SHANGHAI, Feb 3 (SMM) – SHFE and LME base metals closed mixed overnight. On the macro front, the European Central Bank raised interest rates by 50 basis points as expected, while the Bank of England adopted a more dovish tone on inflation. The US dollar rose against a basket of currencies and the US dollar index rose overnight.
Copper: LME copper prices closed at $9,033.5/mt in overnight trading, a decline of 0.23%. Trading volume was 18,000 lots and open interest stood at 254,000 lots.
The most active SHFE 2303 copper contract finished at 68,560 yuan/mt overnight, down 0.9%. Trading volume was 41,000 lots, and open interest stood at 171,000 lots.
On the macro front, the European Central Bank raised interest rates by 50 basis points as expected, while the Bank of England adopted a more dovish tone on inflation. The US dollar rose against a basket of currencies and the US dollar index rose overnight.
In terms of fundamentals, the current social inventory is still accumulating, while registered warrants have continued to increase. The supply of available cargoes is not as ample as expected. In China’s domestic spot market, with more and more downstream enterprises resuming their production as well as the execution of long-term orders by smelters, the market activity has increased, but trades under small orders are still modest. In terms of consumption, end-user plants have not fully resumed production yet. Copper prices are expected to remain rangebound as the market awaiting a signal of consumption recovery.
Aluminium: The most-traded SHFE 2303 aluminium contract opened at 19,065 yuan/mt overnight before closing at 19,110 yuan/mt, up 15 yuan/mt or 0.08%.
LME aluminium opened at $2,626.5/mt on Thursday and closed at $2,604.5/mt, a decrease of $1/mt or 0.04%.
The interest rate hikes by US Federal Reserve and the European Central Bank were in line with market expectations, thus little shock was felt in the market. Optimism over consumption recovery is expected to continue to support SHFE aluminium. Market players need to closely monitor how the power rationing in Yunnan will develop.
Lead: Yesterday, the LME cash to three month lead contract rose rapidly to $2,172/mt after opening, but then fell rapidly in the intraday and fluctuated at $2,125/mt. But then LME cash to three month lead contract pulled up again, it gradually fluctuated and closed at $2,150/mt, up 0.47%.
The SHFE 2303 lead contract rose slightly to 15400 yuan/mt after opening yesterday night, but then fell and closed at 15,270 yuan/mt, down 0.26%.
Zinc: Overnight, the European Central Bank (ECB) hiked the three major interests by 50 basis points each, in line with market expectations. ECB said that it will evaluate the follow-up rate adjustment after another 50 basis-point rate hike in March. This fuelled the market expectations for a closer end of the hiking cycle. The US initial jobless claims recorded 235,000 in the week ending January 28, a new low since the week ending April 23, 2022. Goldman Sachs traders pocketed more than $3 billion in the scramble for commodities. The EU will launch its 10th sanctions package against Russia on February 24. Chinese Ministry of Commerce announced to focus on the key consumer areas of automobiles and home furnishing by introducing a series of new policies, and shorten the negative list for foreign investment access.
LME zinc closed at $3,355/mt on Thursday, up $35/mt or 1.06% after opening at 3,348 yuan/mt. The trading volume rose to 7,719 lots, and open interest lost 3,212 lots to 207,000 lots. LME zinc inventory remained flat.
The most traded SHFE 2303 zinc contract opened lower at 24,060 yuan/mt and closed at 24,210 yuan/mt overnight, up 45 yuan/mt or 0.19%. The trading volume was down to 57,273 lots, and open interest added 992 lots to 92,375 lots. At present, the operating rates of terminal enterprises were weak amid the low season, and it still remains to be seen whether the demand will pick up rapidly when zinc prices are impacted by the macro front and the market expectations. It is expected that zinc prices will remain volatile, and market players are warned against the pressure on the supply side.
Tin: SHFE tin fluctuated within a narrow range last night with few funds of the most-traded SHFE tin contract leaving the market.
Domestic tin inventory under SHFE warrants continued to increase. Trades in the spot market improved slightly due to the fall in tin prices. LME inventory remained stable as the expected import profits were limited. But the imported tin prices were lower than the domestic ones.
In terms of futures prices, the SHFE tin prices fluctuated and closed at 230,400 yuan/mt. The open interest of the most traded contract decreased slightly. The open interest of distant-month contract increased slightly and investors maintained their positions.
To sum up, the supply and demand was temporarily balanced. As the market sentiment is stable, tin prices may fluctuated widely.
Nickel: On the supply side, the upstream companies were more willing to ship as the SHFE nickel prices remained high. The spot prices were low, and the transactions picked up slightly in the early trading yesterday. In terms of NPI, according to SMM research, a steel mill in south China bought high-grade NPI at 1,385 yuan/mtu (tax included, delivery to factory) yesterday, and the prices of thousands of mt of NPI purchased by a mill in east China were 1,390 yuan/mtu (tax included, delivery to factory). On the demand side, recent market transactions have been weak, and it will take some time to release downstream demand. Spot prices remained low under inventory pressure. The #316L stainless steel witnessed no transactions, and some traders suspended quotations. The guide price of steel mills continues to rise amid the rising raw material prices, and there are few transactions in the market. Alloy enterprises were reluctant to purchase as the nickel prices stood high. To sum up, the overall fundamentals of pure nickel were weak, reducing the support for nickel price.
[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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