Base metal update

Category:-Metal | 31-Mar-2022 04:43 PM

Shanghai nonferrous metals mostly closed mixed on disappointing China manufacturing PMI which stood at 48.83, down 4.62% YoY, and the climate index was greatly impacted by the pandemic.

Shanghai copper fell 0.48%, aluminium rose 0.22%, lead gained 1.15%, zinc advanced 0.83%, tin lost 0.32%, and nickel dipped 1%.

Copper: The most-traded SHFE 2205 copper closed down 0.48% or 350 yuan/mt at 73,320 yuan/mt, with open interest down 11,058 lots to 155,903 lots.

In the spot market, copper consumption was thin, and copper processing companies in Pudong district in Shanghai were severely impacted by the regional lockdown. And the supply was even tighter after Wuxi city was also locked down. Imports dropped amid low SHFE/LME price ratio.

If the pandemic situation improves, copper consumption may pick up slightly, and copper prices will gain support from low inventory.

Aluminium: The most-traded SHFE 2205 aluminium closed up 0.22% or 50 yuan/mt to 22,730 yuan/mt, with open interest down 16,816 lots to 199,522 lots.

On the fundamentals, SMM aluminium social inventory stood at 1.04 million mt, up 2,000 mt from a week ago, and down 11,000 mt from Monday. In the short term, domestic aluminium ingot inventory kept rising, and a large number of ingot was still on road and has not yet been warehoused. The shipments to and from warehouses stood low amid poor logistics efficiency, which is unlikely to be addressed in the short term. And the pandemic also depressed downstream operating rates.

Lead: The most-traded SHFE 2205 lead closed up 1.15% or 180 yuan/mt at 15,815 yuan/mt, with open interest up 6,266 lots to 54,491 lots.

In the spot market, some primary lead smelters quoted with discounts larger than 200 yuan/mt, but the transactions were still thin. The profits of secondary refined lead smelters kept improving, which stimulated their interest in purchasing lead-acid battery and making shipments. Discounts of secondary refined lead expanded, and stood mainly at 175-275 yuan/mt over SMM #1 lead. However, the downstream turned away from high lead prices, and the purchase demand weakened from a day ago.

Zinc: The most-traded SHFE 2205 zinc closed up 0.83% or 220 yuan/mt at 26,785 yuan/mt, with open interest down 1,467 lots to 110,591 lots.

Market supply remained tight. On the consumption side, terminal orders fell amid high zinc prices, and downstream manufacturers were also cautious in purchasing. The sentiment of longs was relatively gloomy as the consumption side has not yet reached the pivot, containing the momentum of futures.

In addition, the China manufacturing PMI released today stood at 48.83, down 4.62% YoY, and the climate index was greatly impacted by the pandemic. In the spot market, transactions almost stagnated amid strict pandemic control measures in Shanghai, and some downstream manufacturers turned to purchase from surrounding areas like Ningbo.

Tin: The most-traded SHFE 2205 tin closed down 0.32% or 1,110 yuan/mt at 344,840 yuan/mt, with open interest down 724 lots to 33,020 lots.

In the spot market, the average quote dropped 2,250 yuan/mt from yesterday, but the actual transactions of refined tin did not pick up greatly, and the downstream mainly purchased on rigid demand. The transportation was still restricted amid severe pandemic situation in Shanghai and surrounding areas, and some solder companies in Yangtze River delta region said that they could not ship the goods from warehouses in Shanghai, and deliveries to areas surrounding Shanghai were also delayed, which is expected to influence the terminal demand in April to some extent.

SHFE warrants inventory added 75 mt to 2,030 mt today.

Nickel: The most-traded SHFE 2205 nickel closed down 1.00% or 2,190 yuan/mt at 217,780 yuan/mt, with open interest down 1,252 lots to 58,758 lots.

On the supply side, the pandemic has brought transportation problems, and the supply of Jinchuan nickel in Shanghai is relatively tight. As the price difference between SHFE and LME nickel remains great, and the supply of Sumitomo, NORNICKEL, NIKKELVERK nickel and nickel briquette is still tight. In terms of nickel pig iron, the production and transportation problems of NPI plants in Liaoning and Inner Mongolia have been seriously affected, and the output is expected to fall in March.

On the demand side, the cost efficiency of self-dissolved nickel briquette in the nickel sulphate plant has not recovered amid high futures prices. In addition, the output of the downstream precursor plants and the ternary cathode material plants did not contract in March thanks to their in-plant stocks, but the inventory in April will be low, hence there is possibility of production cuts. In terms of stainless steel, the operating rates of steel mills were lower than expected, and spot transactions were muted against the backdrop of high raw material prices.

To sum up, under the background that futures prices deviate from fundamentals and the pandemic intensifies, nickel prices are bound to return to the fundamentals.

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