SMM Morning Comments (Mar 31): Base Metals Closed Mixed as US Dollar Weakened against Euro on Eased German Inflation

SHANGHAI, Mar 31 (SMM) - LME and SHFE base metals closed mixed last night. On the macro front, the dollar fell to its lowest level against the euro in a week on Thursday as data showed that inflation in Germany eased, boosting the euro. Concerns about the banking sector eased, sending the U.S. dollar index lower.

Copper: LME copper prices closed at $9,001/mt last evening, up 0.23%. Trading volume was 14,000 lots and open interest stood at 251,000 lots. SHFE 2305 copper contract finished at 69,460 yuan/mt last evening, down 0.34%. Trading volume was 33,000 lots, and open interest stood at 172,000 lots.

In terms of fundamentals, the import loss has further expanded and it is expected that the possibility of a large inflow of imported goods flowing into the spot market in the short term will be low, which will affect sellers’ price hikes. The month-end and high copper prices kept downstream buyers cautious in purchasing, and overall trading was lacklustre. Affected by European inflation data, copper prices are expected to move at highs and will return to fundamentals.

Aluminium: Overnight, the most-traded SHFE 2305 aluminium contract opened at 18,735 yuan/mt, with its lowest and highest at 18,685 yuan/mt and 18,770 yuan/mt before closing at 18,715 yuan/mt, up 20 yuan/mt or 0.11%.

LME aluminium opened at $2,380.5/mt on Thursday, with its high and low at $2,400/mt and $2,369.5/mt respectively before closing at $2,386.5/mt, an increase of $3.5/mt or 0.15%.

On the macro level, the pace of the Fed's interest rate hike seems to be slowing down, adding to market uncertainty. On the fundamentals, despite a slight recovery on the production side, domestic aluminium ingot social inventory continued to fall as downstream consumption continued to pick up. The short-term aluminium prices may go up, driven by improving fundamentals. However, macro uncertainty should be closely watched.

Lead: Yesterday, LME cash to three month lead contract gradually fell and then stabilised after reaching the lowest point at $2,122/mt and finally closed at $2,137.5/mt, down 0.02%.

Yesterday, the SHFE 2305 lead contract gradually rose and then fell slightly after reaching a high point around 15,330 yuan/mt, and finally closed at 15,315 yuan/mt, up 0.13%.

Zinc: Overnight, LME zinc closed at $2,927.5/mt, down $34/mt or 1.15%. LME zinc inventory shed by 200 mt to 39,125 mt. SHFE zinc opened lower in overnight trading and settled at 22,735 yuan/mt, a loss of 120 yuan/mt or 0.53%.

So far, the inflation in the United States is still high, but the macro sentiment is relatively stable. In China, although the production is affected by power rationing, smelters across the country still maintain relatively high operating rates in pursuit of high profits. The operating rates of downstream enterprises also remain high despite a slight decline last week. The growth rate of new orders is contained. Zinc prices are expected to continue moving sideways.

Nickel：SHFE nickel prices fell after surging yesterday. The spot prices hovered at lows, and the transactions were poor. In terms of NPI, stainless steel mills reduced production in March intensively, which was negative for NPI prices as a whole, and they are less likely to ramp up production in April. The mills were less willing to restock amid the poor stainless steel consumption, and they lowered their purchase prices. On the demand side, according to SMM research, there have been more inquiries and transactions for NPI recently, and the prices trended lower. Tsingshan Group disclosed the bid prices. The cost support also declined greatly. News said that a stainless steel mill in east China had partially resumed production, thus the futures prices hovered at lows. In summary, the recent macro situation is stable, but the growth of nickel prices will still be hindered by the weak fundamentals.

[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.]