SMM Morning Comment For SHFE Base Metals On Mar 26

SHANGHAI, Mar 26(SMM) –

Copper

LME copper prices opened at a low of $8,840/mt on Monday, reaching a low of $8,835.5/mt, and dropped to $8,840/mt after hitting a high of $8,933/mt, and finally closed at $8,863/mt. Trading volume was 16,000 lots, and open interest was 314,000 lots. Overnight, the most-traded SHFE 2405 copper contract opened 72,180 yuan/mt, hitting a low of 72,160 yuan/mt, and declined after a hiking to 72,520 yuan/mt, and finally closed at 72,340 yuan/mt. Trading volume was 38,000 lots and open interest was 196,000 lots.

On the macro front, Federal Reserve was still cautious about cutting interest rates, and the US dollar inched down, lifted copper prices. At the same time, according to foreign media, the OPEC+ may keep reducing crude oil output next week. In addition, it is reported that Russia also requires oil companies to complete production control by the end of June. Rising crude oil prices may offer some boost to copper prices. In terms of fundamentals, port arrivals of imported copper will lessen over the weekend. In terms of consumption, copper prices remained high, and rigid demand lingered. Moreover, facing financial constraints, some enterprises may cut their purchases at the end of Q1. Overall, as of March 25, SMM copper inventories in mainstream regions in China fell by 7,700 mt from March 21 to 387,300 mt. A focus will be put on copper import market this week. On the whole, positive macro sentiment and crude oil price hike may keep copper prices at high levels.

Aluminum

Overnight, the most-traded SHFE 2405 aluminum contract opened at 19,490 yuan/mt, with its lowest and highest at 19,485 yuan/mt and 19,625 yuan/mt before closing at 19,590 yuan/mt, up 135 yuan/mt or 0.69%. LME aluminum opened at $2,305/mt in the previous trading day, with its high and low at $2,331/mt and $2,294/mt respectively before closing at $2,326.5/mt, up $17.5/mt or 0.76%.

Summary: On the macro front, the conflict between Russia and Ukraine drove up the price of gold and brought great uncertainty to the future situation. 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 arrival of the traditional peak season boosted downstream operating rate. Boosted by positive fundamentals and macro front, aluminum prices may swing on a strong note.

Lead

LME lead opened at $2,036.5/mt on Monday, hitting a high of $2,051.5/mt, and dipped to a low of $2,025.5/mt due to more short positions, but finally closed up 0.22% at $2,041.5/mt, owing to the falling US dollar index.

Overnight, the most-traded SHFE 2405 lead contract opened at 16,235 yuan/mt, and dropped to 16,195 yuan/mt as the bulls backed away from the market, but then inched higher due to LME lead price uptick, and finally closed down 0.99% at 16,220 yuan/mt.

Zinc

Overnight, LME zinc opened at $2,485/mt, and hit a low of $2,471/mt after hitting a high of $2,506/mt, but finally closed up $8.5/mt or 0.34% at $2,491/mt. Trading volume decreased to 8,612 lots. Open interest hiked by 1,103 lots to 231,000 lots. Overnight LME zinc stocks slid 2,725 mt or 0.1% to 269,375 mt. Constantly negative news about overseas mines kept tightening supply, pushing up zinc prices. Moreover, the weakening of the US dollar index slowed down falling LME zinc prices.

The most-traded SHFE 2405 zinc contract opened at 21,140 yuan/mt overnight, and increased to a high of 21,270 yuan/mt after a low of 21,095 yuan/mt, and finally closed up 30 yuan/mt or 0.14% at 21,240 yuan/mt. Trading volume decreased to 39,400 lots. Open interests dropped by 754 lots to 99,731 lots. SHFE zinc moved up yesterday and gained supports at the 40-day moving average. TCs for domestic and imported zinc will decrease in April, unveiling lingering supply tightness at mines. Zinc ingot demand hiked to a limited extent.

Tin

SHFE 2404 tin contract fell to 223,650 yuan/mt and closed at 223,620 yuan/mt, down 1.18%.

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 300-600 yuan/mt over SHFE 2404 tin contract, versus discounts of 600 yuan/mt to premiums of 200 yuan/mt for delivery brands, premiums of 400-500 yuan/mt for Yunxi brand, and discounts of 1,400 yuan/mt for imported brand tin ingots. Tin prices were stable yesterday. Inquiries from downstream and terminal market picked up. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 135,110 yuan/mt, and closed at 133,330 yuan/mt, down 1,380 yuan/mt. Trading volume fell by 43,048 lots, and open interest decreased by 5,215 lots. From a macro perspective, the US Fed has kept the upper limit of its interest rate at 5.5%. The Fed once again maintained interest rates unchanged. Powell's speech has not disclosed when to cut interest rate. This interest rate decision will have little impact on the market. Fundamentally, the progress of nickel ore approval accelerated and production of intermediate product projects in Indonesia ramped up. The market's expectations for tight supply of raw materials began to weaken. Nickel price is expected to go down.