SMM Morning Comment For SHFE Base Metals On Mar 12

SHANGHAI, Mar 12(SMM) –

Copper

LME copper prices opened at $8586/mt and closed at $8654/mt overnight, a rise of 1.00%, with the low-end of $8611.5/mt and the high-end of $8657.5/mt. Trading volume was 13,000 lots, and open interest stood at 287,000 lots. The most active SHFE 2405 copper contract prices opened at 69560 yuan/mt and finished at 69790 yuan/mt overnight, with the high-end of 69830 yuan/mt and the low-end of 69930 yuan/mt, up 0.33%. Trading volume was 23,000 lots, and open interest stood at 150,000 lots. On the macro front, the revised annualized quarterly rate of Japan's real GDP in the fourth quarter turned positive, and rumors of an interest rate hike by the Bank of Japan heated up, causing the US dollar to fall slightly. The rise in crude oil and gold prices also supported the overall copper price. The market awaited Chinese financial data and U.S. consumption price data. From the supply side, domestic inventories continue to rise, and the overall supply remains sufficient. In terms of consumption, as delivery is approaching, the market is generally optimistic, and some demand occurred in the beginning of the week. In terms of price, as current consumption has not yet recovered, domestic copper inventory is still in a state of accumulation, and it is expected that there will be pressure on copper prices. In addition, attention should also be paid to the February core CPI data of the United States released today, which will provide guidance for copper prices.

Aluminum

The most-traded SHFE 2404 aluminum contract opened at 19,195 yuan/mt overnight, with its low and high at 19,165 yuan/mt and 19,225 yuan/mt before closing at 19,220 yuan/mt, up 20 yuan/mt or 0.10%. LME aluminum opened at $2,236/mt yesterday, with its high and low at $2,260.5/mt and $2,231.5/mt respectively before closing at $2,252/mt, up by $16/mt or 0.72%.

On the macro level, State Council released favourable policies to boost the economy during the “Two Sessions”. Attitude towards cutting interest rates began to swing in Europe and the US, bringing uncertainty to aluminum prices. Fundamentally, China's aluminum production increased YoY in February, and the operating rate of aluminum plate/sheet, strip and foil declined YoY. The fundamentals are insufficient to provide upward momentum for aluminum prices. In the short term, we need to pay close attention to recovery in consumption during the peak season and the fluctuation of expectations for overseas interest rate cuts.

Lead

Overnight, LME lead price opened at US$2,100/ton. During the European session, LME lead price hit a high of US$2,146/ton, and finally closed at US$2,120.5/ton, an increase of 0.98%.

Overnight, the most active SHFE 2404 lead contract opened at 16280 yuan/ton and fell to 16235 yuan/ton, finally closing at 16265 yuan/ton, an increase of 0.09%.

Zinc

Overnight, LME zinc opened at $2520/mt, hitting a low and high of $2512.5/mt and $2569/mt respectively, and closed at $2566/mt, up $43.5/mt or 1.72%. Trading volume decreased to 10628 lots, and open interest grew 1994 lots to 228,000 lots. LME zinc inventories decreased by 325 mt to 271,950 mt, a decrease of 0.12%. The U.S. dollar is weakening, non-ferrous metals are strong, and the news of overseas smelting plant reductions and shutdowns is gradually transmitted to spot supply. The market expects tighter supply, providing support for LME Zinc.

The most active SHFE 2404 zinc contract prices opened at 21305 yuan/mt and gained 135 yuan/mt or 0.64% to settle at 21340 yuan/mt, with the high-end of 21390 yuan/mt and the low-end of 21285 yuan/mt. Trading volumes decreased to 33634 lots and open interest fell 227 lots to 82081 lots. Expectations over output cuts at smelters bolstered SHFE zinc. The continuous inflow of imported zinc ingots may replenish part of the supply, coupled with the slow recovery of consumption, the upside space for SHFE zinc is limited.

Tin

SHFE 2404 tin contract rose slightly to 221,740 yuan/mt before closing at 220,560 yuan/mt overnight, down 0.08%.

Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 600-1,100 yuan/mt against SHFE 2404 tin contract, versus discounts of 500 yuan/mt to premiums of 300 yuan/mt for delivery brands, premiums of 200-700 yuan/mt for Yunxi brand, and discounts of 1,300 yuan/mt for imported brand tin ingots. Tin prices rose slightly and then fell back in early trading yesterday, and the purchasing sentiment of downstream companies remained sluggish. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 138,810 yuan/mt, and closed at 137,640 yuan/mt, down 840 yuan/mt. Trading volume fell by 5,825 lots, and open interest decreased by 4,919 lots. On the macro level, Fed officials said the Feb should be able to cut interest rates later this year. The economy and monetary policy are in good conditions. The official said inflation slowed down sharply last year, but the pace may not be sustained this year, requiring policymakers to be cautious. From a fundamental perspective, yesterday’s spot market transactions were weak. Given the nickel prices, downstream manufacturers still focused on destocking. The downstream orders did not improve significantly. Nickel prices are vulnerable to decline.