SMM Evening Comments (Mar 3): Shanghai Nonferrous Metals Most Closed with Gains on Lingering Geopolitical Tensions

SHANGHAI, Mar 3 (SMM) – Shanghai nonferrous metals mostly closed with gains as the market was still on edge in light of the on-going Russia-Ukraine tensions.   

Shanghai copper added 2.13%, aluminium rose 3.71%, lead lost 0.8%, zinc advanced 2.61%, tin climbed 0.8%, and nickel jumped 5.01%.

Copper: The most-traded SHFE 2204 copper closed up 2.13% or 1,520 yuan/mt at 73,010 yuan/mt, with open interest up 10,590 lots to 150,786 lots.

Crude prices continued to surge today, while the base metals all rose significantly today amid surging natural gas prices in Europe. Copper prices were still undervalued through comparison with other metals. And the market shall watch if the seasonal high in March would sustain the current upside cycle.  

Aluminium: The most-traded SHFE 2204 aluminium closed up 3.71% or 850 yuan/mt to 23,775 yuan/mt, with open interest up 14,534 lots to 245,470 lots.

On the macro front, the exports and transportation of NORNICKEL nickel are expected to be hindered by the on-going Russia-Ukraine conflicts. The continuously rising energy prices in the Europe exacerbated the concerns over production cuts. As such, LME aluminium moved upwards, pulling up SHFE nickel, which is estimated to carry strong upside potential.

Lead: The most-traded SHFE 2204 lead closed down 0.8% or 125 yuan/mt at 15,495 yuan/mt, with open interest up 1,487 lots to 58,799 lots.

In the spot market, primary lead mostly quoted in discounts of 100-200 yuan/mt over SMM #1 lead, while secondary refined lead (tax included) was in discounts of 200-250 yuan/mt. In the trade market, lead brands of Jijin, Jiangtong, Tongguan and Mulun were offered between 15,405-15,445 yuan/mt in Zhejiang and Jiangsu, or in discounts of 40-0 yuan/mt over SHFE 2203.

The downstream became more cautious on correcting lead prices, and most transactions were made under long-term orders, with few small orders.

In the short term, the seasonal low will deplete lead with its upside potential, and the supply side is recovering as a whole there has been both increment and reduction.

Zinc: The most-traded SHFE 2204 zinc closed up 2.61% or 665 yuan/mt at 26,120 yuan/mt, with open interest down 329 lots to 128,486 lots.

Though SHFE zinc recorded considerable gains recently, it was still conservative compared with LME zinc. Last night, European natural gas and electricity prices again surged to new highs. Meanwhile, the market was still on edge amid on-going geopolitical tensions.

Tin: The most-traded SHFE 2205 tin closed up 0.8% or 2,730 yuan/mt at 342,410 yuan/mt, with open interest up 270 lots to 37,772 lots.

On the fundamentals, upstream offers rose slightly after the most-traded tin contract rallied in the day trade, but the high prices clearly suppressed downstream demand. And the spot market was quiet today. SHFE warrants dropped 12 mt to 2,751 mt, and SHFE inventory has been relatively stable recently, indicating a sluggish trade market.

Nickel: The most-traded SHFE 2204 nickel closed up 5.01% or 8,980 yuan/mt to 188,180 yuan/mt, with open interest up 4,118 lots to 152,039 lots.

In the spot market, Jinchuan nickel was in premiums of 3,200-3,500 yuan/mt over SHFE 2204, an average of 3,650 yuan/mt and down 300 yuan/mt from a day ago. NORNICKEL nickel was in premiums of 3,000-3,100 yuan/mt over SHFE 2204, an average of 2,900 yuan/mt and up 150 yuan/mt from yesterday mainly due to supply shortage. The spot transactions were muted today amid high futures prices, and absolute prices of pure nickel were also high.

For nickel briquette, the premiums kept rising on tight supplies, and stood at 4,500-5,000 yuan/mt over SHFE 2204, and there were basically no transactions in the market.