SMM Morning Comments (Apr 12): Base Metals Closed Mixed ahead of US March Inflation Data

SHANGHAI, Apr 12 (SMM) - LME and SHFE base metals closed mixed last night. On the macro front, the market is waiting for the U.S. inflation data to learn more about whether inflationary pressures have continued to weaken which will affect the Fed’s subsequent interest rate hike path. The U.S. index inched lower, bolstering copper prices.

Copper: LME copper closed at $8,891/mt in overnight trading, a gain of 0.33%. Trading volume was 14,000 lots and open interest stood at 248,000 lots. SHFE 2305 copper contract finished at 69,870 yuan/mt overnight, up 0.47%. Trading volume was 35,000 lots, and open interest stood at 168,000 lots.

In terms of fundamentals, spot quotes yesterday were suppressed to a low level, mainly due to the impact of the expansion of the price difference between the SHFE front-month and SHFE next-month copper contract. Combined with lower SHFE copper prices, the overall transaction was brisk. There have been still imported copper inflows recently, but their impact on the spot market dropped. According to SMM data, although more smelters entered into maintenance in April, the overall output will not be significantly affected, and the output is expected to increase by 0.26% from the previous month. The terminal demand is still relatively sensitive to copper prices and has not yet shown a strong recovery. The market is waiting for the U.S. inflation data. And copper inventory declines and consumer demand have slowed down. Copper prices are expected to have support and fluctuate widely.

Aluminium: Overnight, the most-traded SHFE 2305 aluminium contract opened at 18,415 yuan/mt, with the highest price of 18,485 yuan/mt and the lowest price of 18,375 yuan/mt, and closed at 18,420 yuan/mt, down 45 yuan/mt or 0.24% from the previous trading day.

LME aluminium prices opened at $2,337.5/mt with the highest point of $2,344/mt and the lowest point of $2,296/mt, and finally closed at $2,303/mt, a decrease of $37/mt or 1.58% from the previous trading day.

On the macro front, as the US inflation data is to be released, the market expects the Fed to raise interest rates. On the fundamentals, in the second quarter of 2023, domestic aluminium supply continues to rise slowly and the demand also gradually recovers. As such, aluminium ingots inventory continues to decline and the short-term aluminium prices may remain volatile. It is necessary to continue to pay attention to the power supply in Yunnan and the Fed’s interest rate hikes.

Lead: Overnight, the LME lead prices opened at $2,111.5/mt and hit the lowest point at $2,100/mt, and finally closed at $2,083.5/mt, down $35.5/mt, or 1.68%.

The most-traded SHFE 2305 lead contract opened at 15,255 yuan/mt, and rose to 15,310 yuan/mt, but then fell amid declining LME lead prices and finally closed at 15,280 yuan/mt, an increase of 10 yuan/mt or 0.07%.

Zinc: LME zinc opened at $2,787/mt at last night’s session, hitting a high of $2,806.5/mt and a low of $2,765/mt, and closed at $2,771/mt, down $33/mt or 1.18%. Trading volume was reduced to 6,842 lots, and open interest increased by 417 lots to 178,000 lots. LME zinc inventory decreased by 200 mt or 0.45% to 44,700 mt.

LME zinc prices continued to weaken last night, and a pullback in the spot premiums in Europe also signalled a recession in overseas consumption. Eyes should be put on the CPI due today.

Overnight, the most-traded SHFE 2305 zinc contract opened lower at 21,990 yuan/mt and closed at 21,960 yuan/mt, down 75 yuan/mt or 0.34%. Trading volume was down to 48,265 lots, and open interest gained 1,811 lots to 107,000 lots. As SHFE zinc prices fell below 22,000 yuan/mt, the market sentiment was weak, accompanied with low operating rates of downstream enterprises. The social inventory also saw a slowdown in decline.

Nickel：The spread between the SHFE front-month and next-month contracts did not narrow yesterday. The prices of NORNICKEL nickel hovered at highs despite the drop in futures prices in the early trading. NPI plants held prices firm. Recently, the transactions between traders and NPI plants have increased. Market players generally remained bullish.

On the demand side, according to SMM research, the SS contract prices hovered at highs in the early trading, and the spot prices rose slightly. The spot transaction improved in the afternoon, and prices of cold and hot-rolled coil added about 200 yuan/mt. Some specifications of cold-rolled coils were out of stock, and some hot-rolled coil agents closed orders. Short-term spot stainless steel prices will rebound. In general, pure nickel demand grew slightly. SMM presumes that the downward space of nickel prices will be limited.

[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.]