SMM Morning Comments (Mar 17): Base Metals Closed Mostly with Losses with Unwavering ECB Rate Hike Coming Soon

SHANGHAI, Mar 17 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, the European Central Bank still raised interest rates as planned despite the market chaos in recent days, and the market expects that the Fed may also raise interest rates next week. European and American central banks will continue to curb inflation, and concerns about banking crises remain.

Copper: LME copper closed with a drop of 0.45% at $8,533/mt overnight. Trading volume stood at 22,000 lots. Open interest stood at 250,000 lots. The most active SHFE 2304 copper contract finished at 66,740 yuan/mt overnight, down 0.52%. Trading volume was 54,000 lots and open interest stood at 125,000 lots.

On the macro front, the European Central Bank still raised interest rates as planned despite the market chaos in recent days, and the market expects that the Fed may also raise interest rates next week. European and American central banks will continue to curb inflation, and concerns about banking crises remain. In terms of fundamentals, copper futures fell sharply due to the impact of the banking crisis yesterday, and imports of copper also showed profit margins. At present, imported copper has not yet flowed in a large amount. Stimulated by the decline in the market, the downstream was actively replenishing cargoes, and the spot quotes rose. Inventory in south China has declined for two consecutive days, the main reason is still that the arrival volume was not large. On the whole, after the sharp drop in copper prices, the enthusiasm for downstream transactions has increased significantly, and market transactions have been active. In terms of prices, the market expects the Federal Reserve to continue to raise interest rates, and concerns about the banking crisis remain, suppressing the rise in copper prices.

Aluminium: The most-traded SHFE 2304 aluminium contract opened at 18,250 yuan/mt overnight and fell to around 18,045 yuan/mt before closing at 18,135 yuan/mt, flat from the previous trading day. LME aluminium opened at $2,283/mt and settled at $2,280/mt, down 0.07%.

On the macro level, the ECB announced to raise the interest rate by 50 basis points, which will pressure the aluminium prices. In terms of fundamentals, the operating rate of downstream enterprises rose, contributing to growing transactions in the spot market and a decline in the social inventory. However, the bearish macro sentiment will weigh on overseas consumption, and it is expected that the aluminium prices will face downside pressure, though the decline may be limited.

Lead: Overnight, LME Lead opened at $2,071.5/mt, and fell $2/mt or 0.1% to close at $2,066/mt. The trading volume decreased 1,350 lots to 4,075 lots, and the open interest increased 2,767 lots to 103,000 lots.

The most-traded SHFE 2304 lead contract opened at 15,250 yuan/mt last night and closed at 15,285 yuan/mt, up 5 yuan/mt or 0.03%. Trading volume fell 21,329 lots to 17,653 lots, and open interest rose 3,785 lots to 47,484 lots.

Zinc: LME zinc opened at $2,880/mt overnight and showed a V-shaped trend before closing at $2,818/mt, a decrease of $14.5/mt or 0.5%. The trading volume was down to 7,804 lots, and open interest lost 932 lots to 184,000 lots. LME zinc inventory remained unchanged at 37,775 mt. LME zinc continued to weakened last night as the concerns over Credit Suisse eased slightly and the ECB decided to raise the interest rate by 50 basis points.

The most-traded SHFE 2304 zinc contract opened at 22,120 yuan/mt and closed at 22,220 yuan/mt, down 155 yuan/mt or 0.69%. Trading volume was reduced to 64,855 lots, and open interest shed by 983 lots to 80,758 lots. The market sentiment was slightly restored by overseas countries’ quick response to the credit crisis, but the bearish sentiment still persisted and limited the upside room of SHFE zinc prices.

Tin: The SHFE 2304 tin contract hovered sideways last night and closed at 179,890 yuan/mt, down 1.12%.

On the fundamentals, the warrants fell slightly yesterday amid and the spot market improved. In the spot market, the discounts of small brands maintained high. The supply of imported tin was scarce.

The SHFE 2304 tin contract hovered sideways and closed at 179,890 yuan/mt, down 1.12%.

To sum up, the current tin prices were still suppressed by the weak demand from downstream enterprises. Downstream processing companies cannot actually digest inventory by stocking up at low prices, and they still need to pay close attention to the progress of consumer confidence restoration.

Nickel: On the supply side, SHFE nickel prices reached a new low yesterday. The spot premiums bottomed out, and the spot quotations remained low. NPI quotations were temporarily stable. Some NPI traders held a wait-and-see sentiment. On the demand side, according to SMM research, the spot stainless steel traders quoted low prices to ship, which still failed to boost the transactions. The agents were less willing to pick up goods and mainly consumed the high-priced inventories stored earlier. Alloy companies mainly purchased on demand amid the poor orders. To sum up, the pure nickel sector faces weak supply and demand, and the risky assets were sold off amid the banking crisis in Europe and US, weighing on nickel prices.

[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.]