SMM Morning Comment For SHFE Base Metals On Mar 6

Copper

LME copper prices opened at $8543/mt and closed at $8489/mt in overnight trading, a drop of 0.42%, with the low-end of $8484.5/mt and the high-end of $8534/mt. Trading volume was 15,000 lots, and open interest stood at 284,000 lots. The most active SHFE 2404 copper contract prices opened at 69090 yuan/mt and closed at 69000 yuan/mt last evening, down 0.25%, with the high-end of 69200 yuan/mt and the low-end of 68980 yuan/mt. Trading volumes stood at 12,000 lots and open interest stood at 148,000 lots. On the macro front, the U.S. dollar index rose last night, but then due to the U.S. PMI data in February falling short of expectations, the U.S. dollar index staged dived, causing copper prices to fluctuate widely. A series of important U.S. economic data will be released this week. In terms of fundamentals, from the supply side, imported copper began to flow into the domestic trade market, which had an impact on spot premiums and discounts, and supply of domestic and imported copper continued to be ample. In terms of consumption, the recovery of market demand is still lower than expected, and the rise in copper prices has exerted a drag on the recovery of demand. According to SMM, some large processing companies have large inventories of raw materials in their warehouses, which are expected to be difficult to be reduced in the short term. Overall, the market pattern of oversupply will continue to exist in the short term. Copper prices will remain at the current level.

Aluminum

The most-traded SHFE 2404 aluminum contract opened at 19,080 yuan/mt overnight, with its low and high at 19,060 yuan/mt and 19,125 yuan/mt before closing at 19,065 yuan/mt, up 15 yuan/mt or 0.08%. LME aluminum opened at $2,237/mt yesterday, with its high and low at $2,241.5/mt and $2,223/mt respectively before closing at $2,226.5/mt, down $7.5/mt or 0.34%.

Summary: From a macro perspective, lower-than-expected economic data has strengthened the Fed’s interest rate cut expectations, making it possible to cut interest rates in June, and the US dollar index weakened. However, market opinions are divided over the time for interest rate cuts and its sustainability. State Council released favourable policies to boost the economy and consumer demand during the “Two Sessions”. Fundamentally, aluminum smelters maintained stable production, and supply disturbances in China and overseas have basically eased. On the demand, the production resumption after CNY holiday boosted the operating rate of aluminum downstream enterprises. Short-term consumption is still expected to rebound, and spot transactions and outbound performance improved. Aluminum ingots inventory growth slowed down in the third week after CNY holiday. SMM expects domestic aluminum ingot inventories may move between 800,000-900,000 mt in the first half of March, while aluminum billets inventories has entered destocking cycle for a week. Overall, aluminum prices are likely to grow in traditional peak season in March, and we need to pay attention to aluminum supply, recovery of consumption, and when aluminium ingot and aluminium billets stocks will begin to drop.

Lead

LME lead opened at $2039/mt last evening and fell by 0.02% to close at $2055/mt, after hitting the lowest point at $2031/mt and the highest point at $2062/mt.

Overnight, the most active SHFE 2404 lead contract opened at 15,980 yuan/ton and rose to 16,005 yuan/ton as long positions increased, finally closing at 15,990 yuan/ton, an increase of 0.06%.

Zinc

Overnight, LME zinc opened at $2441.5/mt, hitting a low and high of $2434/mt and $2473.5/mt respectively, and closed at $2454/mt, up $5/mt or 0.2%. Trading volume increased to 11203 lots, and open interest grew 1261 lots to 232,000 lots. LME zinc inventory dropped by 650 to 275150 mt. The market continues to bet on the Federal Reserve cutting interest rates in June. The U.S. service industry PMI in February was lower than expected and recorded 52.6, a decline from January. After the data was released, the U.S. dollar index "dived from a high level", and LME zinc continued to rise.

The most-traded SHFE 2404 zinc contract opened at 20740 yuan/mt overnight and fell to 20705 yuan/mt before rallying to a peak of 20820 yuan/mt. It eventually settled at 20775 yuan/mt, up 85 yuan/mt or 0.41%. Trading volume grew to 47564 lots, and open interest decreased by 1343 lots to 99706 lots. The market has positive expectations for the two sessions. In addition, there will be more maintenance of smelters in March, and the supply of zinc ingots may not recover as scheduled, which will boost the SHFE zinc price.

Tin

SHFE 2404 tin contract fluctuated downwards and stabilized at 218,200 yuan/mt before closing at 218,560 yuan/mt overnight, down 0.39%.

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 600-1,000 yuan/mt against SHFE 2404 tin contract, versus discounts of 400 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 500-700 yuan/mt for Yunxi brand, and discounts of 800-1,300 yuan/mt for imported brand tin ingots. Tin prices rose slightly and then fell back in early trading yesterday, with most downstream companies taking a wait-and-see attitude. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 138000 yuan/mt, and closed at 136420 yuan/mt, down 200 yuan/mt. Trading volume decreased by 126,000 lots, and open interest decreased by 1,190 lots. RKAB approval process in Indonesia still has big impact on nickel prices. Nickel prices continued to run weakly yesterday, mainly due to the gradual digestion of the early market macro sentiment. Nickel prices may fluctuate downward due to the influence of fundamentals.