SHANGHAI, Feb 9 (SMM) – Shanghai Base metals closed mixed overnight after the US dollar index rebounded on the support of the surging US trade deficit. Their counterparts on LME performed similarly on Tuesday.

LME copper dropped 0.3%, aluminium rose 1.72%, lead edged up 0.13%, and zinc fell 1.29%.

SHFE copper decreased 0.35%, aluminium increased 1.9%, lead rose 0.51%, zinc shed 0.65%, and nickel dropped 2.53%.

Copper: Three-month LME copper opened at $9,693/mt and dropped 0.3% to close at $9,820/mt on Tuesday. The trading volume was 13,000 lots, and the open interest was 251,000 lots. Three-month LME copper is expected to trade between $9,750-9,850 yuan/mt today.

The most-traded SHFE 2203 copper contract opened at 70,430 yuan/mt and edged down 0.35% to close at 70,330 yuan/mt in overnight trading. The trading volume was 36,000 lots, and the open interest was 126,000 lots. SHFE copper is expected to trade between $69,900-70,500/mt today, with spot premiums at 20-150 yuan/mt.

On the macro front, the European Central Bank (ECB) President Lagarde’s speech dispelled the market’s expectations for a rapid interest hike, and the US dollar index rebounded. In addition, the 2021 US trade deficit increased by 27% on the year, hitting a record high, which also brought support to the US dollar index, and the copper prices were dragged down. The market focus is currently on the US January CPI to be announced this week, which will guide the market expectations for the Fed policy. In the spot market, the downstream market participants did not fully returned to work yesterday, and the prices fluctuated at high levels. The market transactions were sluggish. During the Chinese New Year holiday, the SMM copper social inventory across major regions increased by 58,800 mt, prompting some traders to sell on high prices, which dragged down the spot premiums rapidly. The relatively active transactions supported the premiums. If the spot prices remain high, the premiums are likely to stand below 100 yuan/mt.

Aluminium: LME aluminium opened at $3,136/mt on Tuesday, with the highest and lowest prices at $3,236/mt and $3,131.5/mt. LME aluminium closed at $3,188/mt, up $54/mt or 1.72%.

The most-traded SHFE 2203 aluminium contract opened at 22,730 yuan/mt overnight, with the highest and lowest prices at 22,955 yuan/mt and 22,675 yuan/mt before closing at 22,755 yuan/mt, up 425 yuan/mt or 1.9%.

On the supply side, some aluminium smelters in south-west China resumed their production. Under the influence of the pandemic in Guangxi, local aluminium smelters plan to close 500,000 mt of capacity. Some alumina refineries in Guangxi have already stopped production, stimulating the rise in alumina prices. As the import window was closed, the domestic aluminium ingot inventory accumulation was relatively slow and fell short of expectations. The market is optimistic about post-holiday consumption, especially for plate/sheet, strip and foil companies, who are running at close to full capacity. SMM expects that the price of aluminium will still have upward momentum after the CNY.

Lead: Three-month LME opened at $2,208/mt on Tuesday, hitting the lowest and highest points at $2,188/mt and $2,217/mt respectively, and closed at $2,209/mt, up 0.30%.

The most-liquid SHFE 2203 lead contract opened at 14,820 yuan/mt and settled 0.51% higher at 14,915 yuan/mt overnight.

Zinc: LME zinc opened at $3,631/mt on Tuesday, and hit a high of $3,657/mt before falling back to $3,590/mt, and closed at $3,593/mt, down $47/mt or 1.29%. Trading volume was 8,205 lots, and open interest increased by 345 lots to 253,000 lots. LME zinc inventory decreased by 450 mt to 153,875 mt, a drop of 0.29%. The overseas energy crisis has not been resolved. LME zinc is expected to move between $3,590-3,640/mt on Wednesday.

Overnight, the most-traded SHFE 2203 zinc contract opened at 25,365 yuan/mt and fell to 25,100 yuan/mt before closing at 25,180 yuan/mt, down 165 yuan/mt or 0.65%. Trading volume was 85,540 lots, and open interest increased by 62 lots to 108,342 lots. On the supply side, it is expected that domestic refined zinc production in February will decrease by 33,300 mt to 487,700 mt, an increase of 3.5% year-on-year. Some downstream companies started work one after another, but most will not resume production until after February 15. The global energy issue and the speed of recovery of consumption still needs attention. It is expected that zinc price will move at highs in the short term. The most-traded SHFE zinc contract is expected to move between 25,000-25,500 yuan/mt on Friday. #0 domestic Shuangyan zinc is likely to trade at premiums of 30-50 yuan/mt over the SHFE 2203 zinc contract.

Nickel: The most-liquid SHFE 2203 nickel contract opened at 171,810 yuan/mt last night, and fluctuated within a narrow range around 173,000 yuan/mt before falling to around 167,000 yuan/mt. The prices rebounded slightly in the late trading and closed at 168,590 yuan/mt, down 4,380 yuan/mt or 2.53%. The trading volume was 56,000 lots, and the trading volume decreased by 3,479 lots to 129,000 lots. The SHFE nickel pulled back after rising to two days, while the fundamentals remained bullish amid low inventories and strong demand. The nickel stocks across LME warehouses dropped further by 1,122 mt to 85,890 mt, a new low since the end of 2019. The import window remained closed, hence the imports were limited. The global pure nickel supply was tight. The nickel prices are expected to remain in an upward trend.

Tin: Tin inventory under warrants changed little in both China and overseas. The domestic spot market recovered slightly. Overnight, the SHFE 2203 tin contract traded sideways. SHFE tin will remain rangebound with limited inflows of capital.