.53%, aluminium dropped 1.09%, lead slid 0.06%, zinc lost 1.94%, tin shed 2.45%, and nickel lost 1.81%.

Copper: The most-traded SHFE 2301 copper closed down 0.53% or 350 yuan/mt at 65,110 yuan/mt, with open interest down 6,985 lots to 123,414 lots.

In the spot market, the premiums were relatively firm today, and downstream demand picked up slightly after SHFE 2212 was delivered. The premiums of mainstream standard-quality copper stood at 450-470 yuan/mt in early trade, and then rose to 460-480 yuan/mt in the morning as downstream restocking demand was slightly boosted by falling SHFE copper prices, while most transactions were done with premiums of 450-470 yuan/mt. The spot market turned quiet approaching the noon time, and the premiums fell accordingly to 440 yuan/mt.

Aluminium: The most-traded SHFE 2301 aluminium closed down 1.09% or 205 yuan/mt at 18,540 yuan/mt, with open interest down 6,516 lots to 133,622 lots.

At present, the focus of the supply side is in Guizhou. If aluminium smelters in the province reduce production by 30%, the domestic operating capacity will be affected. However, there has been no large-scale production reduction in the province, and SMM will closely monitor the situation in Guizhou. On the demand side, the overall operating rates of downstream enterprises declined as more employees were infected with COVD and orders fell in the off-season. More enterprises have closed early for the Chinese New Year. Aluminium ingot inventories have not accumulated yet, and alumina prices continued to rise, offering some support to aluminium price. Aluminium prices are expected to trade rangebound.

Lead: The most-traded SHFE 2301 lead closed down 0.06% or 10 yuan/mt at 15,510 yuan/mt, with open interest down 1,992 lots to 50,584 lots.

Downstream inquiries picked up after SHFE lead fell. But the sources available in the market were limited, and the traders held the prices firm. The market players shall watch the impact of spiking confirmed COVID cases on the spot market.

Zinc: The most-traded SHFE 2301 zinc closed down 1.94% or 470 yuan/mt at 23,790 yuan/mt, with open interest down 5,249 lots to 75,599 lots.

The market sentiment is relatively bearish recently, and the social inventory also started to accumulated, alluding insufficient support on the fundamentals.

Tin: The most-traded SHFE 2301 tin closed down 2.45% or 4,710 yuan/mt at 187,500 yuan/mt, with open interest down 5,357 lots to 45,209 lots.

In the spot market, the transactions were lacklustre in the morning, and the prices kept falling in the afternoon. SHFE warrants inventory fell 634 mt to 4,905 mt.

Nickel: The most-traded SHFE 2301 nickel closed down 1.81% or 3,950 yuan/mt at 213,730 yuan/mt, with open interest down 9,275 lots to 64,532 lots.

In the spot market, Jinchuan nickel was in premiums of 8,200-8,500 yuan/mt today, with an average of 8,350 yuan/mt, up 100 yuan/mt from the previous trading day. NORNICKEL nickel was in premiums of 6,400-6,500 yuan/mt, with an average of 6,450 yuan/mt, up 200 yuan/mt on a daily basis. Spot premiums were high recently amid tight spot supply despite falling SHFE nickel price recently. For nickel briquette, the prices stood between 218,000-218,500 yuan/mt, down 900 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.]

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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