SMM Morning Comments (Feb 10): Base Metals Closed Mixed as Investors Keen on US Inflation Data Next Week

SHANGHAI, Feb 10 (SMM) – SHFE and LME base metals closed mixed overnight. On the macro front, the market expects that U.S. inflation has been kept in check, and the Fed will slow down interest rate hikes.

Copper: LME copper prices closed at $9,000.5/mt in overnight trading, a gain of 0.89%. Trading volume was 15,000 lots and open interest stood at 253,000 lots. SHFE 2303 copper contract finished at 68,520 yuan/mt overnight, up 0.06%. Trading volume was 29,000 lots, and open interest stood at 153,000 lots.

On the macro front, the market expects that U.S. inflation has been kept in check, and the Fed will slow down interest rate hikes.

In terms of fundamentals, Guangdong's inventory has fallen sharply for three consecutive days, mainly due to the slight decrease in the arrivals and the active replenishment of downstream buyers. The downstream consumption has gradually picked up. But high copper prices will have a greater impact on the full recovery of consumption. With the recovery of domestic demand, it is expected that copper prices will remain relatively strong in the next few days.

Aluminium: The most-traded SHFE 2303 aluminium contract opened at 18,930 yuan/mt overnight and moved around 19,000 yuan/mt, showing a cross-star pattern at the end of the session.

LME aluminium opened at $2,488/mt on Thursday, and dropped to a low of $2,460/mt, but then returned to $2,500/mt, and finally closed at $2,507/mt, ending six-day losing streak.

From the perspective of the supply side, smelters in Yunnan are subject to power rationing. Transactions in the spot market have become increasingly active as downstream purchases have begun to pick up, forming support for aluminium prices. However, the inventory of aluminium ingots is still in a state of accumulation, with no obvious sign of inflection point. Therefore, aluminium prices are expected to remain in a narrow range.

Lead: Overnight, LME lead opened at $2,132.5/mt and fluctuated between $2,135-2,140/mt amid the light transactions during the Asian trading hours. As the US dollar index fell sharply, LME hit the highest point at $2169/mt and then pulled back amid weak fundamental.

SHFE lead finally closed at $2,119/mt, a decrease of 0.61%. Overnight, the most-traded SHFE 2303 lead contract opened at 15,280 yuan/mt and remained high at 15,300 yuan/mt amid strong LME lead prices. But the poor recovery of demand and expectations for increasing inventory dragged down the prices. SHFE lead rushed to a weekly high of 15,390 yuan/mt with the exit of shorts. SHFE Lead closed at 15,385 yuan/mt, up 0.92%, with open interest decreasing 3,907 lots to 63,919 lots.

Zinc: On the news front, the People's Bank of China issued the "No. 1 Order" in 2023, a clear guidance for transactions between financial holding companies. The US Treasury Secretary Yellen said that she still hoped to visit China while stressing the importance to strengthen communication with China. The Russian Direct Investment Fund (RDIF) claimed to sell all euro assets and will only hold assets dominated in RMB, rubles, and gold. German’s CPI in January increased by 8.7% year-on-year, and its inflation unexpectedly fell to the lowest point in five months. The Pan-European BIG bond index hit a ten-month high, and the FTSE 100 index also hit a record high. The European bond yields that have been rising for four consecutive days pulled back. 

Yesterday, LME zinc mainly moved sideways and closed at $3,147.5/mt, up $10/mt or 0.32%. LME zinc inventory added by 1,950 mt to 21,375 mt.

Overnight, SHFE zinc showed great momentum after opening, but pared some of the gains afterwards before finishing at 23,365 yuan/mt, up 85 yuan/mt or 0.37%. The market's macro sentiment was relatively strong, but zinc prices still remained rangebound as overseas supply pressure mounted.

Tin: SHFE tin fluctuated narrowly last night. The most-traded SHFE 2303 tin contract closed at 220,820 yuan/mt.

Domestic warrants remained stable from yesterday. The spot premiums were stable and the shipments improved slightly from yesterday. The import window remained open as the imported tin prices were in obvious discounts.

SHFE tin prices fluctuated narrowly after opening last night. The most-traded SHFE 2303 tin contract closed at 220,820 yuan/mt, with open interest increasing 5,019 lots. The open interest of SHFE 2304 and other forward-month contracts increased.

To sum up, SHFE tin prices fluctuated amid the long-short game. The spot market was stable amid the high downstream raw material inventory and the impact of imported tin.

Nickel: During the week, NORNICKEL nickel arrived at the market one after another, and the premiums trended lower. The inquiries and transactions in the early trading yesterday were sluggish. The quotations offered by some NPI factories and traders stabilised with some declines. The nickel ore market witnessed some high-priced transactions, and the overall nickel ore prices grew slightly with the firm cost support. On the demand side, according to SMM research, 200-series cold-rolled coils arrived in the south China market intensively, weighing on the inventory again. Transactions of #304 cold-rolled coils were slack, while those of hot-rolled coils were acceptable. Alloy companies still purchased pure nickel on dips in a small amount. In general, pure nickel demand remained weak. SMM presumes that nickel prices will remain 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.]