SMM Morning Comment For SHFE Base Metals On Mar 20

SHANGHAI, Mar 20(SMM) –

Copper

LME copper prices opened at $9003/mt and closed with a drop of 1.43% at $8972/mt last evening, with the low-end of $8944/mt and the high-end of $9003/mt. Trading volume stood at 24,000 lots. Open interest stood at 313,000 lots. The most active SHFE 2405 copper contract prices opened at 72420 yuan/mt and finished at 72620 yuan/mt last evening, down 0.89%, with the low-end of 72350 yuan/mt and the high-end of 72750 yuan/mt. Trading volume was 52,000 lots, and open interest stood at 221,000 lots. On the macro front, previous U.S. economic data showed that inflation is still highly sticky, expectations of interest rate cuts have been suppressed, and the U.S. dollar index has risen, which is negative for copper prices. The market is paying more attention to the Fed's interest rate decision and summary of economic expectations. In terms of fundamentals, from the supply side, there is still a large supply of goods in the hands of cargo holders, and some have begun to ship at low prices. Although downstream companies have replenished goods, most are still in a wait-and-see mode, and the overall supply is still ample. In terms of consumption, copper prices remain at a high level, and some processing companies have stopped production to eliminate inventory. It is expected that demand will be difficult to improve before copper prices fall significantly. In terms of price, before the Federal Reserve meeting, the market had strong expectations for the postponement of interest rate cuts, and there was pressure on copper prices.

Aluminum

Overnight, the most-traded SHFE 2404 aluminum contract opened at 19,160 yuan/mt, with its lowest and highest at 19,150 yuan/mt and 19,280 yuan/mt before closing at 19,275 yuan/mt, up 60 yuan/mt or 0.31%. LME aluminum opened at $2,276.5/mt yesterday, with its high and low at $2,279/mt and $2,248/mt respectively before closing at $2,269/mt, down $7.5/mt or 0.33%.

On the macro level, State Council released favourable policies to boost demand. Attitude towards cutting interest rates swung in Europe and the US, which coupled with the US presidential election, bringing uncertainty to aluminum prices. Yunnan aluminium smelters will begin to resume production this week, which is in line with previous expectations and does not have a strong impact on the prices. The arrivals of peak season boosted downstream operating rates. Aluminum ingot inventory rose at a slower pace and is likely to peak, supporting aluminum prices. We need to pay attention to when aluminium ingot inventory will begin to decline and fluctuations in expectations of overseas interest rate cuts.

Lead

Overnight, LME lead prices opened at US$2,088/ton. LME lead inventory increased by 4,775 tons, approaching the 200,000 tons mark. At the same time, the U.S. dollar index continued to strengthen. Under dual pressure, LME lead prices fell to as low as US$2074/ton. The contract finally closed at $2095/mt, a rise of 0.36%.

Overnight, the most active SHFE 2405 lead contract opened at 16260 yuan/mt. Due to the weaker trade, the prices lead dropped to a low of 16220 yuan/mt. The contract closed at 16260 yuan/mt, a gain of 0.12%. Open interest stood at 53125 lots, an increase of 1116 lots from the previous trading day.

Zinc

LME zinc opened at $2530/mt last evening, and hit a low of $2485/mt, and closed at $2501.5/mt, down $27/mt or 1.07%. Trading volume grew to 11285 lots, and open interest decreased by 1103 lots to 228,000 lots. LME zinc inventory increased by 2300 mt to 267200 mt, an increase of 0.87%. The U.S. dollar is strengthening under high inflation and macro sentiment is weak.

The most active SHFE 2405 zinc contract prices opened at 21110 yuan/mt and fell 145 yuan/mt or 0.68% to close at 21135 yuan/mt, with the high-end of 21325 yuan/mt. Trading volumes decreased to 42229 lots and open interest fell increased 1097 lots to 104,000 lots. The recent poor macro sentiment has superimposed on the supply shortage, but the weakness of ferrous metals prices has dragged down downstream consumption.

Tin

SHFE 2404 tin contract fell after opening lower, closing at 224,250 yuan/mt, down 2.71%.

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 600-1,300 yuan/mt over SHFE 2404 tin contract, versus discounts of 1,000 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 200-700 yuan/mt for Yunxi brand, and discounts of 1,100-1,500 yuan/mt for imported brand tin ingots. Tin prices stayed at highs yesterday, suppressing downstream and terminal companies from purchasing. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 139,600 yuan/mt, and closed at 137,460 yuan/mt, down 2,490 yuan/mt. Trading volume fell by 15,008 lots, and open interest decreased by 859 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.