SMM Morning Comment For SHFE Base Metals On Mar 21

SHANGHAI, Mar 21(SMM) –

Copper

LME copper prices opened at $8907.5/mt and closed at $8990/mt in last evening trading, a gain of 0.2%, with the low-end of $8895/mt and the high-end of $8995/mt. Trading volume was 21,000 lots, and open interest stood at 310,000 lots. The most active SHFE 2405 copper contract prices opened at 72230 yuan/mt and finished at 72390 yuan/mt last evening, down 0.32%, with the low-end of 72160 yuan/mt and the high-end of 72600 yuan/mt. Trading volume was 43,000 lots, and open interest stood at 216,000 lots. On the macro front, interest rate cut bets have heated up again after the release of the Federal Reserve's interest rate decision, and the U.S. dollar index has accelerated its decline, which is good for copper prices. In addition, the dot plot shows that the Federal Reserve will maintain its expectation of cutting interest rates three times this year. Domestically, the People's Bank of China kept the one-year and five-year LPR unchanged at 3.45% and 3.95% respectively. In terms of fundamentals, from the supply side, most of the imported copper that flowed into domestic trade market has been consumed. A new batch of imported copper will flow in at the end of the week, which is expected to lower the spot premiums. In terms of consumption, copper prices fluctuated greatly, and downstream purchases are cautious, focusing on on-demand purchases. It is expected that under the current high copper prices, it is difficult to see a significant increase in demand. Copper prices are expected to rise.

Aluminum

Overnight, the most-traded SHFE 2405 aluminum contract opened at 19,320 yuan/mt, with its lowest and highest at 19,295 yuan/mt and 19,365 yuan/mt before closing at 19,325 yuan/mt, up 40 yuan/mt or 0.21%. LME aluminum opened at $2,268/mt yesterday, with its high and low at $2,287/mt and $2264.5/mt respectively before closing at $2,283.5/mt, up $14.5/mt or 0.64%.

On the macro level, State Council released favourable policies to boost demand. Fed remained interest rates unchanged in March, which was in line with expectations. However, attitude towards cutting interest rates swung, which coupled with the US presidential election, bringing uncertainty to aluminum prices. Fundamentally, imports of primary aluminum are still at a high level, and the drought in Yunnan will not disturb aluminum production resumption in the short term. The arrivals of peak season boosted downstream operating rates. Aluminum ingot inventory is likely to peak, supporting aluminum prices.

Lead

Overnight, LME lead prices opened at US$2,096.5/ton. LME lead inventory surged by 67,300 tons to 267,000 tons, and LME lead prices plummeted to as low as US$2,062.5/ton, and finally closed at US$2,070/ton, a decrease of 1.19%.

The most active SHFE 2405 lead contract prices opened at 16215 yuan/mt with the low-end of 16175 yuan/mt, and finally closed at 16175 yuan/mt, down 0.52%. Open interest decreased 723 lots to 53781 lots.

Zinc

Overnight, LME zinc prices opened at US$2,500/ton and dropped to a low of US$2,494/ton during European trading, finally closing at US$2,523/ton, up US$21.5/ton, or 0.86%. Trading volume decreased to 6211 lots, and open interest decreased by 6957 lots to 221,000 lots. LME zinc stocks increased by 3325 mt or 1.24% to 270525 mt overnight. It is reported that Volcan will stop production at its three mines in Peru from Tuesday for up to 30 days, with an estimated impact of about 8,000 tons. In addition, MBC Mining Company will resume the KZK zinc-lead-copper project, with an annual output of 235 million pounds of zinc.

SHFE 2405 zinc opened at 21170 yuan/mt overnight and rose to a high of 21250 yuan/mt. The contract closed at 21195 yuan/mt, up 10 yuan/mt or 0.05%. Transaction volume decreased to 34936 lots, and open interest decreased by 307 lots to 103,000 lots. Fed interest rate cuts are still expected, and the weak supply and demand have not changed significantly yet. Zinc prices are consolidating at a low level.

Tin

SHFE 2404 tin contract rose slightly and then fell back, closing at 223,560 yuan/mt, down 0.57%. 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 600-1,000 yuan/mt over SHFE 2404 tin contract, versus discounts of 700 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 200-500 yuan/mt for Yunxi brand, and discounts of 1,200 yuan/mt for imported brand tin ingots. Tin prices were stable yesterday. Falling tin prices boosted buying sentiment among downstream and terminal enterprises.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 137,000 yuan/mt, and closed at 136,560 yuan/mt, down 900 yuan/mt. Trading volume fell by 73,375 lots, and open interest decreased by 7,544 lots. On the macro front, the number of Americans filing for unemployment benefits stood at 209,000 in the week ending Mar 9, lower than the market forecast and previous value, indicating that the US job market recovered. Fundamentally, Indonesia said that it had completed the approval of 107 companies, and the progress of nickel ore approval accelerated. The market's expectations for tight supply of raw materials began to weaken, so the prices fell sharply in the afternoon. In addition, according to SMM research, the tight output of intermediate products is expected to ease in April. Nickel price is expected to go down.