SHANGHAI, Mar 13 (SMM) – LME and SHFE base metals closed with losses last Friday. On the macro front, the U.S. non-farm payrolls data for February showed a slowdown in wage growth, suggesting that easing inflationary pressures may keep the pace of Fed rate hikes relatively mild, sending the dollar lower.
Copper: LME copper closed at $8,777/mt last Friday evening, a drop of 0.62%. Trading volume was 19,000 lots and open interest stood at 246,000 lots. The most active SHFE 2304 copper contract finished at 69,020 yuan/mt last Friday evening, down 0.17%. Trading volume was 49,000 lots, and open at 143,000 lots.
On the macro front, the U.S. non-farm payrolls data for February showed a slowdown in wage growth, suggesting that easing inflationary pressures may keep the pace of Fed rate hikes relatively mild, sending the dollar lower. On the fundamentals, as of Friday March 10, SMM copper inventories in major Chinese markets decreased 37,000 mt to 271,100 mt from last Monday, down 38,000 mt from the two Fridays ago. Delivery taking volume in east China increased significantly last week, mainly due to the drop in copper prices and the increase in orders. Guangdong also saw a significant increase in consumption due to the production resumption by large downstream producers. With the arrival of the peak season and the drop in copper prices, consumption is expected to continue to recover. Due to the influence of overseas macroeconomics, the market risk aversion has increased, weighing on copper prices.
Aluminium: The most-traded SHFE 2304 aluminium contract opened at 18,245 yuan/mt at last Friday’s night session and hovered around 18,250 yuan/mt before closing at 18,255 yuan/mt, down 110 yuan/mt or 0.6%. LME aluminium opened at $2,324/mt last Friday and fell to $2,285/mt before closing at $2,306/mt, down 0.58%.
On the macro front, the market generally expects US interest rate hikes, and the US non-farm payrolls and inflation data will be released soon, keeping the macro atmosphere cautious. If the non-farm payrolls data exceeds expectations, aluminium prices will come under downward pressure. In terms of fundamentals, the positive impact from aluminium production reduction in Yunnan has been basically digested by the market. Downstream production was recovering slowly in the peak season, and social inventories of aluminium ingots have not entered destocking cycle. Lower alumina prices diminished cost support to aluminium prices, which may fluctuate weakly in the short term.
Lead: LME lead opened at $2,081.5/mt last Friday, and hovered around the daily moving average during the Asian trading hours. During the European trading hours, LME lead rebounded to $2,103/mt amid the weakening US dollar index after hitting the lowest point at $2,059/mt, and finally closed at $2,068/mt, down $15/mt or 0.72%.
The most-traded SHFE 2304 lead contract opened at 15,155 yuan/mt and fell 25 yuan/mt or 0.16% to 15,140 yuan/mt last Friday, after briefly hitting the highest point at 15,190 yuan/mt.
Zinc: Last Friday, LME zinc opened at $2,974/mt and closed at $2,909/mt, down $66.5/mt or 2.23%, with open interest down 3,949 lots to 187,000 lots. The trading volume rose to 8,121 lots. LME zinc inventory decreased by 300 mt to 38,450 mt, down 1.24%. An economic recession loomed large in the overseas market, and the market players became increasingly panic, which may cause LME zinc to weaken.
The most-traded SHFE 2304 zinc contract opened at 22,890 yuan/mt during last Friday’s night session and finished at 22,875 yuan/mt, down 215 yuan/mt or 0.93%. The trading volume was down to 69,235 lots, and open interest lost 217 lots to 84,545 lots. On the fundamentals, the domestic zinc smelters have been running at high capacity, but the demand is still picking up slowly. The SMM zinc ingot social inventory remains low. Market players are suggested to be alert to the macro front overseas.
Tin: The SHFE 2304 tin contract fell last Friday night and closed at 186,990 yuan/mt, down 1.46%.
In terms of fundamentals, the social inventory of refined tin increased sharply last week. The spot market picked up as tin prices fell. The spot discounts of deliverable brands remained stable while that of small brands were still high. The market supply of imported goods were still insufficient.
To sum up, the resumption of tin market needs to rely on the recovery of downstream consumption and inventory digestion. Downstream processing companies cannot actually digest inventory by stocking up at low prices, and they still need to pay close attention to the progress of consumer confidence restoration.
Nickel: Nickel prices trended lower last week as many bearish macro factors were released. After nearly a year of rate hikes, the US inflation rate is still higher than the target of 2%. On the evening of March 7, US Fed’s Powell made a speech indicating that it is necessary to accelerate the pace of rate hikes in the future. The US ADP employment data on March 8 was higher than market expectations, confirming the resilience of the current US labour market, which aroused market concerns about a sharp rate hike in the future and sent nickel prices into a nosedive. On the supply side, the fall in spot pure nickel prices encouraged upstream shipments. In terms of NPI, a stainless steel mill in east China bought thousands of tonnes of Indonesia and Chinese NPI at 1,250 yuan/mtu (tax included, delivery to factory). Some traders and NPI factories chose to accept the prices since the NPI supply was ample and the market remained sluggish. On the demand side, according to SMM research, affected by the slumping futures prices, the stainless steel suppliers were eager to ship, hence the spot quotes declined last week. Pure nickel transactions made by alloy companies picked up slightly amid the falling nickel prices. It is expected that the downward space of nickel prices may narrow in late March, mainly because the prices have plummeted amid the news factors at the beginning of the month and the pure nickel inventory has not yet seen a large accumulation. In addition, the peak season will also beef up the 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.]
