SMM Morning Comments (Dec 8): Shanghai Base Metals Rose across the Board amid Bullish Market Sentiments

SHANGHAI, Dec 8 (SMM) – Shanghai base metals basically trended upward on Wednesday morning amid positive macro sentiments. Meanwhile, their counterparts on LME trended mixed.

LME metals closed mixed in the trading on Thursday. Copper fell 0.28%, lead lost 0.29%, aluminium rose 1.18%, and zinc gained 1.86%.

SHFE metals all closed with gains in the overnight trading. Copper rose 0.49%, aluminium increased 0.83%, lead gained 0.94%, zinc won 1.33%, and nickel rose by 2,000 yuan/mt.

Copper: Three-month LME copper opened at $9,635/mt in the overnight trading last night and rose rapidly to the highest point at $9,677.5/mt, then fell to the lowest level at $9,540/mt. It closed at $9,550.5/mt, a drop of 0.28%. The trading volume was 14,000 lots, and the open interest was 26,000 lots. Three-month LME copper is expected to trade between $9,500-9,600/mt today.

The SHFE 2201 copper contract opened at 70,160 yuan/mt last night and rose 0.49% to close at 69,860 yuan/mt after hitting the lowest level at 69,600 yuan/mt. The trading volume was 48,000 lots, and the open interest stood at 142,000 lots. SHFE copper is expected to trade between 69,300-69,900 yuan/mt today, with spot prices between premiums of -100-100 yuan/mt.

The market concerns of COVID-19 variant Omicron resided. The US stocks market a largest gain in the past 9 months. Meanwhile, the negotiations on nuclear weapons between US and Iran was interfered. The oil prices kept rising amid weakened market concerns, which boosted copper futures. In the spot market, some holders lowered the prices by hearing the inflow of imported copper, and the spot premiums dropped rapidly. However, the downstream users refused to purchase at high prices, and the transactions were sluggish. The domestic consumption may not grow significantly at the end of the year. The spot premiums may stand low in the short term amid sufficient supply and opened import window.

Aluminium: LME aluminium opened at $2,592/mt on Tuesday and closed at $2,624.5/mt, an increase of $30.5/mt or 1.18%.

Overnight, the most-traded SHFE 2201 aluminium contract opened at 18,815 yuan/mt, with the highest and lowest prices at 18,940 yuan/mt and 18,780 yuan/mt before closing at 18,910 yuan/mt, up 155 yuan/mt or 0.83%.

According to SMM statistics, China’s aluminium output fell by 3% year-on-year in November. On the demand side, the export volume of unwrought aluminium and aluminium semis increased by over 20% year-on-year in November. In the short term, SHFE aluminium is expected to continue to move within a narrow range.

Lead: Three-month LME lead opened at $2,210/mt on Tuesday night and fluctuated between $2,200-2,210/mt in the Asian Session. Then the LME lead rose to $2,225.5/mt in the European session as US Congress passed an agreement to raise the debt ceiling. It closed at $2,200/mt, down 0.29% last night.

The most-liquid SHFE 2201 lead contract opened at 15,000 yuan/mt last and gained 0.94% to settle at 15,040 yuan/mt last night, with open interest decreasing 529 lots to 42864 lots.

Zinc: Three-month LME zinc gained 1.86% to settle at $3,232/mt last night, with open interest increasing 149 lots to 264,000 lots. LME stocks across LME-listed warehouses fell by 550 mt or 0.36% to 152,100 mt. The macro data in Europe performed well, and the effectiveness of the Omicron vaccine boosted market sentiment, pushing up LME zinc. LME zinc is expected to move between $3,200-3,250/mt.

The most-traded SHFE 2201 zinc contract gained 305 yuan/mt or 1.33% to settle at 23,165 yuan/mt, with open interest decreasing by 1,407 lots to 70,451 lots. The market sentiment became warm after the news that China's central bank will cut the RRR by 0.5 percentage point has been digested. SHFE zinc trended higher as the supply in December is likely to be less than expected. The most-traded zinc contract is expected to move between 23,000-23,500 yuan/mt today and #0 domestic Shuangyan zinc may trade at premiums of 100-120 yuan/mt over the SHFE 2201 zinc contract.

Nickel: The most traded SHFE nickel contract rose by 2,000 yuan/mt to 148,400 yuan/mt, driven by the macro sentiments. However, the upward momentum at fundamentals remained weak. The spot consumption was thin, and the stainless steel prices kept falling. In the new energy industry, the precursor plants have reduced the production in November in order to reduce the stocks, and they had weaker demand of nickel, which may suppress the nickel prices. The prices may rise in the short term, but the investors should be cautious in the bullish operations.

Tin: According to SMM's survey, domestic refined tin output declined slightly from the previous month in November and is expected to stabilise in December. Overnight, the SHFE 2201 tin contract fell back after opening higher, and moved around 284,000 yuan/mt. Funds continued to flow out of the market due to wait-and-see sentiment among investors. The SHFE 2201 tin contract is expected to hover at highs.