SMM Morning Comments (Mar 15): Base Metals Mostly Settled with Losses amid Easing Russia-Ukraine Tension

SHANGHAI, Mar 15 (SMM) – Shanghai base metals mostly closed with losses overnight amid weak consumption and alleviated tension between Russia and Ukraine. Their counterparts on LME all closed down on Monday.

LME copper fell 2.11%, aluminium loset 4.74%, lead dropped 1.24%, and zinc decreased 0.55%.

SHFE copper rose 0.87%, aluminium fell 0.8%, lead dropped 1.47%, and zinc shed 1.02%.

Copper: LME copper prices opened at $9,932/mt yesterday, then rose to $9,968.5/mt. At last, the prices closed at 9,887.5/mt, down 2.11%. Trading volume was 16,000 lots, and open interest stood at 254,000 lots.

SHFE 2204 copper contract opened at 71,260 yuan/mt in overnight trading and remained rangebound around the daily average line. At last, the prices closed at 71,380 yuan/mt, up 0.87%. Trading volume was 25,000 lots, and open interest stood at 111,000 lots.

On the macro level, as the Russia-Ukraine conflict cooled down, the market turned the focus to FOMC meeting on Wednesday. Copper prices dropped at night along with the falling crude oil yesterday. At present, the market generally expects the US Fed to raise interest rates, thus copper futures are weak and remain rangebound at low levels.

In terms of spot, small import losses hindered the imported goods from flowing into domestic continuously. Meanwhile, the market was rumoured that smelters in Shandong reduced production due to funding problems, so domestic inventory will continue to remain low in the short term. However, under the influence of the pandemic, the logistics in the Yangtze River Delta are greatly influenced. The consumption is not as good as expected, except for traders who bought a small amount on dips. It is expected that the premiums before delivery will be around 200 yuan/mt. LME copper will trade between $9,830-9,930/mt today; SHFE copper prices are expected to move between 71,000-71,600 yuan/mt. Spot premiums are likely to fluctuate between 170-260 yuan/mt.

Aluminium: LME aluminium opened at $3,497/mt on Monday and closed at $3,315/mt, down $165/mt or 4.74%.

Overnight, the most-traded SHFE 2204 aluminium contract opened at 21,800 yuan/mt, with the highest and lowest prices at 21,885 yuan/mt and 21,655 yuan/mt before closing at 21,730 yuan/mt, down 175 yuan/mt or 0.8%.

In terms of real estate, 22 cities with centralised land supply sold a total of 2,111 residential-related land in 2021 after three rounds of centralised land supply. As of February 9, 2022, only 21% of them has commenced construction. Overseas: The EU announced new sanctions against Russia, abolishing the most-favoured-nation treatment for Russian trade, prohibiting EU companies from investing in the Russian oil and gas industry, prohibiting the export of luxury goods and high-end cars to Russia, and prohibiting the export of Russian steel to the EU.

Lead: LME lead opened at $2,320/mt on Monday, hitting the highest point at $2,338/mt and the lowest point at $2,250.5/mt, and closed at $2,268/mt, down 1.24%.

The most traded SHFE 2204 lead contract opened at 15,120 yuan/mt, hitting the lowest point at 14,910 yuan/mt, before closing at 15,030 yuan/mt, down 1.47%.

Zinc: LME zinc opened at $3,184/mt on Monday, hitting the highest and lowest points at $3,872/mt and $3,744/mt respectively, and closed at $3,809/mt, a decrease of 0.55% or $21/mt. The trading volume was 5,578 lots, and the open interest fell 2,084 lots to 248,000 lots. The LME zinc inventory dropped by 200 mt or 0.14% to 140,525 mt. The concern of supply shortage eased amid alleviated tension between Russia and Ukraine. LME zinc is expected to trade between $3,770-3,820/mt.

The most traded SHFE 2205 zinc contract opened at 25,200 yuan/mt, and shed 260 yuan/mt or 1.02% to 25,145 yuan/mt. The trading volume was 32,220 lots, and the open interest rose by 521 lots to 71,188 lots. The supply remained tight, but the consumption was still weaker compared with the same period in 2021. The social inventory of lead ingots rose to 285,700 mt. The zinc prices gradually returned to the fundamental logic. SHFE zinc is expected to trade between 25,000-25,500 yuan/mt, and the discounts of domestic 0# Shuangyan zinc are expected to be 0-10 yuan/mt.

Nickel: Due to the Russia-Ukraine conflict, the current supply cannot meet the growth rate of demand. Nickel prices are gradually returning to normal. After the extreme market, the downstream manufacturers on the demand side are still waiting for the prices to return to a reasonable range. It is understood that downstream manufacturers have stopped production, such as the NiMH battery factory. Therefore, the spot transaction is weak at present. To sum up, LME has not opened the market yet, and it is expected that SHFE nickel prices will still remain rangebound in the short term.

Tin: Overnight, SHFE tin fluctuated at below 330,000 yuan/mt. Tin inventory under SHFE warrants increased significantly. The delivery deadline is approaching and the downstream demand is sluggish due to production restrictions, which has increased seller's willingness to deliver cargoes to SHFE warehouses. The short-term tin prices will be facing downward pressure due to weak downstream demand.