SMM Evening Comments (Jan 19): Shanghai Nonferrous Metals Mostly Closed with Gains amid Rising Commodity Prices

SHANGHAI, Jan 19 (SMM) – Shanghai nonferrous metals mostly closed with gains amid rising commodity prices including crude oil. While the first press conference held by the People’s Bank of China in 2022 put forward the theme of “stability” with paramount importance.

Shanghai copper was flat, aluminium rose 1.77%, lead lost 0.77%, zinc gained 1.27%, tin advanced 1.36%, and nickel advanced 0.23%.

Copper: The most-traded SHFE 2203 copper closed up 0.01% or 10 yuan/mt at 70020 yuan/mt, with open interest up 1019 lots to 136183 lots.

On the macro front, the first press conference held by the People’s Bank of China (PBoC) in 2022 was quite productive. PBoC made it clear that it will maintain the steady growth of the total amount of money and credit, the steady optimisation of the credit structure, thesteady reduction in the comprehensive financing costs of enterprises, as well as the basic stability of the RMB exchange rate at a reasonable and balanced level. PBoC also indicated that RRR still has room of further adjustment, though limited.

In terms of oil, crude prices surged to seven-year high. OPEC believed that the oil market will gain sound support in 2022, which will offer some support to copper prices. Japanese Yen dropped on the central bank’s insistence on ultra-loose monetary policy. US dollar index rose 0.6% in late trading.

Tonight, the market shall watch the ZEW economy climate index in the eurozone in January.

Aluminium: The most-traded SHFE 2202 aluminium closed up 1.77% or 375 yuan/mt to 21530 yuan/mt, with open interest down 10718 lots to 129016 lots.

The fundamentals of aluminium have not changed much recently. The operating aluminium capacity in Yunnan and Shanxi rose slightly, and the total operating capacity was still low. The downstream consumption weakened approaching the Chinese New Year (CNY), resulting in rising inventory.

SMM expects that the aluminium inventory increase during the CNY will be less than in previous years, with an estimated high below 1.2 million mt.

Lead: The most-traded SHFE 2202 lead closed down 0.77% or 120 yuan/mt at 15510 yuan/mt, with open interest down 3951 lots to 18135 lots.

In spot market, secondary lead smelters were less willing to make shipments amid falling lead prices and high lead-acid battery scrap prices. The spot transactions were sluggish, coupled with tight supply. Primary lead was offered with discounts of 50-100 yuan/mt over SMM #1 lead. In the trading market in Zhejiang, the Tongguan, Jijin and Mulun lead was reported between 15,495-15,515 yuan/mt, or in discounts of 20-0 yuan/mt over SHFE 2202. The downstream purchased on dips. Some battery companies and small secondary lead smelters have already closed for CNY holiday.

Zinc: The most-traded SHFE 2202 zinc closed up 1.27% or 310 yuan/mt at 24780 yuan/mt, with open interest down 3688 lots to 48225 lots.

On the fundamentals, the spot prices rose along with rising SFHE zinc prices. The downstream demand was suppressed by high raw materials prices. On the other hand, some traders sold off, resulting in quickly falling intraday premiums. The spot prices in Shanghai were in premiums of around 90 yuan/mt over SFHE 2202 zinc.

Tin: The most-traded SHFE 2202 tin closed up 1.36% or 4270 yuan/mt at 318500 yuan/mt, with open interest down 5648 lots to 38655 lots.

On the fundamentals, the spot supply was stable, and the prices rose slightly. The warrants inventory dropped further. The supply and demand were still weak currently, and are expected to remain so in the short term.

Nickel: The most-traded SHFE 2202 nickel closed up 0.23% or 370 yuan/mt to 163760 yuan/mt, with open interest down 7110 lots to 125036 lots.

On the news front, a power plant was bombed amid political turbulence in Myanmar, while the nickel processing companies nearby were not severely affected, according to SMM research. However, the explosive indecent will definitely upset the market, boosting nickel prices. LME inventory also underpinned nickel prices.