SMM Evening Comments (Jan 11): Shanghai Nonferrous Metals Closed Mixed with Nickel Outperforming the Market

SHANGHAI, Jan 11 (SMM) – Shanghai nonferrous metals closed mixed today. The macro front has been relatively quiet in light of the upcoming Chinese New Year. Nickel outperformed the market with a gain of 3.45% supported by falling inventories.  

Shanghai copper was flat, aluminium added 1.97%, lead was unchanged, zinc dropped 0.06%, tin jumped 0.44%, and nickel gained 3.45%.

Copper: The most-traded SHFE 2202 copper closed down 0.01% or 10 yuan/mt at 69720 yuan/mt, with open interest down 1447 lots to 109625 lots.

On the macro front, the US economy has achieved high-speed growth, and the labour market was also vigorous, according to Fed president Powell. The Fed would stop the inflation from rising further; and the Fed’s policy shall stay extensive and forward looking in order to maximise the labour market and stabilise goods prices.  

The possibility that the Fed will raise the interest rate in March has been as high as 90%, and the transaction regarding February Fed Funds Futures was heated. The US dollar index rose significantly. In terms of crude, the international oil futures dropped for the second consecutive trading day on Monday, amid concerns over oil supply in Kazakhstan and Libya, as well as the quickly expanding omicron variant.  

On the fundamentals, LME copper inventory dropped further by another 750 mt, and remained at a low of 84,000 mt, which underpinned copper prices.

Tonight, the market shall watch the China M2 money supply in December as well as the total social financing.

Aluminium: The most-traded SHFE 2202 aluminium closed up 1.97% or 415 yuan/mt to 21495 yuan/mt, with open interest up 1729 lots to 192678 lots.

On the supply side, domestic operating capacity of aluminium is likely to rise slightly in January. On the demand side, however, the downstream consumption showed signs of weakening except for aluminium plate/sheet and foil. The support to aluminium prices from the fundamentals have been falling though the short-term shipments have been modest and the inventory dropped yesterday amid less arrivals.

Lead: The most-traded SHFE 2202 lead closed flat at 15190 yuan/mt, with open interest down 2183 lots to 42668 lots.

On the fundamentals, lead ingot output rose slightly. But the lead ingot market and the transportation of raw materials have been restricted by the lockdown measures taken by Henan and Tianjin amid resurging COVID. The downstream continued to build up its stocks ahead of the CNY. Nonetheless, some lead-acid battery companies will take holidays early.

Zinc: The most-traded SHFE 2202 zinc closed down 0.06% or 15 yuan/mt at 24240 yuan/mt, with open interest down 4840 lots to 75893 lots.

On the fundamentals, the total inventory across seven major markets in China stood at 126,800 mt, which has been rising recently as the overall consumption weakened. The market was especially quiet when the production in Daqiuzhuang, Tianjin was suspended as the staff was required to take COVID test. Currently speaking, the high production costs

Tin: The most-traded SHFE 2202 tin closed up 0.44% or 1310 yuan/mt at 299590 yuan/mt, with open interest up 155 lots to 42077 lots.

On the fundamentals, domestic warrants inventory kept rising, and spot shipments picked up slightly. The supply and demand were still weak ahead of the CNY.

Nickel: The most-traded SHFE 2202 nickel closed up 3.45% or 5300 yuan/mt to 158960 yuan/mt, with open interest up 29556 lots to 181438 lots.

SHFE nickel recorded significant gains today supported by LME nickel and falling SHFE nickel inventory, which has been at a low level. In the spot market, pure nickel supply was tight, resulting in higher premiums. The prices of spot NPI and nickel sulphate showed upside momentum.