SHANGHAI, Feb 8 (SMM) – SHFE and LME base metals closed mixed overnight. On the macro front, Federal Reserve Chairman Powell reiterated last week's statement that inflation has begun to slow, saying he expects inflation to fall sharply this year, and the dollar's rally has stalled.
Copper: LME copper closed at $8,906.5/mt in overnight trading, a gain of 0.08%. Trading volume was 15,000 lots and open interest stood at 254,000 lots. The most active SHFE 2303 copper contract finished at 68,190 yuan/mt overnight, up 0.22%. Trading volume was 31,000 lots, and open at 159,000 lots.
On the macro front, Federal Reserve Chairman Powell reiterated last week's statement that inflation has begun to slow, saying he expects inflation to fall sharply this year, and the dollar's rally has stalled, which buoyed copper prices.
In terms of fundamentals, Guangdong's inventory has ended 14 consecutive weeks of increases, but it is still at a high level. The decline in copper prices has increased downstream buying interest, and after the Lantern Festival, companies have stepped up inventory replenishment. The market activity is significantly greater than before. In terms of consumption, market demand is gradually improving. Due to the influence of macro and fundamentals, it is expected that copper prices will remain rangebound in the near future.
Aluminium: SHFE 2303 aluminium contract opened at 19,030 yuan/mt overnight and mostly fluctuated above 19,000 yuan/mt before finally closing at 19,065 yuan/mt.
LME aluminium opened at $2,547/mt on Tuesday and dropped to $2,505/mt before closing at $2,534/mt, down 0.37%.
On the demand side, demand in aluminium ingot, billet and downstream alloy sectors are recovering, which has been reflected in the spot market. On the supply side, expectations for production reduction still exist, thus aluminium prices are supported. Although aluminium inventory is still in accumulation cycle, the growth is expected to slow down in the future. Aluminium prices are expected to go up.
Lead: Overnight, LME lead opened at $2,100/mt. Under the pressure of the increasing US dollar index and the rising lead inventory, LME lead fell to $2,083/mt. But LME lead prices rebounded 0.55% and closed at $2,111.5/mt as the US dollar index fell. As of February 7, LME lead inventory were 22,175 mt, an increase of 1,975 mt from the previous day.
The most-traded SHFE 2303 lead contract opened at 15,155 yuan/mt overnight amid the increasing domestic and overseas inventory. SHFE lead remained at 15,170-15,190 yuan/mt for a long time amid the long-short game and finally closed at 15,175 yuan/mt, down 0.26%, with the open interest up 414 lots to 73,624 lots. The warrants inventory of SHFE lead ingot was 40,766 mt yesterday, an increase of 477 mt from the previous day.
Zinc: Yesterday, China's president Xi Jinping delivered an important speech at the opening ceremony of a seminar on studying and implementing the spirit of the party, emphasizing the need to understand and promote modernisation of Chinese characteristics. Premier Li Keqiang stressed the importance of innovating policy implementation and focusing on the needs of market players. Powell's said in his first speech after the release of employment report that a further rate hike was necessary on strong employment rate, though the inflation began to cool. The FOMC warned that the data of US non-farm payrolls indicates that the interest rates still needed to be raised.
Yesterday, LME zinc rose after opening, and then dropped slightly before advancing again. It finally closed at $3196.5/mt, an increase of $75.5/mt. LME zinc inventory shed by 625 mt to 15,600 mt.
Overnight, SHFE zinc climbed and neared the middle of the Bollinger Bands, settling at 23,600 yuan/mt, up 235 yuan/mt, or 1.01%. On the macro front, the zinc prices rallied after the US dollar index slowed down in growth and the market sentiment was digested. Before the consumption recovery shows a clear sign, zinc prices may still remain rangebound.
Tin: SHFE tin prices fell after opening last night and then rebounded after briefly hitting the low point at 215,150 yuan/mt. The most-traded SHFE 2303 tin contract closed at 217,660 yuan/mt.
Fundamentally, the domestic tin inventory under warrants fell slightly yesterday. And the spot premiums rebounded slightly, hence the shipments were lower than that in February 6. The import window remained open as the imported tin prices were in obvious discounts.
In terms of futures prices, the SHFE tin prices remained volatile last night and closed at 217,660 yuan/mt. The open interest of SHFE 2303 tin contract remained stable while that of SHFE 2304 tin contract increased slightly.
To sum up, the futures prices declined amid the stalemate of long-short game. The operating rates of downstream companies has not yet picked up significantly, hence the market may be less active after the restocking period ended.
Nickel: On the supply side, SHFE nickel rebounded in early trading yesterday. The spot prices dropped slightly, and the intraday inquiries picked up. However, according to SMM research, supply of NORNICKEL nickel in the market tightened. The problem of a mismatch between the supply and demand of stainless steel still exists, and the profits of NPI can hardly grow. It is expected that the game between NPI and stainless steel sectors will continue. On the demand side, according to SMM survey, the prices of #316L hot-rolled coils offered by Tsingshan were lower than the current market quotation, but the demand from the industrial sector is gradually released. Recently, the transactions of #316L hot-rolled coils have been relatively good, and the prices have gradually returned to rationality. Some alloy manufacturers completed the restocking amid the falling nickel prices in the past few days. To sum up, the supply of pure nickel was tightened, and downstream demand weakened. SMM believes that the nickel prices will move 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.]
