SMM Morning Comments

Category:-Metal | 30-Sep-2022 09:09 AM

LME and SHFE base metals closed mostly with gains. News yesterday said that the London Metal Exchange (LME) was mulling over a possible ban on Russian metal trading, and then LME metals soared. At the same time, the fall in the US dollar index also supported the rebound of metal prices.

LME copper rose 0.48%, aluminium gained 4.54%, lead advanced 0.87%, and zinc added 1%.

SHFE copper rose 0.2%, aluminium gained 1.39%, lead advanced 0.2%, and zinc added 0.53%.

Copper: LME copper opened at $7,511.5/mt yesterday, and once hit the highest and lowest price of $7,583.5/mt and $7,433.5/mt respectively. After that, the contract bottomed out and stabilised at $7,545/mt. At last, the contract closed at $7,515/mt, up 0.48%. Trading volume was 20,000 lots, and open interest stood at 245,000 lots.

SHFE 2211 copper contract opened at 61,280 yuan/mt in overnight trading and climbed to 61,410 yuan/mt at the beginning of the session. And then, the contract rallied from 60,638 yuan/mt. At last, it closed at 60,900 yuan/mt, up 0.2%. Trading volume was 50,000 lots, and open interest stood at 143,000 lots.

News yesterday said that the London Metal Exchange (LME) was negotiating a possible ban on Russian metal trading, and then LME copper soared. At the same time, the fall in the US dollar index also supported the rebound of copper prices.

In the domestic spot market, the wide spread between spot and futures, high premiums and high copper prices did not suppress the downstream restocking, which reflected the supply tightness of the spot. Although the National Day holiday is approaching, the cargo holders’ transactions were still active, and the prices stood high. It is understood that some cargo holders had some cash demand at the beginning of the week, and they still held a wait-and-see attitude towards the market when the supply became tight later. Spot premiums will stay stable, and copper prices may remain rangebound.

Aluminium: The most-traded SHFE 2211 aluminium contract opened at 18,430 yuan/mt overnight and rose to 18,500 yuan/mt before closing at 18,240 yuan/mt, up 250 yuan/mt or 1.39%.

LME aluminium opened at $2,134/mt on Thursday and closed at $2,232/mt, an increase of $97/mt or 4.54%.

Market rumours were flying last night that the LME may negotiate a possible ban on Russian metal trading, triggering a surge in the price of LME aluminium. However, the price rise will not sustain, in view of weak demand. The short-term aluminium prices are expected to remain strong and volatile, with eyes on the progress of the LME’s potential ban on Russian metal trading.

Lead: LME lead opened at $1,836.5/mt and fell to the lowest point at $1,810/mt. LME lead rebounded to the highest point at $1,891/mt as the US dollar index fell, and finally closed at $1,865/mt overnight, up $16/mt or 0.87%.

The mos traded SHFE 2211 lead contract opened at 15,075 yuan/mt and rose 30 yuan/mt or 0.2% to 15,010 yuan/m, after briefly hitting the highest point at 15,100 yuan/mt.

Zinc: LME zinc closed at $2,939/mt on Thursday, up $29/mt or 1%. The open interest lost 307 lots 197,000 lots. Overnight LME inventory added 125 mt to 53,900 mt, which stopped falling and rebounded, stabilising the market sentiment to some extent.

The most traded SHFE 2211 zinc contract closed at 23,790 yuan/mt overnight, up 125 yuan/mt or 0.53%. The open interest lost 2,090 lots to 105,000 lots. On the supply side, the inflow of imported ore, coupled with rising TCs of domestic zinc concentrate, weakened the support to zinc prices. On the consumption side, downstream players gradually completed their pre-holiday restocking, and some will be closed for the holiday. SMM zinc ingot social inventory across seven markets in China remained low amid robust market transactions. Zinc prices are likely to move in a narrow range ahead of the National Day holiday.  

Overnight, San Francisco Fed President Daley said the Fed needs to let the US economy slow down and cool the strong job market to reduce erosive high inflation, but does not need to trigger a recession to do so. President Vladimir Putin will officially incorporate four Ukrainian regions into Russia starting on Friday. China will release its official and Caixin manufacturing PMI for September on Friday.

Tin: Overnight, SHFE tin fell back after opening slightly higher and fluctuated below 180,000 yuan/mt.

Capital flowed out of the market due to pre-holiday risk aversion. The domestic tin inventory under SHFE warrants rose slightly. Trades in the spot market waned as the holiday is around the corner. LME tin inventories remained high. Import profits are expected to change little. A small amount of imported tin for delivery after the holiday was offered at discounts against the SHFE 2210 contract.  Given little disturbance to the short-term market supply and demand, as well as the poor willingness of investors to enter the market, it is expected that SHFE tin will continue to move sideways at a low level.

Nickel: On the supply side, affected by the decline in futures prices, spot premiums rebounded yesterday, improving the upstream shipments. In terms of NPI, profits of NPI plants improved with the rise in NPI prices this month, pushing up the plants’ shipment willingness, which further eased the pressure on finished product inventory. On the demand side, steel mills are expected to increase their production in October, but the increase in demand may not be as good as that in supply. SMM believes that the spot prices will remain rangebound with some downward potential after the National Day holiday. In terms of alloys, the alloy production was normal and the demand for pure nickel did not decrease significantly in September, but the rigid demand for pure nickel still existed. In general, the current supply and demand of pure nickel have picked up, and the short-term nickel prices are expected to remain rangebound.

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