SMM Morning Comments (Feb 9): Base Metals Closed Mixed on Dovish US Fed

SHANGHAI, Feb 9 (SMM) – SHFE and LME base metals closed mixed overnight. On the macro front, affected by Fed Chairman Powell's dovish speech, the dollar was running at a relatively low level. The market is awaiting more economic data to predict the direction of interest rate hikes.

Copper: LME copper closed at $8,921.5/mt overnight, up 0.17%. Trading volume was 15,000 lots and open interest stood at 254,000 lots.

The most active SHFE 2303 copper contract finished at 68,150 yuan/mt overnight, down 0.04%. Trading volume was 32,000 lots, and open interest stood at 158,000 lots.

On the macro front, affected by Fed Chairman Powell's dovish speech, the dollar was running at a relatively low level. The market is awaiting more economic data to predict the direction of interest rate hikes. In terms of fundamentals, Guangdong's inventory has fallen for two consecutive days due to the obvious improvement in consumption, and it has now fallen below the 60,000 mt level. The transaction in the spot market gradually picked up, and the structure of contango on SHFE copper expanded. The demand has continued to improve, and it is expected that the upstream and downstream producers will fully recover by the end of February. Due to the uncertainties over macro, it is expected that copper prices will remain rangebound.

Aluminium: The most-traded SHFE 2303 aluminium contract opened at 19,075 yuan/mt overnight and moved around 19,000 yuan/mt before closing at 18,915 yuan/mt.

LME aluminium opened at $2,535/mt on Wednesday and fell to $2,471/mt before closing at $2,487/mt, down 1.87%.

On the supply side, the operating aluminium capacity fell to 40.1 million mt in early February, and the output is expected to be 3.07 million mt this month. Smelters in Guizhou and Yunnan maintained production cuts. Although the social inventory kept accumulating, downstream consumption and procurement are gradually becoming active. It is expected that aluminium prices will still fluctuate rangebound in the short term. Market players should pay attention to the risk of the Fed's hawkish stance and bigger-than-expected accumulation of domestic and overseas inventories.

Lead: Overnight, LME lead opened at $2,111.5/mt, LME fell amid the strong US dollar index. Coupled with the hawkish remarks, LME lead prices fell below $2,100/mt, but then rebounded and finally closed at $2,132/mt, an increase of 0.97%.

The most-traded SHFE 2303 lead contract opened at 15,280 yuan/mt and decreased 0.03% to close at 15,225 yuan/mt last night amid the increasing warrant inventory and long-short game. The open interest decreased 386 lots to 69,206 lots. The warrants inventory of SHFE lead ingot was 41,267 mt yesterday, an increase of 501 mt from the previous day.

Zinc: It is expected that the January new loans in China may set a monthly record high. Many US Fed officials took a hawkish stance claiming that the 5.1% rate peak was rational, and the Fed governor said the rate hikes may last longer with larger sizes. Traders began to bet aggressively that interest rates would rise to 6%. Data from the China Passenger Car Association showed that the retail sales of passenger cars in January fell by 37.9% year-on-year, and those of new energy vehicles dropped by 48.3% month-on-month. The NEV producers all faced headwind in sales except Tesla, who got off to a good start in 2023 with price cuts. In terms of installed capacity of batteries in 2022, Chinese battery producers accounted for over 60% of the global share, with CATL ranking first.

Yesterday, LME zinc went down to close at $3,137.5/mt, down $59/mt or 1.85%. LME zinc inventory added by 3,825 mt to 19,425 mt.

Overnight, SHFE zinc also dropped by 175 yuan/mt or 0.75% to finish at 23,295 yuan/mt. On the macro front, the zinc prices still fluctuated following the volatile US dollar index.

Tin: SHFE tin prices fell after opening last night and the most-traded SHFE 2303 tin contract closed at 217,220 yuan/mt.

Fundamentally, affected by the intensive delivery of smelters, the domestic warrant inventory increased obviously yesterday. The spot premiums were normal and the shipments were slightly lower than yesterday. The import window remained open as the imported tin prices were in obvious discounts.

SHFE tin prices fell after opening last night and the most-traded SHFE 2303 tin contract closed at 217,220 yuan/mt, with open interest increasing 1458 lots. The open interest of SHFE 2304 and other forward-month contracts increased slightly.

To sum up, SHFE tin prices fluctuated widely amid the long-short game. The spot market was stable amid the high downstream raw material inventory and the impact of imported tin.

Nickel: On the supply side, the spot imports of pure nickel gained profits yesterday. SMM believes that imported nickel plates will flow into the market this week and next week. The quotations offered by some NPI factories and traders dropped somewhat. The nickel ore market witnessed some high-priced transactions, and the overall nickel ore prices grew slightly with the firm cost support. On the demand side, according to SMM research, the recent stainless steel cold-rolled transactions have weakened, while hot-rolled trading is acceptable. Tsingshan Group opened at a par price for three consecutive days, and orders of #316L stainless steel were better. Some alloy manufacturers completed the restocking amid the falling nickel prices in the past few days. To sum up, the supply tightness of pure nickel is expected to be eased, so nickel prices will remain rangebound with some downward potential.

[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.]