SHANGHAI, Dec 16 (SMM) – Shanghai base metals all trended lower on Thursday morning after the Fed announced to accelerate the tapering starting from January 2022. Meanwhile, their counterparts on LME all cruised higher.
LME metals basically closed lower in the trading on Wednesday. Copper fell 1.4%, aluminium dropped 0.8%, zinc lost 0.76%, and lead rose 0.59%.
SHFE metals, except for nickel, fell across the board in the overnight trading. Copper dropped 1.49%, aluminium fell 0.89%, lead decreased 0.19%, zinc shed 0.49%, and nickel rose 30 yuan/mt.
Copper: Three-month LME copper opened at $9,253/mt in the overnight trading and hit the lowest level at $9,135/mt, before closing at $9,257/mt, down 1.4%. The trading volume was 22,000 lots, and the open interest was 249,000 lots.
The SHFE 2201 copper contract opened at 67,860 yuan/mt last night, and fell to the lowest point at 67,040 yuan/mt, before closing at 67,640 yuan/mt, down 1.49%. The trading volume was 66,000 lots, and the open interest was 134,000 lots.
The Fed announced on Wednesday that the benchmark interest rate will remain unchanged, while the tapering speed will be doubled starting from mid-January 2022. The Fed also marked the three predicted interest rate hikes in 2022 and 2023 in the lattice diagram, which weighed on the market more significantly than the hawkish signals. The copper futures closed with losses. The spot transactions were sluggish, and are expected to weaken further at the end of the year. LME copper is expected to trade between $9,280-9,380/mt today. SHFE copper is expected to trade between 67,900-68,500 yuan/mt today, with spot premiums between 60-160 yuan/mt.
Alunimium: Three-month LME aluminium opened at $2,630/mt on Wednesday and closed at $2,601/mt, down $21/mt or 0.8%.
Overnight, the most-traded SHFE 2201 aluminium contract opened at 18,945 yuan/mt, with the highest and lowest prices at 19,000 yuan/mt and 18,935 yuan/mt before closing at 18,935 yuan/mt, down 170 yuan/mt or 0.89%.
Domestic aluminium output remains low. Smelters in Ningxia and Inner Mongolia may reduce output. On the demand side, downstream consumption is relatively stable, and it is expected that this will continue to drive destocking this week. On the cost side, the price of alumina continued to fall, driving the cost of aluminium to continue to fall. It is expected that SHFE aluminium will remain rangebound today, and the market still needs to pay attention to the sustainability of consumption and cost changes.
Lead: Three-month LME lead opened at $2,282.5/mt yesterday, hitting the lowest and highest points at $2,246/mt and $2,305/mt respectively, and closed at $2,294/mt, up 0.59%.
The most-active SHFE 2201 lead contract opened at 15,380 yuan/mt last night, hitting the lowest point at 15,250 yuan/mt, and closed at 15,445 yuan/mt, a decrease of 0.19%. The SHFE lead stabilised in the overnight trading. Today’s focus will be the support at 15,300 yuan/mt.
Zinc: LME zinc opened at $3,282/mt on Wednesday and fell to a low of $3,214/mt due to risk aversion before the US Fed's interest rate meeting, but rallied later due to low inventories in Europe before closing at $3,283/mt, down $2/mt 0.06%. Trading volume increased to 8,460 lots, and open interest fell 4,924 lots to 245,000 lots. LME zinc inventory decreased by 1,600 mt to 207,575 mt, a drop of 0.76%. With falling European inventories and digestion of negative macro factor, LME zinc is expected to move at $3,260-3,310/mt on Thursday.
Overnight, the most-traded SHFE 2201 zinc contract opened at 23,005 yuan/mt and fell to a low of 22,870 yuan/mt before closing at 23,120 yuan/mt, down 215 yuan/mt or 0.49%. Trading volume rose to 102,800 lots, and open interest increased by 3,682 lots to 173,800 lots. On the supply side, Nexa, the world’s fourth largest zinc producer, claimed that it has temporarily decided to suspend its mining activities in Peru due to the blockade of mine entrances by protesters. The mine's annual zinc output is about 100,000 mt. On the consumption side, the pandemic in Ningbo caused some local alloy plants to stop production, and the local end-users also stopped production. Arrivals in the Guangdong market continued to increase, while downstream demand was modest. Spot discounts expanded again amid oversupply. Downstream purchases increased slightly after the prices of zinc fell. Under the background of low domestic inventories, it is expected that there will be strong support for zinc prices. The SHFE 2201 zinc contract is expected to move within a range of 23,000-23,500 yuan/mt today. 0# domestic Shuangyan zinc may trade at premiums of 110-130 yuan/mt over the SHFE 2112 zinc contract.
Nickel: SHFE nickel contract opened at 140,500 yuan/mt in the overnight trading and fluctuated around 141,300 yuan/mt. The contract closed at 141,240 yuan/mt, up 30 yuan/mt, with the open interest falling 6,000 lots to 164,000 lots. The SHFE nickel remained in a downward trend, but it gained support at 140,000 yuan/mt and moved into a narrow positive range last night. SHFE nickel stood firmer than LME nickel, so the import window is likely to open. SMM will continue to monitor the inflow of imported goods.
Tin: Supply in Myanmar is disturbed by the pandemic, tightening raw material supply to China, but the overall production of domestic downstream solder companies is stable. Overnight, the SHFE 2201 tin contract fell after a lower opening, but rebounded after gaining support at previous low of 275,000 yuan/mt. SHFE tin will continue to hover near current levels amid stable fundamentals.
