SMM Morning Comments (Mar 18): Shanghai base metals were mostly higher as investors reacted to Fed decision

SHANGHAI, Mar 18 (SMM) — Nonferrous metals on the SHFE were mostly higher on Thursday morning on a positive note following record gains on Wall Street after the US Federal Reserve’s policymaking committee voted to keep short-term borrowing rates near zero. Meanwhile, their counterparts on the LME also rose for the most part.

Shanghai base metals mostly advanced in overnight trading. Copper increased 1.22%, aluminium rose 0.57%, tin went up 0.3% and zinc strengthened 0.37%, while lead fell 0.24% and nickel weakened 0.3%.

The LME complex performed similarly on Wednesday. Copper added 1.92%, aluminium rose 0.77%, tin increased 3.06%, zinc went up 1.07% and nickel strengthened 0.4%, while lead fell 0.96%.

Copper: Three-month LME copper rose 2.31% to end at $9,130/mt on Wednesday, and is likely to trade between $9,090-9,180/mt today.

The most-active SHFE 2105 copper contract went up 0.69% to close at 67,400 yuan/mt in overnight trading, and it is expected to move between 67,100-67,700 yuan/mt today, while spot copper will be traded between discounts 150 – premiums 50 yuan/mt.

The Federal Reserve announced the latest interest rate decision in March, which was in line with market expectations. Powell reiterated that inflation is a temporary phenomenon, and there is no need to take action on the rise of US bond yields. He predicted that the benchmark interest rate will remain near zero level until the end of 2023. The Fed's zero interest rate outlook and quantitative easing policy remained unchanged, while the three major stock indexes of US stocks were boosted and rose across the board, with the S&P 500 index and Dow Jones index both reaching record highs. The US dollar index fell sharply in intraday trading, while copper futures closed up at night. In terms of spot, it is still difficult to attract a large number of rigid demand restocking in the market, and the trade transaction is tepid.

Aluminium: Three-month LME aluminium rose 1.66% to close at $2,232/mt on Wednesday. Carbon neutralization pushed refined aluminium to industry hotspots, and supply and demand improved on the fundamentals. It is expected that the contract will keep fluctuating at high and trade between $2,210-2,250/mt today. 

The most-liquid SHFE 2105 aluminium contract rose 0.57% to settle at 17,720 yuan/mt on Wednesday night, and is likely to trade between 17,600-17,900 yuan/mt today.

Zinc: Three-month LME zinc rose 1.57% to close at $2,840/mt on Wednesday. Zinc stocks at LME-listed warehouses fell 400 mt to 266,000 mt. The Federal Reserve kept interest rates unchanged and raised its GDP and inflation expectations. Powell hinted that it would not raise interest rates before the end of 2023. US stocks soared, and short positions funds withdrew. The contract is likely to trade between $2,800-2,850/mt today.

The most-liquid SHFE 2104 zinc contract rose 0.37% to end at 21,710 yuan/mt in overnight trading. Yesterday, zinc prices weakened and the spot market turnover improved slightly. However, the orders of downstream galvanised enterprises did not improve obviously, and it is expected that the zinc prices will fluctuate strongly in the near term. The actual production reduction of mines and smelters under the dual control of energy consumption in Inner Mongolia will be monitored in the near term. The SHFE zinc contract is expected to move between 21,500-22,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 40-50 yuan/mt.

Nickel: The most-active SHFE 2106 nickel contract fell 0. 3% to close at 120,580 yuan/mt on Wednesday. Open interests rose 220 lots to 144,000 lots. The contract will keep fluctuating weakly today.

Lead: Three-month LME lead settled 0.78% lower at $1,916/mt on Wednesday. LME lead stocks fell 425 mt to 124,525 mt. Whether the US dollar index continued its decline to boost LME Lead to stop falling and stabilize will be monitored today.

The most-active SHFE 2104 lead contract went down 0.24% to close at 14,760 yuan/mt on Wednesday night. Whether the contract could stand firm above 14,800 yuan/mt will be monitored today.

Tin: Three-month LME tin closed up 1.98% at $25,750/mt on Wednesday. The Fed's interest rate remained unchanged, which led to the downward trend of the US dollar and supported the contract. Pressure above will be seen from $27,000/mt today. Support below will be seen from $24,500/mt today.

The most-liquid SHFE 2105 tin contract fell 0.2% at 175,690 yuan/mt on Wednesday night. After the CNY, tin ingots accumulated and the consumption slowed down, which led to an increase in inventory pressure and dragged down the trend of tin prices. Pressure above will be seen from 180,000 yuan/mt today. Support below will be seen from 170,000 yuan/mt today.