SMM Evening Comments (Mar 24): Shanghai Nonferrous Metals All Closed with Gains amid Energy Supply Concerns and Lingering Pandemic, Nickel Hit Limit Up Again

SHANGHAI, Mar 24 (SMM) – Shanghai nonferrous metals all closed with gains amid sustaining energy supply concerns and impacts from spreading COVID in China.

Shanghai copper climbed 0.59%, aluminium added 0.91%, lead gained 0.52%, zinc advanced 1.81%, tin rose 5%, and nickel jumped 17%.

Copper: The most-traded SHFE 2205 copper closed up 0.59% or 430 yuan/mt at 73,580 yuan/mt, with open interest up 7,617 lots to 153,880 lots.

On the macro front, Putin said yesterday that gas supplies to Europe will be settled in rouble, sparking market concerns about supply and costs. Gas prices went up 34%, while crude oil prices rose more than 5%, aggravating inflation issues and shoring up commodity prices.

In the spot market, downstream demand has been suppressed by spreading pandemic in China, and the transaction could hardly improve in the near future. Most traders rushed to liquidate their stocks approaching the end of the month for exchange of cash as the delivery of monthly long-term orders is about to end. Premiums have been falling in the past two days.

Aluminium: The most-traded SHFE 2205 aluminium closed up 0.91% or 210 yuan/mt to 23,190 yuan/mt, with open interest up 4,382 lots to 242,634 lots.

On the supply side, overseas energy prices surged again, deepening market concerns over potential aluminium production curtailment. On the demand side, domestic aluminium social inventory dropped further, underpinning aluminium prices to some extent.

Lead: The most-traded SHFE 2205 lead closed up 0.52% or 80 yuan/mt at 15,380 yuan/mt, with open interest down 68 lots to 56,729 lots.

In the spot market, primary lead smelters broadly had low inventory, and the situation varied by region. High premiums were maintained in a number of places. For secondary lead, shrinking supply and European energy crisis created more difficulties for secondary refined lead smelters to purchase raw materials. And secondary refined lead (tax included) was reported at discounts of 50 yuan/mt over SMM #1 lead, and the downstream only purchased on rigid demand.

Zinc: The most-traded SHFE 2205 zinc closed up 1.81% or 465 yuan/mt at 26,145 yuan/mt, with open interest up 5,794 lots to 99,660 lots.

On the fundamentals, the terminal consumption has been suppressed by high zinc futures prices, and downstream orders are still waiting for the pivot. The market turned increasingly sluggish amid inflating energy and futures prices. In the spot market, logistics has not improved due to the pandemic.

Tin: The most-traded SHFE 2205 tin closed up 4.00% or 13,490 yuan/mt at 350,380 yuan/mt, with open interest up 3,760 lots to 36,974 lots.

In the spot market, spot prices rose palpably today amid rising futures prices, with an intraday growth of 10,750 yuan/mt from a day ago. The downstream was extremely muted in making purchase. SHFE warrants dropped 4 mt to 1,915 mt today.

Nickel: The most-traded SHFE 2204 nickel closed up 17% or 35,700 yuan/mt at 245,740 yuan/mt, with open interest down 3,217 lots to 43,636 lots.

On the supply side, deteriorating COVID further hindered the transport in Shanghai, and absolute prices of pure nickel were still high despite falling premiums because the futures prices are high. Market supply and demand were both weak.

For NPI, the prices have been supported by smelting cost, price spread as well as supply and demand. Market supply is expected to tighten after concentrated purchase of steel mills.

On the demand side, upstream and downstream of nickel sulphate were both cautious in bids and offers, and market transaction would be thin before nickel prices fully stabilise.

For stainless steel, market transactions were mostly made on rigid demand, and the overall market was quiet.

LME nickel recorded gains of 13.67% after opening yesterday, and overnight SHFE nickel hit limit up. Nickel prices are mainly subject to capital moves at the moment.