SMM Morning Comment For SHFE Base Metals On Apr 15

SHANGHAI, Apr 15 (SMM) –

Copper

LME copper prices opened at $9549/mt and closed at $9407/mt in last Friday evening trading, a gain of 0.49%, with the low-end of $9378/mt and the high-end of $9586/mt. Trading volume was 33,000 lots, and open interest stood at 331,000 lots. The most active SHFE 2406 copper contract prices opened at 77410 yuan/mt and closed at 76310 yuan/mt last Friday evening, down 0.04%, with the high-end of 77940 yuan/mt and the low-end of 76220 yuan/mt. Trading volumes stood at 117,000 lots and open interest stood at 201,000 lots. On the macro level, the European Central Bank hinted that it would start cutting interest rates soon, and the US dollar index rose. In addition, geopolitical tensions in the Middle East further intensified, and market risk aversion increased, which also pulled up the US dollar index and was bearish for copper prices. LME once again proposed the option of sanctions on Russian metals, and we need to be cautious about the impact on copper prices. In terms of fundamentals, from the supply side, copper prices are running at a high level, and the shipments from sellers were low. A large amount of goods have become warehouse receipts. Currently, the warehouse receipts have exceeded 300,000 tons. The market is more worried about the impact of subsequent cargoes to be offered for sale on premiums and discounts. In addition, according to SMM, many refineries are no longer in a hurry to ship goods and have begun to prepare inventory in advance for maintenance. In terms of consumption, copper prices continue to rise, and downstream companies are mostly in a wait-and-see state. Current purchases are mainly for replenishment of just-in-time needs, and market activity is not brisk. In terms of price, we need to pay attention to the specific impact of LME's metal sanctions on Russia, and copper prices may continue to rise.

Aluminum

The most-traded SHFE 2406 aluminum contract opened at 20,750 yuan/mt last Friday night, with its lowest and highest at 20,605 yuan/mt and 20,975 yuan/mt before closing at 20,650 yuan/mt, up 65 yuan/mt or 0.32%. LME aluminum opened at $2,457.5/mt last Friday, with its high and low at $2,512/mt and $2,454/mt respectively before closing at $2,478.5/mt, up $22.5/mt or 0.92%.

Summary: On the macro level, the recent strong employment data and high inflation data further delayed the Fed's interest rate cut expectations, and favourable policies such as "trade in" in China have been introduced. Consumption is optimistic. However, the situation in Middle East intensified on weekends. UK and the US imposed greater sanctions on Russian aluminum, triggering turbulence in global metals market. Fundamentally, the supply pressure is limited due to Yunnan's electricity supply and the continued closure of the import window. On the demand, high aluminum price suppressed downstream purchasing enthusiasm and operating rate. The spot discounts sustained, but driven by the destocking expectation of aluminum ingots, the discounts may narrow. Overall, the aluminum prices were more influenced by growing expectations of macroeconomic recovery and positive fundamentals rather than interest rate cut expectations. Aluminum prices may swing on a strong note in the second half of April. We need to pay attention to impact of high prices on downstream procurement and changes in domestic inventory.

Lead

Last Friday, LME lead price opened at US$2148/ton and hit a high of US$2194/ton, and finally closed at US$2168/ton, an increase of 1.28%.

The most traded SHFE 2406 lead contract opened at 16795 yuan/mt and fell 0.42% to close at 16760 yuan/mt, after briefly hitting a high point at 16940 yuan/mt and the lowest point at 16730 yuan/mt.

Zinc

Last Friday, LME zinc opened at US$2,773/ton, and touched a low of US$2,766.5/ton. During the European trading session, it rose to the intraday high of US$2,863/ton, and finally closed up at US$2,802.5/ton, up US$35.5/ton, or 1.28%. The trading volume increased to 22,954 lots, and the position increased by 2,087 lots to 252,000 lots. LME zinc inventory dropped by 450 mt or 0.17% to 258475 mt.

The most active SHFE 2406 zinc contract prices opened at 23110 yuan/mt and gained 95 yuan/mt or 0.42% to settle at 22940 yuan/mt, with the high-end of 23380 yuan/mt and the low-end of 22845 yuan/mt. Trading volumes decreased to 201,000 lots and open interest fell 4899 lots to 129,000 lots. The macroeconomic atmosphere is relatively warm, but the performance of the consumer is poor. SHFE zinc may fluctuate weakly.

Tin

SHFE 2405 tin contract moved downwards after opening higher last Friday night, closing at 254,770 yuan/mt, up 2.35%.

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 800-2,000 yuan/mt for SHFE 2405 tin contract, versus discounts of 0-800 yuan/mt for delivery brands and premiums of 200-300 yuan/mt for Yunxi brand. Tin prices remained at a high level, some downstream enterprises restocked only as needed. Few deals were heard among traders.

Nickel

Nickel prices surged last week, reaching 142,000 yuan/mt. Despite a slight dip on last Thursday due to macro factors, nickel prices closed on last Friday with a 3.6% increase WoW. Last Wednesday night, the Federal Reserve released the March CPI. It raised up by 3.5% YoY, with the growth being 0.3 percentage point higher than in February. It went beyond what the market expected and was the biggest jump in six months. It went up by 0.4% MoM, the same as February. Surprise high inflation data shook market confidence for a June rate cut by the Fed. This led to a hit on the non-ferrous sector, especially nickel, which fell hard because of its weak fundamentals. Fundamentally, refined nickel production is going strong despite a few smelters taking a break in March. National output keeps climbing because nickel prices were high in March and new production capacity has been steadily coming online since the start of the year. It looks like companies that cut back before are gearing up to ramp up production again, which will boost nickel plate supply even more. Demand side, downstream sectors may have entered a phase of essential purchasing, with a slight decrease. This suggests that some plants began to accept high-priced raw materials, especially special alloy steels. In summary, nickel prices are driven by overall market sentiments. Though they dipped last week after US CPI data disappointed, the anticipation of non-ferrous metals going up hints that SHFE nickel will probably stay strong this week.