SMM Evening Comments (Jan 3): Shanghai Nonferrous Metals Closed Mostly with Losses on Aggravating Demand Concerns

SHANGHAI, Jan 3 (SMM) – Shanghai nonferrous metals closed mostly with losses on the first trading day of 2023. On the macro front, China's Caixin manufacturing PMI recorded 49 in December, a new low in three months and below the previous reading of 49.4, making investors worried about the demand outlook in the next few months.

Shanghai copper lost 0.5%, aluminium fell 2.22%, lead slid 0.35%, zinc shed 1.05%, tin flat, and nickel dropped 0.16%.

Copper: The most-traded SHFE 2302 copper closed down 0.5% or 330 yuan/mt at 65,790 yuan/mt, with open interest down 2,795 lots to 96,846 lots.

In terms of inventory change, LME copper inventory rose to 88,925 mt last Friday, setting a new high in nearly a month, and SHFE copper inventory also accumulated. Today January 3, SMM copper inventory in mainstream markets in China added 11,300 mt from last Friday to 109,300 mt. Rising copper inventory weighed on copper price.

Aluminium: The most-traded SHFE 2302 aluminium closed down 2.22% or 415 yuan/mt at 18,270 yuan/mt, with open interest up 16,653 lots to 153,402 lots.

On the supply side, power rationing in Guizhou tends to escalate. The increase in domestic aluminium production was lower than expected in December. On the demand side, the domestic downstream processing sectors are in the off-season, and new orders are insufficient, dragging down the operating rates last week. Aluminium ingot inventory rose for two consecutive weeks, weakening support for aluminium prices. The short-term aluminium prices are expected to maintain a rangebound trend, and attention should be paid to downstream pre-holiday stocking and inventory changes.

Lead: The most-traded SHFE 2302 lead closed down 0.35% or 55 yuan/mt at 15,875 yuan/mt, with open interest down 3,764 lots to 67,830 lots.

In the spot market, the traders mostly quoted with small discounts as SHFE fell after hitting high, while the downstream players were generally wait-and-see. Market inquiries picked up from before the New Year’s Day, but the actual transactions were mostly of sources from smelters. The spot market was relatively quiet. The primary and secondary lead smelters will commence annual routine maintenance soon or be closed for Chinese New Year holiday, and the supply is likely to fall. While smelters are still restocking raw materials, lead price is likely to remain high on high cost.

Zinc: The most-traded SHFE 2302 zinc closed down 1.05% or 250 yuan/mt at 23,455 yuan/mt, with open interest down 1,969 lots to 86,057 lots.

SMM zinc ingot social inventory across seven markets in China totalled 63,200 mt, up 13,100 mt from Last Monday, and the support to SHFE zinc weakened.

Tin: The most-traded SHFE 2302 tin closed flat at 209,060 yuan/mt, with open interest down 4,516 lots to 43,388 lots.

In the spot market, downstream players were strongly wait-and-see amid high prices. SHFE warrants inventory added 98 mt to 4,764 mt today.

Nickel: The most-traded SHFE 2302 nickel closed down 0.16% or 360 yuan/mt at 228,820 yuan/mt, with open interest down 6,056 lots to 71,622 lots.

In the spot market, Jinchuan nickel was in premiums of 8,300-9,000 yuan/mt against SHFE 2302, with an average of 8,650 yuan/mt, up 2,150 yuan/mt on a daily basis. NORNCIKEL nickel was in premiums of 8,000-8,600 yuan/mt, with an average of 8,300 yuan/mt, up 3,300 yuan/mt from the previous trading day. Premiums of NORNICKEL nickel were high amid persistent import losses of pure nickel, while that of Jinchuan nickel is expected to fall in the future, or even below that of NORNICKEL nickel. For nickel briquette, the prices stood between 232,900-235,000 yuan/mt, down 3,800 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.]