SMM Morning Comment For SHFE Base Metals On Mar 7

SHANGHAI, Mar 7(SMM) –

Copper

LME copper prices opened at $8530/mt and closed at $8546/mt in last evening trading, a gain of 0.67%, with the low-end of $8512.5/mt and the high-end of $8590/mt. Trading volume was 18,000 lots, and open interest stood at 282,000 lots. The most active SHFE 2404 copper contract prices opened at 69200 yuan/mt and closed at 69420 yuan/mt last evening, up 0.55%, with the high-end of 69580 yuan/mt and the low-end of 69110 yuan/mt. Trading volumes stood at 28,000 lots and open interest stood at 152,000 lots. On the macro front, as Powell said on Capitol Hill that he would cut interest rates later this year, the U.S. dollar index fell, bolstering copper prices. In addition, Pan Gongsheng, governor of the PBOC, said that the current average statutory reserve requirement ratio is 7%, and there is still room for subsequent RRR cuts. In terms of fundamentals, from the supply side, the supply of copper in the spot market remains abundant. Some refineries have accumulated inventory due to the recent slow shipments, and their enthusiasm for low-price shipments has increased. On the consumption side, downstream demand has not been fully released, and only some downstream companies are replenishing goods at low prices, and the overall demand is still weak. Due to the influence of macro sentiment, copper prices will move at highs in the near future.

Aluminum

The most-traded SHFE 2404 aluminum contract opened at 19,065 yuan/mt overnight, with its low and high at 19,065 yuan/mt and 19,115 yuan/mt before closing at 19,080 yuan/mt, up 50 yuan/mt or 0.26%. LME aluminum opened at $2,226.5/mt yesterday, with its high and low at $2,243.5/mt and $2,220/mt respectively before closing at $2,223/mt, down $5.5/mt or 0.25%.

Summary: From a macro perspective, Powell's speech has strengthened the Fed’s interest rate cut expectations, and the US dollar index weakened. However, market opinions are divided over the time for interest rate cuts and its sustainability. State Council released favorable policies to boost the economy and consumer demand during the “Two Sessions”. Fundamentally, aluminum smelters maintained stable production, and supply disturbances in China and overseas have basically eased. On the demand, the production resumption after CNY holiday boosted the operating rate of aluminum downstream enterprises. Short-term consumption is still expected to rebound, and spot transactions and outbound performance improved. Aluminum ingots inventory growth slowed down in the third week after CNY holiday. SMM expects domestic aluminum ingot inventories may move between 800,000-900,000 mt in the first half of March, while aluminum billets inventories has entered destocking cycle for a week. Overall, aluminum prices are likely to grow in traditional peak season in March, and we need to pay attention to aluminum supply, recovery of consumption, and when aluminum ingot and aluminum billets stocks will begin to drop.

Lead

LME lead opened at $2050.5/mt last evening and rose by 0.68% to close at $2069/mt, after hitting the lowest point at $2046/mt and the highest point at $2077/mt.

Overnight, the most active SHFE 2404 lead contract opened at 16095 yuan/ton and fell to 16000 yuan/ton, finally closing at 16030 yuan/ton, an increase of 0.06%.

Zinc

Last evening, LME zinc prices opened at $2447/mt and went up to close at $2490.5/mt, up $36.5/mt or 1.49%. Trading volume increased to 12338 lots, and open interest increased 87 lots to 232,000 lots. LME zinc inventory decreased by 250 mt or 0.09% to 274900 mt. South Korea's YP Company cut one-fifth of the output of the Seokpo zinc smelter, and the supply of zinc ingots is expected to decrease. Market optimism has revived, and Powell has stated that he will cut interest rates later this year. The U.S. dollar index has weakened again, and LME zinc has soared.

The most interest-traded SHFE 2404 zinc contract opened at 20870 yuan/mt overnight and fell to 20870 yuan/mt before rallying to a peak of 20940 yuan/mt. It eventually settled at 20905 yuan/mt, up 150 yuan/mt or 0.72%. Trading volume decreased to 40303 lots, and open interest fell by 2090 lots to 97095 lots. Macroeconomic optimism continued during the two sessions, and there were expectations for improvement in the consumption.

Tin

SHFE 2404 tin contract rose to 223,350 yuan/mt after opening higher, and closed at 221,600 yuan/mt overnight, up 1.29%.

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 600-800 yuan/mt against SHFE 2404 tin contract, versus discounts of 400 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 300-700 yuan/mt for Yunxi brand, and discounts of 700-1,000 yuan/mt for imported brand tin ingots. Tin prices moved rangebound in early trading yesterday. Most downstream companies relied on their stocks to maintain production.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 137,260 yuan/mt, and closed at 135,240 yuan/mt, down 1,180 yuan/mt. Trading volume decreased by 60,208 lots, and open interest increased by 215 lots. RKAB approval process in Indonesia still has big impact on nickel prices. Nickel prices continued to run weakly yesterday, mainly due to the gradual digestion of the early market macro sentiment. Nickel prices may fluctuate downward due to the influence of fundamentals.