SMM Morning Comment For SHFE Base Metals On Mar 25

SHANGHAI, Mar 25(SMM) –

Copper

LME copper prices opened at $8968/mt and closed at $8847/mt last Friday, down 1.30%, with the highest of $8971/mt and the lowest of $8833/mt. The trading volume was 21,000 lots, and open interest stood at 315,000 lots. The most active SHFE 2405 copper contract prices opened at 72180 yuan/mt and finished at 72340 yuan/mt overnight, with the high-end of 72690 yuan/mt and the low-end of 72150 yuan/mt nearby, down 0.25%. The trading volume was 39,000 lots, and open interest stood at 203,000 lots. On the macro front, the president of the Atlanta Federal Reserve Bank spoke against expectations of an interest rate cut. It is expected that interest rates will be cut only once in 2024. The strength of the US dollar has suppressed copper prices. In terms of fundamentals, in terms of consumption, the decline in copper prices has led to a certain recovery in consumption, but the overall desire for downstream replenishment was still not strong. If copper prices continue to fall, consumption is expected to gradually recover. Overall, supply remains adequate. Due to the influence of macro sentiment, copper prices will move at highs in the near future.

Aluminum

At last Friday’s night session, the most-traded SHFE 2405 aluminum contract opened at 19,445 yuan/mt, with its lowest and highest at 19,400 yuan/mt and 19,595 yuan/mt before closing at 19,510 yuan/mt, up 110 yuan/mt or 0.57%. LME aluminum opened at $2,310/mt in the previous trading day, with its high and low at $2,312.5/mt and $2,281/mt respectively before closing at $2,309/mt, unchanged from the previous trading day.

Summary: On the macro front, the conflict between Russia and Ukraine drove up the gold prices and brought great uncertainty to the future situation. Fundamentally, imports of primary aluminum are still at a high level, and the drought in Yunnan will not disturb aluminum production resumption in the short term. The arrival of the traditional peak season boosted downstream operating rate. Last Thursday, the total inventory of aluminum ingots and billets dropped. Boosted by positive fundamentals and macro front, aluminum prices may swing on a strong note.

Lead

LME lead opened at $2055/mt last Friday and fell by 0.97% to close at $2037/mt with the lowest point at $2032/mt.

Overnight, the most active SHFE 2405 lead contract opened at 16225 yuan/ton, finally closing at 16245 yuan/ton, a gain of 0.15%.

Zinc

LME zinc prices opened at $2532/mt last Friday and closed down $49.5/mt or 1.95% at $2482.5/mt, with the high-end of $2535.5/mt and the low-end of $2481.5/mt. Trading volume decreased to 9945 lots, and open interest grew by 6370 lots to 230,000 lots. The market began to expect that the Federal Reserve would cut interest rates later, the U.S. dollar index strengthened again, and the early optimism was digested.

Last Friday, the SHFE 2405 zinc contract opened at 21180 yuan/ton with a low of 21165 yuan/ton and a high of 21305 yuan/ton. It finally closed down at 21230 yuan/ton, down 80 yuan/ton, or 0.38%. The trading volume dropped to 43143 lots, and the open interest decreased by 104 lots to 102,000 lots. Recently, TCs have been running at low levels. The shortage of supply at the mines may still support zinc prices. However, there has been no major improvement in consumption, and SHFE zinc may have insufficient upward momentum.

Tin

SHFE 2404 tin contract saw limited fluctuations last Friday night, closing at 226,800 yuan/mt, down 0.24%.

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 1,000-1,200 yuan/mt over SHFE 2404 tin contract, versus discounts of 700 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 200-500 yuan/mt for Yunxi brand, and discounts of 1,200-1,400 yuan/mt for imported brand tin ingots. Tin prices continued to decline last Friday, suppressing downstream and terminal companies from purchasing. Few deals were heard among traders.

Nickel

Nickel prices dropped last week. By last Friday, SHFE nickel contract closed at 134,710 yuan/mt, down by 5.05% WoW. The decline was driven by waning optimism in the market, leading prices to align with fundamentals. Bullish sentiment was fueled by Indonesia RKAB and supply-demand imbalances in the new energy sector. Firstly, nickel prices were greatly impacted by slow RKAB approval, which didn't meet market expectations. This led to a belief in scarce raw material supply, boosting prices across the nickel industry. However, recent research by SMM shows an acceleration in Indonesia RKAB approval, with 107 companies approved, totaling 152.6 million wmt capacity. This has shattered the expectation of scarce supply, causing market prices to drop. Secondly, the nickel sulphate spot transactions were weak. There's limited room for further increase in nickel salt prices. Supply side, more nickel is being produced both in China and abroad. In March, China's refined nickel production is expected to rise by 3% MoM. Also, Russian nickel might arrive by the end of the month, increasing expectations of more pure nickel supply. Demand side, spot transactions picked up slightly as nickel prices fell, prompting some restocking in alloy and special steel sectors. Yet, downstream industries express pessimism about future demand, with some reporting a notable drop in orders YoY. In summary, with ample supply and low demand for pure nickel, SHFE nickel 2404 contract is anticipated to show weak performance this week.