SMM Evening Comments (Apr 28): Shanghai Nonferrous Metals Closed Mixed on Constantly Rising US Dollar

SHANGHAI, Apr 28 (SMM) – Shanghai nonferrous metals closed mixed as the US dollar soared and refreshed its 5-year high in light of the US interest rate hike as well as a sharp rally in U.S. bond yields.

Shanghai copper rose 0.11%, aluminium added 0.99%, lead dropped 0.45%, zinc gained 1.2%, tin lost 1.43%, and nickel advanced 1.61%.

Copper: The most-traded SHFE 2206 copper closed up 0.11% or 80 yuan/mt at 73,320 yuan/mt, with open interest up 1,899 lots to 150,234 lots.

On the macro front, in light of the US interest rate hike as well as a sharp rally in U.S. bond yields, the dollar soared all the way up, and the dollar once again refreshed more than 5-year high to 103.29 on Wednesday, pressuring commodity prices. In China, as the May Day holiday approached, some of the shorts closed their positions after paying off and left the market.

In the spot market, SHFE copper rose in the second to last trading day in April, and repairing SHFE/LME price ratio. The SHFE front-month and next-month spread expanded from 200-250 yuan/mt in morning trade to 300-320 yuan/mt in the afternoon, attracting traders, which sustained the premiums around 250 yuan/mt. The premiums are likely to remain stable should the spread post no significant changes tomorrow. The transactions in Zhejiang and Jiangsu picked up before the holiday, and the supply tightness in Jiangsu eased slightly amid constant shipments from smelters, with premiums at 300-500 yuan/mt.

Aluminium: The most-traded SHFE 2206 aluminium closed up 0.99% or 205 yuan/mt to 20,915 yuan/mt, with open interest down 8,152 lots to 202,820 lots.

SHFE aluminium gained strong support around 20,000 yuan/mt, and has been slowly repairing previous losses, but met resistance at 21,000 yuan/mt. There is possibility that the shorts may leave the market for risk aversion, while the longs need further verification.

Lead: The most-traded SHFE 2206 lead closed down 0.45% or 70 yuan/mt at 15,435 yuan/mt, with open interest down 643 lots to 54,259 lots.

Though the recovery of secondary lead supply has become the greatest bearish factor concerned by the market, secondary lead supply recovery still takes time amid uncertainties surrounding the COVID and high lead-acid battery scrap prices. Social inventory rose limitedly this week. The market shall watch the support at 15,400 yuan/mt.

Zinc: The most-traded SHFE 2206 zinc closed up 1.2% or 330 yuan/mt at 27,895 yuan/mt, with open interest up 1,797 lots to 123,775 lots.

The futures prices improved palpably. The longs were boosted by highlighted energy supply concerns as Russia firmly cut natural gas supplies to Poland and Bulgaria. On the other hand, the downstream operating rates rose after market transactions picked up when zinc prices fell a few days ago. The spot market was relatively quiet amid rising zinc prices and about-to-close restocking.

Tin: The most-traded SHFE 2206 tin closed down 1.43% or 4,690 yuan/mt at 324,410 yuan/mt, with open interest down 341 lots to 29,197 lots.

In the spot market, the offers from smelters and traders both dropped 1,750 yuan/mt from a day ago to 335,750 yuan/mt, while imported tin was mostly flat over SHFE 2205. However, some sellers held firm to their offers, hence the action transactions differed among sellers. The downstream purchased on rigid demand as a whole. SHFE warrants dropped 42 mt to 1,408 mt, and the warrants fell 624 mt in April. Nonetheless, LME tin inventory added 150 mt to 3,030 mt on April 17, an increase of 1,030 mt in the past month.

Nickel: The most-traded SHFE 2206 nickel closed up 1.61% or 3,610 yuan/mt at 227,280 yuan/mt, with open interest up 5,483 lots to 52,068 lots.

On the fundamentals, pure nickel prices were still high amid supply shortage of spots, unfavourable SHFE/LME price ratio for the import side. As domestic operating rates of pure nickel were relatively low, the supply shortage is likely to ease only after the import becomes profitable. In the downstream, alloy and battery companies have reduced the production because high raw material prices could not be transmitted to their downstream, and the pandemic in Shanghai also resulted in sluggish demand. SHFE nickel prices are expected to hover at a high level in the near term.

[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.]