SMM Morning Comments (Mar 16): Base Metals Closed with Losses with Credit Suisse Stock Slump Fuelling Fears of a Widespread Banking Crisis

SHANGHAI, Mar 16 (SMM) – LME and SHFE base metals closed with losses last night. On the macro front, Credit Suisse's stock prices plummeted after disclosing "flaws" in its financial report. Investors once again worried about a full-scale global banking crisis, and the US index rose overnight.

Copper: LME copper closed at $8,573/mt overnight, a decline of 2.89%. Trading volume was 42,000 lots and open interest stood at 245,000 lots. The most active SHFE 2304 copper contract finished at 66,620 yuan/mt evening, down 3.15%. Trading volume was 63,000 lots and open interest stood at 139,000 lots.

On the macro front, Credit Suisse's stock prices plummeted after disclosing "flaws" in its financial report. Investors once again worried about a full-scale global banking crisis. The US index rose overnight, which was negative for copper prices. In terms of fundamentals, players in the spot market stood on the sidelines yesterday, the first day of the delivery of the SHFE front-month copper contract. It is worth noting that import losses narrowed due to the recent appreciation of the yuan. The market expects that the inflow of imported copper will increase after the delivery, and the supply of tradable goods in the east China market is expected to increase. The inventory in Guangdong has dropped sharply again, and the decrease in arrivals is the main reason. There was not much willingness of downstream buyers to purchase goods in the spot market. Transactions were relatively quiet yesterday. Due to the impact of the banking crisis, copper prices fell under pressure, and attention should be paid to the unfolding of the financial market.

Aluminium: Affected by macro sentiment, non-ferrous metals prices generally fell. The most-traded SHFE 2304 aluminium contract opened at 18,210 yuan/mt overnight and fell to around 18,000 yuan/mt before closing at 18,070 yuan/mt, down 285 yuan/mt or 1.55%. LME aluminium opened at $2,349/mt on Wednesday and sank to $2,261/mt before closing at $2,281/mt, down 3%.

On the macro level, in recent days, the bankruptcy of Silicon Valley Bank and the credit turmoil of Credit Suisse Bank have increased market concerns about global liquidity issues and systemic risks. Surging risk aversion caused hammered commodity market. The fundamentals of aluminium market have not changed much. The demand is gradually recovering. However, under the influence of bearish macro sentiment, it is expected that the aluminium prices will be vulnerable to decline.

Lead: LME lead opened at $2,084.5/mt overnight, touching a low at $2,062.5/mt before closing at $2,068/mt, down 0.74% or $15.5/mt.

The most-traded SHFE 2304 lead contract opened at 15,260 yuan/mt and fell to 15,220 yuan/mt, and finally closed at 15,230 mt, down 30 yuan/mt or 0.2% overnight.

Zinc: Overnight, LME zinc opened at $2,914/mt, touching a high and low at $2,930/mt and $2,835/mt, and closed down $40.5/mt or 1.39% at $2,877/mt. Trading volume was up to 10,893 lots, and open interest lost 843 lots to 185,000 lots. LME zinc inventory decreased by 125 mt to 37,775 mt, a drop of 0.33%. Affected by a sharp rise in the US dollar and the widespread overseas credit crisis, overseas market sentiment was depressed, dragging down the LME zinc.

The most traded SHFE 2304 zinc contract opened lower at 22,490 yuan/mt in overnight trading and closed at 22,415 yuan/mt, down 460 yuan/mt or 2.01%. The trading volume was down to 72,375 lots, and open interest dipped 199 lots to 82,307 lots. Despite the sufficient supply, the domestic zinc ingot social inventory still hovered at a low level, and downstream enterprises are likely to enhance restocking efforts when SHFE zinc prices fall. Nevertheless, the bearish sentiment will still weigh on SHFE zinc prices.

Tin: Affected by the liquidity crisis facing Credit Suisse, SHFE 2304 tin contract declined yesterday night and closed at 179,300 yuan/mt, down 4.17%.

On the fundamentals, the warrants fell significantly yesterday amid the delivery of SHFE 2303 contract. But the spot market was cold amid wait-and-see sentiment.

In the spot market, the discounts of small brands remained stable. The supply of imported tin was scarce. The SHFE 2304 tin contract declined yesterday night and closed at 179,300 yuan/mt, down 4.17%.

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: On the supply side, due to the delivery of the SHFE 2303 nickel yesterday, the upstream companies were less willing to ship, and the spot transactions fell short of expectations. In terms of NPI, a large NPI plant in Indonesia planned to cut production, which may ease the oversupply. On the demand side, according to SMM research, the SS contract prices went up overnight. Spot quotations rose slightly in the morning, and the transactions were acceptable. A stainless steel mill in east China offered a new stainless steel price in south China, which was lower than the weekly price, which failed to boost the downstream orders. Alloy companies mainly purchased on demand amid poor orders. To sum up, the pure nickel sector faces weak supply and demand, weighing on 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.]