SHANGHAI, Feb 22 (SMM) – SHFE and LME base metals closed mixed overnight. On the macro front, US business activity rebounded in February, hitting its highest level in eight months, and strong economic data once again showed the resilience of the US economy. But the market is also waiting for more data to judge the direction of the Fed's interest rate hike.
Copper: LME copper prices closed at $9,179.5/mt overnight, a rise of 0.75%. Trading volumes were 18,000 lots and open interest stood at 241,000 lots.
The most active SHFE 2304 copper contract finished at 70,590 yuan/mt overnight, up 0.93%. Trading volume was 28,000 lots, and open interest stood at 154,000 lots.
On the macro front, US business activity rebounded in February, hitting its highest level in eight months, and strong economic data once again showed the resilience of the US economy. But the market is also waiting for more data to judge the direction of the Fed's interest rate hike.
In terms of fundamentals, the SHFE copper has risen recently, preventing spot discounts from continuing to expand. Downstream buying interest was not strong. It is expected that consumption will hardly change significantly under the pressure of high prices. It is expected that copper prices will remain rangebound at high levels in anticipation of the domestic peak season.
Aluminium: The most-traded SHFE 2303 aluminium contract opened at 18,830 yuan/mt overnight before closing at 18,775 yuan/mt, a drop of 45 yuan/mt or 0.24%.
LME aluminium opened at $2,455/mt on Tuesday and closed at $2,459/mt, a decrease of $3/mt or 0.12%.
On the supply side, production cuts in Yunnan continued to support aluminium prices. On the demand side, downstream buyers turned more cautious after aluminium prices went up. Market players will need to pay attention to the pace of downstream demand recovery. On the macro front, the UK’s manufacturing and service PMI data in February both rebounded more than expected, and there were signs of recovery in Europe. But the manufacturing PMI was still in the contraction territory. In view of production cuts in Yunnan and weaker-than-expected demand recovery, it is expected that aluminium prices will remain rangebound in the short term.
Lead: LME lead opened at $2,161/mt and closed at $2,146.5/mt overnight, down 1.04%. During the Asian trading hours, LME lead fell slowly as the US dollar index stopped increasing sharply. During the European trading hours, LME lead hovered sideways and hit the highest point at $2,171.5/mt and the lowest point at $2,126/mt. Open interest fell 11,126 lots to 103,000 lots, and trading volume rose 138 lots to 5,119 lots
The most-traded SHFE 2303 lead contract opened at 15,405 yuan/mt and closed at 15,395 yuan/mt, up 0.23%, after briefly hitting the highest point at 15,445 yuan/mt and the lowest point at 15,375 yuan/mt. Open interest fell 6,510 lots to 34,009 lots, and trading volume declined 41,555 lots to 21,583 lots.
Zinc: On the news front, Putin accused Western countries of attempting to provoke a global war to destroy Russia, and issued a nuclear warning to the West; Wang Yi, director of China's International Communication Office of the Central Committee, said that the relationship between Russia and China is "as solid as a rock” that will be able to withstand any challenges brought about by changes in the international situation, RIA Novosti reported; The US completed home sales in January recorded a decline in the 12th month in a row, and the housing prices posted the smallest increase year-on-year in 11 years. Eyes shall be put on the release of US economic data today for more clues on the Fed’s decision about rate hikes.
Overnight, LME zinc opened at $3,128.5/mt and closed down $33.5/mt or 1.07% at $3,106.5/mt. The trading volume was 5,779 lots, and open interest lost 23,526 lots to 196,000 lots. LME inventory increased by 1,975 mt to 31,450 mt. The sudden concentration of capitals poses potential risks.
The most-traded SHFE 2304 zinc contract opened at 23,565 yuan/mt overnight and fluctuated narrowly around 23,600 yuan/mt before closing at 23,520 yuan/mt, up 25 yuan/mt or 0.11%. The trading volume stood at 40,000 lots, and open interest gained 2,461 lots to 82,000 lots. According to the latest production costs, the declining zinc prices previously have dragged down the profits of zinc smelters to about 700 yuan/mt. As a result, smelters had been holding back from selling and intended to raise the prices. But when zinc prices rebounded yesterday, smelters became active in making shipment. The recovery of zinc prices was down to changes in capitals. On the fundamentals, the consumption recovery still remains to be seen amid expectations for sufficient supply in the first half of this year. Therefore, zinc prices are still predicted to fluctuate narrowly.
Tin: The SHFE 2303 tin contract rebounded sharply last night and rose 3.13% and closed at 221,720 yuan/mt. The open interest decreased 1,569 lots to 41,238 lots.
The domestic tin inventory under warrants fell sharply. The spot discounts expanded, hence the imported goods were less cost-effective.
The SHFE 2303 tin contract rebounded sharply last night and rose 3.13% and closed at 221,720 yuan/mt. The open interest decreased 1,569 lots to 41,238 lots. Amid the bullish outlook, the longs increased their positions.
To sum up, despite the high social inventory, the sharp decline in warrant inventory provided support for SHFE tin prices. The upstream smelters has not yet fully recovered, and the raw material stocks of downstream enterprises have been digested to a certain extent. Imported tin continued to arrive, but imported goods were less cost-effective than the early stage. The overall demand for spot goods was still under recovery, and the discounts were relatively stable.
Nickel: SHFE nickel warrants hovered around low levels, arousing a wild fluctuation in nickel prices. SHFE nickel prices moved rangebound with occasional ups yesterday, and the spot trading was poor. NPI sellers raised their quotes yesterday as nickel prices and stainless steel futures prices were on the rise. On the demand side, according to SMM research, the recent #304 hot-rolled coil transactions were acceptable. Besides, yesterday, a stainless steel mill in east China tentatively decided not to ship #304 hot-rolled coils to the east China market next week so as to gradually ease the inventory pressure of hot-rolled coils. The futures prices edged higher. Spot quotes of cold-rolled coils rose slightly within the day, but the transactions were average. Warrant trading also weakened. Alloy companies were less willing to purchase pure nickel amid the high prices. In general, pure nickel demand grew slightly. 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.]
