SHANGHAI, Dec 7 (SMM) – LME and SHFE base metals closed overnight. On the macro front, the US released strong employment and service industry data, and more data will be released on Friday, including the producer price index (PPI). The US Federal Reserve’s rate meeting next week is worth attention.
LME copper rose 0.54%, aluminium dropped 0.28%, lead lost 1.17%, and zinc advanced 0.37%.
SHFE copper inched up 0.05%, aluminium added 0.78%, lead lost 0.91%, and zinc advanced 0.96%.
Copper: LME copper opened at $8,378/mt on Tuesday and dropped to a low of $8,363/mt after climbing to $8,495/mt. At last, the contract closed at $8,405.5/mt, up 0.54%. The trading volume was 13,000 lots, and open interest stood at 245,000 lots.
SHFE 2301 copper opened at 65,890 yuan/mt overnight, once hitting the lowest and highest of 65,680 yuan/mt and 66,570 yuan/mt. At last, it closed at 65,930 yuan/mt, up 0.05%. The trading volume was 43,000 lots, and open interest stood at 145,000 lots.
On the macro front, the US released strong employment and service industry data, and more data will be released on Friday, including the producer price index (PPI). The market is reassessing the future path of the US Fed’s rate hikes, and the US dollar closed up overnight. Fed meeting next week is worth attention.
On the fundamentals, SMM copper inventory across China stood at 899,600 mt in November, down 3,700 mt from the expected 903,300 mt. A smelter began its maintenance ahead of schedule due to equipment problems, and the overall supply of blister copper and copper scrap was still relatively tight, which limited the new copper output in November. China copper cathode output is estimated at 887,900 mt in December, up 2% YoY based on the current production schedules. Consumption may recover slightly with the relaxation of COVID-19 control measures, and some companies will restock raw materials near the end of the year. Copper prices are expected to remain rangebound before the release of the Fed’s rate hikes.
Aluminium: The most-traded SHFE 2301 aluminium contract opened at 19,220 yuan/mt overnight and moved above the daily average before closing at 19,360 yuan/mt, up 150 yuan/mt or 0.78%.
LME aluminium opened at $2,505/mt on Tuesday, with its high at $2,529.5/mt before closing at $2,500/mt, a drop of $7/mt or 0.28%.
Aluminium inventory remained low, with little possibility of large accumulation in the near future. Smelters in Gansu and Inner Mongolia continued to resume production. Transactions in aluminium ingot and aluminium billet markets were relatively weak at the current high aluminium prices. Poor orders and high aluminium prices may drive some downstream producers to suspend their production. It is expected that aluminium prices will still fluctuate strongly, driven by expectations for loosening pandemic controls and low inventory.
Lead: Overnight, LME lead opened at $2,228/mt, and the transactions were thin at the beginning of the session amid the market game. LME lead basically fluctuated between $2,220-2,235/mt. In the European trading hours, the market worried that the Fed would remain hawkish, which may exacerbate the risk of economic recession. Therefore, the prices of most metals weakened, and LME lead also fell to the lowest point at $2,199.5/mt, and finally closed at $2,205/mt, a decrease of 1.17%.
Overnight, the most-traded SHFE 2301 lead contract opened at 15,910 yuan/mt, and the lead inventory rose near the delivery of SHFE 2212 lead contract. SHFE lead prices fell rapidly with the exit of longs. In the second half of the session, due to the weak supply and demand and the increase in scrap prices, SHFE lead gradually rose to around 15,850 yuan/mt. But due to the accumulated inventory, SHFE lead prices closed at 15,805 yuan/mt, a decrease of 0.91%. The open interests decreased 8,046 lots from the previous trading day to 77,341 lots. The SHFE lead warrant inventory increased by 1,550 mt to 36,903 mt.
Zinc: LME zinc closed at $3,126/mt on Tuesday, up $11.5/mt or 0.37%. The open interest fell 880 lots to 200,000 lots. LME zinc inventory fell 755 mt to 38,975 mt.
The most traded SHFE 2301 zinc contract closed at 24,755 yuan/mt overnight, up 235 yuan/mt or 0.96%. The open interest added 3,061 lots to some 120,000 lots. On the supply side, the supply is likely to be sufficient in the long run with expectations of supply growth. On the consumption side, the downstream orders and operating rates did not rise significantly amid loosening pandemic controls across the country, and the demand side remained weak. On the whole, SHFE warrants inventory created a new low of merely 25 mt. And SHFE zinc will be supported in the near term amid relaxing macro sentiment and low warrants inventory.
Overnight, US API crude oil inventories fell by 6.426 million barrels in the week of December 2, compared to an expected decrease of 3.884 million barrels and a previous decrease of 7.85 million barrels. On Tuesday December 6 local time, there was news of a third Russian airport being attacked by Ukraine. The Australian Federal Reserve raised interest rates by 25 basis points to 3.10%, in line with market expectations, for the eighth time since May this year and the highest rate level since November 2012. The Australian Fed is expected to raise interest rates in the follow-up period. Goldman Sachs Global Economic Outlook 2075: Indonesia will become the fourth largest economy in the world; the US is unlikely to repeat the strong performance of the past 10 years and the strength of dollar will dissipate in the next decade; the heyday of potential global growth has passed due to demographic issues. In China, the field negotiations of 2022 National Health Insurance Drug Catalogue were postponed, and the validity of the old agreement will be automatically extended until the new version of the catalogue is officially implemented.
Tin: Overnight, SHFE tin went up after opening, and closed at below 200,000 yuan/mt. There was a tug-of-war between longs and shorts at around 200,000 yuan/mt. The domestic tin inventory under SHFE warrants continued to increase. Trades in the spot market were sluggish. Tin of deliverable brands was sold at a small discount. LME tin inventories fell slightly. Overseas premiums were stable. The number of quotations for imported tin decreased. Given stable supply and demand, SHFE tin may hover around 200,000 yuan/mt.
Nickel: On the supply side, due to the long-term losses of imported pure nickel, the spot supply in China remained tight, and the premiums rebounded. In terms of NPI, according to the production schedules in November, most NPI factories reduced their output, but the output increase of integrated enterprises was relatively large. Therefore, NPI supply was in surplus amid the poor downstream demand. On the demand side, according to SMM research, steel mills still controlled the market supply. Although Tsingshan has offered prices for February, the volume of goods approved for pick-up may be relatively low. The intraday trading was average, which mainly flowed into the industrial sector. Pure nickel demand from the military and nuclear power sectors still existed as these companies received orders steadily. To sum up, the supply of pure nickel was tight, so nickel prices will remain rangebound with some downward potential.
[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.]
