SMM Morning Comment For SHFE Base Metals On Mar 11

SHANGHAI, Mar 11(SMM) –

Copper

LME copper prices opened at $8646/mt and closed at $8568/mt last Friday, down 0.85%, with the highest of $8689/mt and the lowest of $8563/mt. The trading volume was 21,000 lots, and open interest stood at 286,000 lots. SHFE 2404 copper opened at 69920 yuan/mt overnight and fell to a low of 69290 yuan/mt after rising to 69930 yuan/mt, closing at 69400 yuan/mt, down 0.72%. The trading volume was 24,000 lots, and open interest stood at 150,000 lots. On the macro front, due to the unexpected increase in the unemployment rate in the United States in February, the U.S. index plunged sharply, but then rebounded on the support of higher-than-expected non-farm payroll data. As a result, copper prices were suppressed. On the fundamentals, as of March 7, SMM copper inventories in major Chinese markets increased 26,600 mt from last Monday to 347,800 mt, and up 42,100 mt from last Thursday. This is up 179,500 mt from pre-CNY level. In terms of consumption, copper prices remain high, which continues to hit downstream consumption, and only necessary purchases are maintained. If copper prices fall, further recovery in consumption may be achieved. In terms of price, on the whole, the U.S. non-farm payrolls data for February is negative for copper prices, and copper prices are expected to be slightly under pressure.

Aluminum

At last Friday’s night session, the most-traded SHFE 2404 aluminum contract opened at 19,195 yuan/mt, with its lowest and highest at 19,120 yuan/mt and 19,225 yuan/mt before closing at 19,140 yuan/mt, down 70 yuan/mt or 0.36%. LME aluminum opened at $2,246.5/mt last Friday, with its high and low at $2,267/mt and $2,233.5/mt respectively before closing at $2,236/mt, down $16/mt or 0.71%.

Summary: On the macro front, the interest rate cut speeches of European Central Bank officials have been intensive. China's February CPI data turned from a YoY decline to an increase and is higher than expected, bringing bullish expectations to the market. Fundamentally, China's aluminum production increased by 7.81% 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

LME lead opened at $2110/mt last Friday and fell by 0.38% to close at $2100/mt, after hitting the lowest point at $2095/mt and the highest point at $2139.5/mt.

The most traded SHFE 2310 lead contract opened at 16205 yuan/mt and fell 0.31% to 16170 yuan/mt, after briefly hitting a high point at 16260 yuan/mt and the lowest point at 16145 yuan/mt.

Zinc

Last Friday, LME zinc prices opened at US$2,528/ton. During the European trading period, LME zinc prices rose all the way to an intraday high of US$2,560.5/ton, then dropped to a daily low of US$2502/ton, finally closing at US$2522.5/ton, down US$6.5/ton or 0.26%, with trading volume reduced to 14,042 lots and open interest reduced by 3,596 lots to 226,000 lots. LME zinc inventory dropped by 300 mt or 0.11% to 272275 mt.

Last Friday, the SHFE 2404 zinc contract opened at 21315 yuan/ton. SHFE zinc reached a low of 21115 yuan/ton. It finally closed down at 21195 yuan/ton, down 5 yuan/ton, or 0.02%. The trading volume reduced to 51930 lots, and the open interest decreased to 84229 lots. From the fundamentals of the spot market, domestic downstream consumption was weak.

Tin

SHFE 2404 tin contract swung on a soft note last Friday night, closing at 220,650 yuan/mt, down 0.81%.

Last Friday, 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 against SHFE 2404 tin contract, versus discounts of 500 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 200-600 yuan/mt for Yunxi brand, and discounts of 1,200 yuan/mt for imported brand tin ingots. Tin prices fell slightly last Friday, but it still did not trigger purchasing enthusiasm among downstream companies. Few deals were heard among traders.

Nickel

Nickel prices continued to rise last week, reaching 138,480 yuan/mt by last Friday, but they dip briefly earlier last week because Indonesia approved nickel ore mining quotas more quickly. On the macro front, Federal Reserve officials hinted that they might lower interest rates later this year since the economy and monetary policies look good. Inflation slowed significantly last year, but officials warn that this trend may not persist this year, advising policymakers to be cautious. As a result, the US dollar dropped, encouraging investment in commodities. China’s Two Sessions discussed implementing four key actions, including "equipment updates" and "replacing old with new." The continuous growth in high-quality development is projected to drive increasing demand for equipment updates, particularly benefiting the downstream nonferrous sector due to the essential role of nonferrous metals in manufacturing various equipment. So nonferrous market performed well last week. From a fundamental perspective, refined nickel inventory is increasing. The growing price gap between domestic and international markets is boosting export profits for refined nickel, possibly resulting in higher nickel plate exports this month. However, high nickel prices are dampening downstream purchasing sentiment, leading to low spot transactions. Looking at the medium to long term, there's expected growth in 300 series stainless steel production in March in the downstream sector, supported by macro policies. This might bolster demand for pure nickel in the future.