SMM Morning Comments (Jan 11): Base Metals Closed Mixed as Investors Brace for US Inflation Data

SHANGHAI, Jan 11 (SMM) – LME and SHFE base metals closed mixed. On the macro front, the US December ISM non-manufacturing PMI fell below the 50-point mark, which is far lower than expected. In addition, the market waited for the US inflation data that is going to be released later this week to highlight the expectations for the Fed’s rate hikes.

LME copper added 1.57%, aluminium rose 0.8%, lead fell 1.42%, and zinc jumped 0.09%;

SHFE copper added 1.2%, aluminium rose 0.66%, lead fell 0.67%, and zinc lost 0.15%.

Copper: LME copper opened at $8,819.5/mt yesterday and climbed to $8,944/mt after falling to $8,790.5/mt. At last, the contract closed at $8,937/mt, up 1.57%. The trading volume was 17,000 lots, and open interest stood at 252,000 lots.

SHFE 2302 copper opened at 66,680 yuan/mt overnight, once hitting the lowest and highest of 66,730 yuan/mt and 67,360 yuan/mt respectively. At last, it closed at 67,310 yuan/mt, up 1.2%. The trading volume was 13,000 lots, and open interest stood at 86,000 lots.

On the macro front, the US December ISM non-manufacturing PMI fell below the 50-point mark, which is far lower than expected. In addition, the market waited for the US inflation data that is going to be released later this week to highlight the expectations for the Fed’s rate hikes. The US dollar index fell sharply overnight, which was bullish for copper prices.

In terms of fundamentals, as more downstream companies take their Chinese New Year holidays and the copper prices have remained high recently, the downstream producers halted their purchases for fear of a further price hike. Cargo holders were also unwilling to cut the quotes for shipments. Transactions between buyers and sellers were in a stalemate. Spot supply was sufficient, but the export profits will restrict some holders’ dumping of goods. The rise in copper prices has made the already poor consumption worse, and copper consumption is expected to continue to weaken approaching the Chinese New Year. The market will focus on the US inflation data this week. It is expected that copper prices will fluctuate with some upward potential under the guidance of macro factors.

Aluminium: The most-traded SHFE 2302 aluminium contract opened at 18,160 yuan/mt overnight and rose to 18,300 yuan/mt before closing at 18,265 yuan/mt, up 120 yuan/mt or 0.66%.

LME aluminium opened at $2,423/mt on Tuesday and closed at $2,458/mt, an increase of $19.8/mt or 0.8%.

Bullish macro factors overseas contributed to the price rally, with market focus on December US CPI  this Thursday. Aluminium ingot and billet inventory continued to accumulate as demand declined with the Chinese New Year drawing close. It is expected that SHFE aluminium will move rangebound in the short term.

Lead: LME lead opened at $2,228/mt overnight, and dropped after stabilizing briefly in Asian trading housing. The contract then fell to $2,155/mt in European trading hours, and closed the session at $2,186/mt, down $31.5/mt or 1.42%.

The most-traded SHFE 2203 contract opened at 15,500 yuan/mt, and then fell to 15,390 yuan/mt after hitting a modest high of 15,585 yuan/mt. The contract finally closed at 15,455 yuan/mt, down 105 yuan/mt or 0.67%.

Zinc: LME zinc closed at $3,167/mt on Tuesday, up $3/mt or 0.09%. The open interest added 2,081 lots to some 188,000 lots. LME inventory fell another 700 mt mt to 22,150 mt, a drop of 3.06%.

The most traded SHFE 2302 zinc contract closed at 23,750 yuan/mt overnight, down 35 yuan/mt or 0.15%. The open interest fell 2,321 lots to 80,555 lots. SHFE zinc was relatively resilient recently with support from real estate, and was contained by falling demand.

On the macro front, Powell said the Fed's independence is the core of its anti-inflation capability and should avoid involvement in social policy. The World Bank expects global economic growth to be 1.7% in 2023, accompanied by recession risk. China's financial data in the last month of 2022 is mixed, while active policies will continue to ensure stable growth. Morgan Stanley raised its estimates for China's economic growth, stock market and yuan, saying the market has underestimated the impact of the re-opening.

Tin: Overnight, SHFE tin rallied slightly, closing at around 206,900 yuan/mt. A large number of longs and shorts left the market. The domestic tin inventory under SHFE warrants dropped slightly. Trades in the spot market declined, with pre-holiday stocking gradually coming to an end. LME tin inventory rose slightly. Overseas market maintained a small discount. The import profit window remained open. SHFE tin may hover sideways amid falling trading activities ahead of the upcoming CNY holiday.

Nickel: SHFE nickel prices fell slightly due to the news factors. The premiums grew while the spot prices trended lower. The imported pure nickel supply remained tight as the import window is still closed. NPI transactions were active in the early stage, and more domestic NPI factories cut their production in December 2022. Besides, the sources of Indonesian NPI have already been booked, which may tighten the spot supply in January 2023. NPI plants held their prices firm due to the high prices of nickel ore in the rainy season, the increase in electricity bills and the in-plant inventories of finished products with high costs. On the demand side, the quotes of spot stainless steel rose along with the growing futures prices. The transactions were relatively slack as most market participants have been on their Chinese New Year holiday. The traded price stood stable. Alloy producers became less willing to purchase with the end of stockpiling. Pure nickel demand has weakened, but the short-term nickel prices will remain rangebound.

[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.]