SMM Morning Comment For SHFE Base Metals On Apr 19

SHANGHAI, Apr 19 (SMM) –

Copper

LME copper prices opened at $9691/mt and closed at $9743/mt in overnight trading, a gain of 2.04%, with the low-end of $9641/mt and the high-end of $9774/mt. Trading volume was 34,000 lots, and open interest stood at 333,000 lots. The most active SHFE 2406 copper contract prices opened at 78900 yuan/mt and closed at 79050 yuan/mt last evening, up 1.78%, with the high-end of 79250 yuan/mt and the low-end of 78200 yuan/mt. Trading volumes stood at 98,000 lots and open interest stood at 210,000 lots. Due to the UK and US metal sanctions on Russia, LME's available inventory has dropped significantly, affecting market sentiment. In addition, Pan Gongsheng, Governor of the People's Bank of China, met with Powell, Chairman of the Federal Reserve, and the two sides exchanged views on issues such as the economic situation of China and the United States, monetary policy, and financial stability. In terms of fundamentals, from the supply side, warehouse receipts began to be gradually released to the spot market, impacting premiums and discounts, but downstream purchases did not increase significantly, and spot supply remained ample. In terms of consumption, copper prices fluctuated higher, which dampened downstream purchasing enthusiasm, and the market maintained on-demand purchasing. On Fundamentals, as of April 18, SMM copper inventories across major Chinese markets stood at 403,500 mt, up 4500 mt from Monday and 220,000 mt higher than the same period last year. Due to the strong market sentiment, copper prices will move at highs in the near future.

Aluminum

Overnight, the most-traded SHFE 2406 aluminum contract opened at 20,475 yuan/mt, with high and low at 20,490 yuan/mt and 20,265 yuan/mt before closing at 20,380 yuan/mt, down 5 yuan/mt or 0.02%. LME aluminum opened at $2,570/mt in the previous trading day, with its high and low at $2,620/mt and $2,561.5/mt respectively before closing at $2,610/mt, up $23/mt or 0.89%.

Summary: On the macro level, Federal Reserve officials sent hawkish signals in the latter part of this week, and the hope of a rate cut this year is becoming increasingly slim; domestic favourable policies such as "trade-in" are constantly being promoted, and the consumption remains optimistic during the traditional peak season. 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, aluminum prices were more influenced by growing expectations of macroeconomic recovery and positive fundamentals, and may swing on a strong note. We need to pay attention to the risk of falling back from highs. High prices on downstream procurement and changes in domestic inventory deserved attention.

Lead

LME lead opened at $2160.5/mt last evening and rose by 0.71% to close at $2183.5/mt, with the lowest point at $2149.5/mt and the highest point at $2192/mt.

The most active SHFE 2406 lead contract opened at 17120 yuan/mt and rose 1.29% to close at 17215 yuan/mt, after briefly hitting a high point at 17265 yuan/mt and the lowest point at 17065 yuan/mt.

Zinc

Overnight, LME zinc opened at US$2,810/ton, reaching a high of US$2,850/ton. Entering the night trading period, LME zinc fell rapidly and tested as low as US$2773.5/ton. It rose slightly at the end of the day and finally closed down at US$2815/ton, down US$10.5/ton, a decrease of 0.37%. The trading volume decreased by 224 lots to 12,257 lots, and positions increased by 1,609 lots to 239,000 lots. LME zinc inventories decreased by 925 tons to 257,050 tons, a decrease of 0.36%.

Overnight, the most-traded SHFE 2406 zinc contract opened at 22700 yuan/mt and fell to 22420 yuan/mt before closing at 22620 yuan/mt, down 140 yuan/mt or 0.62%. Trading volume decreased 142,000 to 117,000 lots, and open interest increased by 390 lots to 124,000 lots. Hawkish speed of the Fed and weak domestic consumption weighed on SHFE zinc.

Tin

SHFE 2405 tin contract went up, closing at 266,670 yuan/mt, up 3.36%.

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 800-1,500 yuan/mt for SHFE 2405 tin contract, versus discounts of 0-1,000 yuan/mt for delivery brands and premiums of 200-400 yuan/mt for Yunxi brand. SHFE 2405 tin contract went up, and downstream companies were on the sidelines. Some downstream companies restocked only as needed. Few deals were heard among traders.

Nickel

On Thursday, the most-traded SHFE nickel contract opened at 136,790 yuan/mt, and closed at 138,270 yuan/mt, up 2,170 yuan/mt compared with the last trading day. Trading volume fell by 24,327 lots to 160,258 lots, and open interest decreased by 1,597 lots to 53,384 lots. The most-traded SHFE nickel contract fluctuated upward after opening, and rose to the highest at the close, with the final increase of 1.96%.