SMM Evening Comments (Apr 18): Shanghai Nonferrous Metals Mostly Closed with Gains after Pricing in Upcoming RRR Cut

SHANGHAI, Apr 18 (SMM) – Shanghai nonferrous metals closed mostly with gains after the market priced in the upcoming RRR cut, which will improve the liquidity. Meanwhile, bullish macroeconomic data also boosted market confidence.

Shanghai copper rose 0.28 %, aluminium added 0.44%, lead advanced 1.1%, zinc gained 0.82%, tin fell 0.3%, and nickel climbed 1.77%.

Copper: The most-traded SHFE 2205 copper closed up 0.28% or 210 yuan/mt at 74,760 yuan/mt, with open interest down 8,275 lots to 156,720 lots.

On the macro front, as Europe and the United States sanctions against Russia may be extended to the energy sector and the world's largest independent oil trader plans to stop buying Russian crude oil, the market was again dented in terms of energy safety concerns. Last week, WTI and Brent both recorded a weekly gain of more than 8%, pulling up copper prices. In China, the GDP grew by 4.8% in the first quarter of 2022, well ahead of market expectations, with industrial value added growing by 5% in March. Domestic financial data was quite bullish, boosting copper prices.

In the spot market, the premiums were relatively firm amid tight supply of spots after the delivery of SHFE 2204 and upcoming concentrated maintenance of smelters, which may suppress downstream demand. Domestic copper cathode social inventory rose slightly to 139,600 mt as of Monday April 18.

Aluminium: The most-traded SHFE 2205 aluminium closed up 0.44% or 95 yuan/mt to 21,840 yuan/mt, with open interest down 11,226 lots to 144,897 lots.

On the macro front, the soon-to-be-implemented RRR cut will improve market liquidity, boosting the real economy. Hence it is expected the near-term prices will keep rising.

Lead: The most-traded SHFE 2205 lead closed up 1.1% or 170 yuan/mt at 15,595 yuan/mt, with open interest down 5,002 lots to 33,625 lots.

In the spot market, the logistics cost of lead ingot rose, and rising secondary lead cost also offered strong support to SHFE lead. The spot market transactions improved after lead prices stopped falling and stabilised. The market shall watch if overnight SHFE lead could maintain the current price level at 15,600 yuan/mt.

Zinc: The most-traded SHFE 2205 zinc closed up 0.82% or 230 yuan/mt at 28,400 yuan/mt, with open interest down 9,261 lots to 106,392 lots.

On the supply side, a domestic smelter announced to suspend the production, hence the estimated zinc ingot output in April may drop. On the consumption side, the downstream purchased only on dips as zinc prices were high, and the trading market was quiet as a whole Zinc ingot social inventory across seven markets in China totalled 284,000 mt.

Tin: The most-traded SHFE 2205 tin closed down 0.3% or 1,020 yuan/mt at 336,200 yuan/mt, with open interest down 359 lots to 23,531 lots.

In the spot market, the offers from smelters and traders both dropped 750 yuan/mt from the previous trading day to around 343,250 yuan/mt after futures prices dropped, but the spot premiums rose 875 yuan/mt to 7,500 yuan/mt. The sources in the market were relatively sufficient compared with last week, and market transactions were also stable. SHFE 2204 tin was finally settled at 343,100 yuan/mt (after paying the taxes), and will be settled between April 18-20. SHFE warrants rose 8 mt to 2,928 mt.

Nickel: The most-traded SHFE 2205 nickel closed up 1.77% or 4,040 yuan/mt at 232,140 yuan/mt, with open interest down 2,779 lots to 51,968 lots.

On the fundamentals, LME nickel moved between $32,400-33,300/mt last week with little liquidity as the prices were still high, which made it difficult to proceed with raw material contracts that use LME nickel as the benchmark. As such, market players were unwilling to hedge, even after LME nickel returns to normal, as is believed by some.

Meanwhile, nickel sulphate supply tightened on raw material shortage, and the output of high-grade nickel matte still remained as the key to relieve supply tightness of new energy and nickel briquette.

SHFE nickel rose last week, and the pure nickel market was both weak in supply and demand, which pressured nickel prices.

[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.]