SMM Morning Comments (Mar 30): Base Metals Closed with Gains amid Rising US Dollar

SHANGHAI, Mar 30 (SMM) - LME and SHFE base metals closed with gains last night. On the macro front, the US dollar rose against most major currencies, reversing recent losses, particularly sharply higher against the Japanese yen. In addition, the market's preference for safe-haven assets is still high, mainly because concerns about banking industry risks have not been completely eliminated.

Copper: LME copper opened at $9,020/mt on Wednesday and rose to $9,080/mt, but then moved all the way down to $8,968/mt before closing up 0.26% at $8,980.5/mt. Trading volume was 14,000 lots, and open interest stood at 250,000 lots.

SHFE 2305 copper opened at 69,900 yuan/mt overnight and climbed to 69,960 yuan/mt, but then went down to 69,530 yuan/mt before closing up 0.27% at 69,580 yuan/mt. Trading volume was 38,000 lots and open interest stood at 173,000 lots.

In terms of fundamentals, copper prices rose yesterday, and trades in the spot market were dominated by traders, while downstream buyers restocked only as needed. Since the month is coming to an end, sellers focus on delivery of long-term orders. Downstream companies took a wait-and-see stance amid high copper prices. Growing market expectations for the recovery of domestic consumption lifted copper prices. However, the rise in the US index capped the gains of copper prices to a certain extent. Copper prices are expected to remain high under the support of improving domestic consumption.

Aluminium: Overnight, the most-traded SHFE 2305 aluminium contract opened at 18,805 yuan/mt, with its high and low at 18,890 yuan/mt and 18,710 yuan/mt before closing at 18,715 yuan/mt, up 25 yuan/mt or 0.13%. LME aluminium opened at $2,383/mt on Wednesday, with its high and low at $2,423/mt and $2,366.5/mt respectively before closing at $2,380/mt, an increase of $2.5/mt or 0.1%.

On the macro level, the pace of the Fed's interest rate hike seems to be slowing down, adding to market uncertainty. On the fundamentals, despite a slight recovery on the production side, domestic aluminium ingot social inventory fell rapidly as downstream consumption continued to pick up. The short-term aluminium prices may go up, driven by improving fundamentals. However, macro uncertainty should be closely watched.

Lead: Yesterday, LME cash to three month lead contract hovered sideways after opening, and gradually fell back after reaching a high around $2,149.5/mt, and finally closed at $2,138/mt, up 0.8%.

SHFE 2305 lead contract opened high and then fell rapidly, and finally closed at 15,300 yuan/mt, up 0.03%.

Zinc: LME zinc closed at $2,999/mt overnight, up $44.5/mt or 1.53%. LME zinc inventory declined by 225 mt to 39,325 mt. SHFE zinc opened higher in overnight trading and settled at 22,820 yuan/mt, a gain of 85 yuan/mt or 0.37%.

At present, the macro sentiment is provisionally stable. In China, the average operating rate of downstream enterprises, albeit slipping slightly, still stood high last week, a sign of good demand for zinc ingots. Although the domestic production is affected by power rationing, smelters across the country still maintain relatively high operating rates in pursuit of high profits. SMM estimates that SHFE zinc prices will remain rangebound.

Nickel: On the supply side, pure nickel prices rebounded. The suppliers were more willing to ship amid the month-end factor, greatly dragging down the premiums. In terms of NPI, stainless steel mills reduced production in March intensively, which was negative for NPI prices as a whole, and they are less likely to ramp out production in April. On the demand side, according to SMM research, the spot stainless steel prices ran stably, but affected by the downward trend of the futures prices yesterday, the prices dropped slightly in the afternoon. The market traders mostly consumed the in-plant inventory in the past few trading days. They have become more willing to pick up goods recently. SMM expects the spot stainless steel prices to be stable with some drops in the short term. In summary, the recent macro situation is stable, but the growth of nickel prices will still be hindered by the weak fundamentals.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]