SHANGHAI, Feb 17 (SMM) – SHFE and LME base metals closed mostly with gains overnight. The price of new homes in China rose for the first time in a year in January, which also encouraged the market, and positive expectations continued to ramp up.
Copper: LME copper closed at $9,055/mt in overnight trading, a gain of 2.11%. Trading volume was 17,000 lots and open interest stood at 239,000 lots.
The most active SHFE 2303 copper contract finished at 69,230 yuan/mt overnight, up 1.42%. Trading volume was 33,000 lots and open interest stood at 136,000 lots.
On the macro front, the dollar rebounded overnight after economic data on Thursday and other reports this week showed that U.S. inflation remains strong and the economy remains relatively resilient in the face of Fed rate hikes. The price of new homes in China rose for the first time in a year in January, which also encouraged the market, and positive expectations continued to increase.
In terms of fundamentals, due to the drop in copper prices yesterday, many downstream producers restocked. But due to the implementation of long-term trade orders in 2023, the supply of available cargoes was not very tight. On the whole, due to poor consumption at present, some sellers lowered their quotes to promote sales. But the downstream buyers continued to restock on demand. In terms of consumption, the end-user market has not seen a significant recovery, and it remains to be seen whether the market demand can continue to increase. It is expected that copper prices will remain rangebound at high levels due to market optimism.
Aluminium: The most-traded SHFE 2303 aluminium contract opened at 18,495 yuan/mt overnight before closing at 18,510 yuan/mt, up 120 yuan/mt or 0.65%.
LME aluminium opened at $2,389/mt on Thursday and closed at $2,418/mt, an increase of $33.5/mt or 1.4%.
Fears of US interest rate hikes and economic recessions put commodities under pressure. After the decline in aluminium inventory when compared to Monday February 13 and the steady increase in downstream operating rates this week, there are signs of stabilisation in the fundamentals. Market attention will be focused on how strong demand recovery will be. It is expected that aluminium prices will remain rangebound in the short term.
Lead: Last night, LME lead opened at $2,054.5/mt and rose 0.34% to $2,069/mt after hitting the lowest point at $2,023/mt.
The most-traded SHFE 2303 lead contract opened at 15,150 yuan/mt and fell slightly to 15,080 yuan/mt due to the falling LME lead prices, but then rose slightly and finally closed at 15,095 mt , up 80 yuan/mt or 0.53% overnight.
Zinc: On the news front, the Federal Reserve’s Mester said that inflation was still too high and it entailed further interest rate hikes. The US labour market was still tense with the January PPI hitting a seven-month high. Standing Committee of the Political Bureau of the CPC Central Committee said that the covid-19 was under control but regular monitoring would be strengthened. The EU planned to gradually lift the restrictions on travellers from China in terms of covid-19 checks.
LME zinc opened at $3,011/mt on Thursday night, touching a high and a low of $3,052.5/mt and $2,982.5/mt respectively. Afterwards, softer US dollar prompted LME zinc to rally and close up $32.5/mt or 1.08% to $3,037.5/mt. The trading volume rose to 8,246 lots, and open interest lost 1,041 lots to 199,000 lots. LME zinc inventory increased sharply by 4,775 mt to 29,850 mt, an increase of 19.04%. The economic data released by the United States recently showed that inflationary pressures were still high, and the Fed’s hawkish speech enhanced the market expectations for rate hikes. As a result, LME zinc was depressed and fell to a one-month low.
Overnight, the most-traded SHFE 2303 zinc contract nosedived after opening at 22,840 yuan/mt, and touched a low of 22,705 yuan/mt. Afterwards, it rallied and touched a high of 22,875 yuan/mt before settling at 22,845 yuan/mt, up 70 yuan/mt or 0.31%. Trading volume was down to 36,555 lots, and open interest gained by 750 lots to 79,843 lots. Although there are strong expectations for increasing supply at home and abroad, the signs of end consumption recovery points to a slow accumulation of domestic social inventory. It is expected that the short-term zinc price will have limited room for decline.
Tin: SHFE tin opened high yesterday night, and rebounded after falling. The most-traded SHFE 2303 tin contract rose 1.61% and closed at 215,600 yuan/mt, with open interest decreased 6,419 lots to 40,761 lots.
As futures prices stopped falling, spot market remained stable, and warrants decreased slightly. The spot premiums were still narrow. The import window remained open.
SHFE tin prices rebounded after falling last night. The most-traded SHFE 2303 tin contract rose 1.61% and closed at 215,600 yuan/mt, with open interest decreased 6,419 lots to 40,761 lots. The open interest of SHFE 2304 and other forward-month contracts also decreased.
To sum up, SHFE tin prices remained volatile. The upstream smelters has not yet fully recovered, and the raw material stocks of downstream enterprises have been digested to a certain extent. Imported tin continued to arrive, but imported goods were less cost-effective than the early stage. The overall demand for spot goods was weak, and the discounts were relatively stable.
Nickel: SHFE nickel prices fell affected by the higher-than-expected US retail sales in January. The spot premiums of pure nickel were raised, but the absolute price of spots dropped by nearly 3,500 yuan/mt. The spot transactions and inquiries were acceptable. NPI sellers generally lowered their quotations yesterday, and the panic began to spread across the market. Due to the weakening of stainless steel futures and spot prices, some NPI factories and traders have reduced their quotations. On the demand side, the intraday spot quotations of stainless steel were stable with occasional drops. Some traders cut their prices to ship amid the high inventories in the market, thus the traded price continued to decline. In general, the demand for pure nickel grew as the prices dropped in the past few days. 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.]
