SMM Evening Comments (Dec 20): Shanghai Nonferrous Metals Closed in Negative Zone with Bears Dominating Market

SHANGHAI, Dec 20 (SMM) – Shanghai nonferrous metals closed with losses as the market sentiment is quite bearish recently. On the macro front, the pandemic outbreak in China continued to weigh on market risk appetite. The Bank of Japan unexpectedly adjusted its yield volatility range and its government bond yields spiked, while the US dollar was affected and fell. The market interpreted Japan's action as a signal for tightening monetary policy.

Shanghai copper fell 0.38%, aluminium dropped 0.38%, lead slid 0.32%, zinc lost 2.05%, tin inched down 0.04%, and nickel lost 0.78%.

Copper: The most-traded SHFE 2301 copper closed down 0.38% or 250 yuan/mt at 65,060 yuan/mt, with open interest down 9,191 lots to 114,223 lots.

In the spot market, the spot premiums were firm amid low inventory. The premiums of mainstream standard-quality copper stood at around 480 yuan/mt in early trade, and then fell slightly with buyers forcing down the prices. The premiums rallied to above 480 yuan/mt afterwards and SHFE copper risked 65,000 yuan/mt. The premiums were around 500 yuan/mt approaching noon time, alluding supply tightness.

Aluminium: The most-traded SHFE 2301 aluminium closed down 0.38% or 70 yuan/mt at 18,590 yuan/mt, with open interest down 4,299 lots to 129,323 lots.

On the supply side, Guizhou Huaren and Zunyi Aluminium have basically completion production cuts that were caused by power rationing, with an estimated loss of over 200,000 mt of annualised production capacity. However, Guizhou Yuanhao put its new project into operation, with an annualised production capacity of about 20,000 mt in the first phase. As of today, the overall production reduction in Guizhou was relatively limited, and thus offering little upward momentum to aluminium prices. Aluminium ingot inventory has begun to accumulate slightly as the consumption has entered the traditional off-season. Downstream purchases in the spot market were sluggish amid growing COVID infections. SHFE aluminium will have little room to rise or fall amid poor demand and historical low inventory.

Lead: The most-traded SHFE 2301 lead closed down 0.32% or 50 yuan/mt at 15,465 yuan/mt, with open interest down 4,767 lots to 45,817 lots.

The discounts narrowed as the cargo holders held the prices firm and the sources available in the market were scarce. The downstream players still purchased on demand, and the transactions in the spot market were muted.

Zinc: The most-traded SHFE 2301 zinc closed down 2.05% or 490 yuan/mt at 23,445 yuan/mt, with open interest down 9,916 lots to 65,743 lots.

The market is quite bearish with the US Fed releasing hawkish signals constantly. On the fundamentals, it is expected that zinc supply will be high in the near term. And SHFE zinc fell amid weakening support from the fundamentals.

Tin: The most-traded SHFE 2301 tin closed down 0.04% or 70 yuan/mt at 191,480 yuan/mt, with open interest down 3,135 lots to 42,074 lots.

In the spot market, the transactions were moderate in the past few days, while today, both the supply and demand was weak with low upstream inventory and muted downstream demand. SHFE warrants inventory fell 353 mt to 4,552 mt.

Nickel: The most-traded SHFE 2301 nickel closed down 0.78% or 1,700 yuan/mt at 215,280 yuan/mt, with open interest down 1,119 lots to 63,413 lots.

In the spot market, Jinchuan nickel was in premiums of 10,000-10,500 yuan/mt, with an average of 10,250 yuan/mt, up 1,900 yuan/mt from the previous trading day. NORNICKEL nickel was in premiums of 7,500-8,000 yuan/mt, with an average of 7,750 yuan/mt, up 1,300 yuan/mt on a daily basis. Falling spot supply offered great support to the spot premiums, while the successful transactions were made on rigid demand. For nickel briquette, the prices stood between 214,800-216,300 yuan/mt, down 2,700 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.]