SMM Evening Comments (Feb 6): Shanghai Nonferrous Metals Closed Mostly in Negative Zone with Falling Risk Assets

SHANGHAI, Feb 6 (SMM) – Shanghai nonferrous metals closed mostly with losses in day trading. On the macro front, the US non-farm payrolls reached 571,000 in January, far exceeding expectations; the unemployment rate fell to a low level in recent years, making investors more alert to the Fed's subsequent interest rate hike, especially when the Fed officials delivered hawkish remarks. The risk assets weakened when US dollar rose to around 103.

SHFE copper fell 0.76%, aluminium edged down 0.03%, lead was flat, zinc lost 2.71%, tin dropped 4.36%, and nickel shed 3.52%.

Copper: The most-traded SHFE 2303 copper closed down 0.76% or 520 yuan/mt at 68,340 yuan/mt, with open interest down 1,362 lots to 165,143 lots.

The spot market picked up slightly after the Lantern Festival, and falling SHFE copper price also boosted downstream demand. However, the high social inventory capped the upside momentum of spot prices.

Aluminium: The most-traded SHFE 2303 aluminium closed down 0.03% or 5 yuan/mt at 19,060 yuan/mt, with open interest down 6,431 lots to 184,183 lots.

The domestic aluminium production declined in January and may drop further amid expectations for production cuts in Yunnan. However, the substantial accumulation of aluminium ingot inventory and slow recovery of downstream production will cap the upside room of aluminium prices. It is expected that aluminium price will fluctuate rangebound this week, and attention should be focused on the implementation of production reduction in Yunnan.

Lead: The most-traded SHFE 2303 lead closed flat at 15,310 yuan/mt, with open interest down 2,686 lots to 71,559 lots.

In the spot market, the cargo holders quoted based on market dynamics, and the spot discounts did not change much. The downstream players have basically resumed the production, and the market inquiries picked up. Some continued to purchase with long-term orders, while the majority stood on the sidelines. The traders favoured sources with large discounts.

Zinc: The most-traded SHFE 2303 zinc closed down 2.71% or 655 yuan/mt at 23,515 yuan/mt, with open interest down 7,185 lots to 83,813 lots.

SMM zinc ingot social inventory across seven major markets in China rose to 180,800 mt as of Monday Janjary 6, up 117,800 mt or 186.08% from 63,200 mt at the beginning of January.

Tin: The most-traded SHFE 2303 tin closed down 4.36% or 10,020 yuan/mt at 219,760 yuan/mt, with open interest up 168 lots to 30,578 lots.

Spot prices rose palpably after SHFE tin slumped, and were offered in premiums. The downstream demand was boosted, and the transactions picked up. SHFE warrants inventory added 838 mt to 7,420 mt.

Nickel: The most-traded SHFE 2303 nickel closed down 3.52% or 7,790 yuan/mt at 213,610 yuan/mt, with open interest down 1,254 lots to 78,042 lots.

In the spot market, Jinchuan nickel was in premiums of 6,500-7,500 yuan/mt, with an average of 7,000 yuan/mt, flat from the previous trading day. NORNICKEL nickel was in premiums of 6,300-6,800 yuan/mt, with an average of 6,550 yuan/mt, down 200 yuan/mt on a daily basis. Spot trades and inquiries improved amid falling SHFE nickel and persistent downstream restocking. For nickel briquette, the prices stood between 216,000-216,500 yuan/mt, down 10,250 yuan/mt from the previous trading day.

[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.]