SMM Morning Comments (Jan 13): Base Metals Closed Mostly with Gains on Easing US Inflation

Published: Jan 13, 2023 10:00 (GMT+8)

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The US Department of Labor released the December CPI data last night, which, together with core inflation, fell as expected.

SHANGHAI, Jan 13 (SMM) – LME and SHFE base metals closed mostly with gains overnight. The US Department of Labor released the December CPI data last night, which, together with core inflation, fell as expected.

LME copper added 0.11%, aluminium rose 1.99%, lead grew 0.6%, and zinc jumped 1.39%;

SHFE copper added 0.19%, aluminium rose 0.05%, lead fell 0.33%, and zinc jumped 0.06%.

Copper: LME copper opened at $9,077/mt yesterday and climbed to $9,240/mt after dropping to $9,073/mt. At last, the contract closed at $9,178.5/mt, up 0.11%. Trading volume was 23,000 lots, and open interest stood at 254,000 lots.

SHFE 2303 copper opened at 68,680 yuan/mt overnight, once hitting the highest and lowest of 69,390 yuan/mt and 68,430 yuan/mt respectively. At last, it closed at 68,790 yuan/mt, up 0.19%. The trading volume was 67,000 lots, and open interest stood at 201,000 lots.

The US Department of Labor released the December CPI data last night, which, together with core inflation, fell as expected. At the same time, the number of initial jobless claims released last week was lower than expected, showing that the labour market remains resilient. But the US dollar index fell sharply overnight, which was bullish for copper prices.

In terms of fundamentals, smelters preferred to export amid higher copper prices in overseas markets. Besides, the holders were unwilling to reduce quotes approaching the delivery of SHFE 2301 copper. In the spot market, due to the high copper prices, only some downstream companies restocked goods. The overall transactions between downstream companies and traders were relatively slack. It is expected that demand will become weaker as some traders and processing companies have begun their Chinese New Year holidays one after another this week and copper prices grew. Copper prices will move rangebound with some drops in the near future affected by the US economic data.

Aluminium: The most-traded SHFE 2302 aluminium contract opened at 18,365 yuan/mt overnight and fell to 18,200 yuan/mt before closing at 18,330 yuan/mt, up 10 yuan/mt or 0.05%.

LME aluminium opened at $2,488.5/mt on Thursday and closed at $2,568/mt, an increase of $50/mt or 1.99%.

Overseas macro data was positive recently, and China released a series of favourable policies, boosting market confidence. However, due to poor downstream demand ahead of the upcoming CNY holiday and rapidly rising inventory, aluminium prices will hardly rise.

Lead: Overnight, LME lead opened at $2,181/mt and fell to $2,120/mt during the European trading hours. After the US dollar index fell back, LME lead rebounded to $2,207.5/mt and finally closed at $2,192/mt, up $13/mt or 0.6%.

Overnight, the most-traded SHFE 2303 lead contract opened at 15,340 yuan/mt and fell to 15,250 yuan/mt at the beginning of the session, but then rebounded to 15,350 yuan/mt and finally closed at 15,330 yuan/mt, down 50 yuan/mt or 0.33%.

Zinc: LME zinc closed at $3,254.5/mt on Thursday, up $44.5/mt or 1.39%. The open interest added 155 lots to some 188,000 lots. LME inventory fell 550 mt mt to 21,125 mt, a drop of 2.54%. US consumer price index dropped for the first time in two years and a half, alluding slowing US inflation.

The most traded SHFE 2302 zinc contract closed at 23,865 yuan/mt overnight, up 15 yuan/mt or 0.06%. The open interest fell 2,916 lots to 74,082 lots. A series of support policies in China boosted SHFE zinc. On the fundamentals, with more companies taking holiday, it becomes increasingly manifested that the supply grows while the demand weakens.

Tin: Overnight, SHFE tin hovered at highs, closing at around 218,000 yuan/mt. Investors rolled their positions onto distant-month contract. The domestic tin inventory under SHFE warrants increased sharply due to upcoming delivery of SHFE 2301 contract. Trades in the spot market were thin. LME tin inventories were little changed. Overseas market maintained a discount. The import profit window remained open. Given weak demand and risk aversion sentiment, it remains to be seen whether the price rise will sustain.

Nickel: On the supply side, LME nickel fell sharply overnight, thus the import window opened. Some NORNICKEL nickel cleared customs. In addition, spot transactions have improved amid low nickel prices. And the downstream companies still intend to restock. NPI plants held low in-plant inventories of finished products. And the factories changed their scales of production cut in December 2022 and January 2023 following the stainless steel prices. SMM believes that spot NPI supply in January will still be tight. On the demand side, according to SMM research, affected by the overseas market, SHFE nickel prices dropped in intraday trading, which further slightly dragged down the stainless steel prices. Around noon time, SHFE nickel bounced back. The spot market witnessed rare inquiries and transactions near the year-end. Logistics services in some areas will be suspended this weekend. Alloy companies restocked raw materials in a small amount this week. To sum up, pure nickel prices were greatly affected by the news factors, but the supply is still expected to be sufficient, hence nickel prices will fluctuate with some drops.

[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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