SHANGHAI, Apr 4 (SMM) - LME and SHFE base metals closed mostly with losses last night. On the macro front, the U.S. dollar fell sharply yesterday, rolling back the gains made after OPEC+ unexpectedly further cut oil production. In addition, data showed that the U.S. economy continued to slow down, with manufacturing activity and construction spending falling, which strengthened market expectations that the Fed’s interest rate hike is nearing an end.
Copper: LME copper prices closed at $8,906.5/mt in overnight trading, a decline of 0.97%. Trading volume was 12,000 lots and open interest stood at 253,000 lots. The most active SHFE 2305 copper contract finished at 68,980 yuan/mt overnight, down 0.56%. Trading volume was 36,000 lots, and open interest stood at 170,000 lots.
In terms of fundamentals, as of Monday April 3, copper stocks in Chinese markets tracked by SMM increased 4,300 mt from last Friday 206,200 mt. The current total inventory increased 9,600 mt from before the Chinese New Year holidays and are 68,500 mt higher than the same period last year. The increase in inventory in east China is mainly due to the increase in imported copper and limited downstream stockpiling at the end of the month. The arrivals and shipments leaving Guangdong were both at a low level, showing weak supply and demand.
In terms of consumption, the enthusiasm of downstream stockpiling will increase at the beginning of the month, but high copper prices will still restrain consumption. In terms of prices, OPEC's unexpected production cuts have made the market worried about rising inflation in the United States, and China's Caixin manufacturing PMI is lower than market expectations, both weighing on copper prices.
Aluminium: At Monday’s night session, the most-traded SHFE 2305 aluminium contract opened at 18,750 yuan/mt, with its lowest and highest at 18,645 yuan/mt and 18,820 yuan/mt before closing at 18,655 yuan/mt, down 45 yuan/mt or 0.24%.
LME aluminium opened at $2,415/mt on Monday, with its high and low at $2,434/mt and $2,385/mt respectively before closing at $2,389/mt, a drop of $28/mt or 1.16%.
Output cuts by OPEC+ will boost the short-term oil prices. Amid the rebound in energy prices, countermeasures by the US are also crucial. The tug-of-war between longs and shorts will escalate amid supply disruptions, inflation expectations, and recession fears. If the US Fed continues to raise interest rates, this will pose threat to aluminium prices in the long run. However, if interest rate hike slows down and energy prices rise, aluminium prices will be supported. Given variables on the macro front and the fact that downstream consumption has not exceeded market expectations, aluminium prices will move rangebound.
Lead: Overnight, LME lead opened at $2,110/mt, and hit the lowest point as the US dollar index strengthened, the SHFE lead prices fell. In the European trading hours, the US dollar index fell back, and thus LME lead prices rebounded and finally closed at $2,112.5/mt, an increase of 0.28%.
Overnight, the most-traded SHFE 2305 lead contract opened at 15,240 yuan/mt and the inventory of lead ingots continued to decline. SHFE lead prices fluctuated at 15,225 yuan/mt and finally closed at 15,220 yua/mt, an increase of 0.03% with open interest rising 75 lots to 54,100 lots.
Zinc: LME zinc opened at $2,910/mt overnight and experienced an inverted V-shaped trend before closing down $21.5/mt or 0.74% at $2,886/mt. Transaction volume rose to 5,949 lots, and open interest expanded by 3,441 lots to 182,000 lots. LME zinc inventory shed by 25 mt to 45,050 mt.
The most-traded SHFE 2305 zinc contract opened higher at 22,585 yuan/mt in overnight trading, touching a high of 22,690 yuan/mt, and finished at 22,510 yuan/mt, down 120 yuan/mt or 0.53%. Trading volume was down to 45,960 lots, and open interest fell 2,314 lots to 95,196 lots.
The March Caixin China manufacturing PMI recorded 50.0, indicating that the business activity in the manufacturing sector was flat from February, a sign of a slowdown in recovery. Fundamentally, the social inventory of zinc ingots has accumulated slightly to 155,200 mt. Although zinc consumption has been weighed down by falling operating rates of downstream enterprises, the zinc prices are still underpinned by the peak season.
Nickel：Traders began to quote pure nickel over the SHFE 2305 nickel contract yesterday, and the suppliers maintained their shipment rhythm. Stainless steel mills have purchased NPI intensively recently. There is still a certain amount of goods that have not been released. It is still necessary to pay attention to whether there will be traders selling goods at lows to withdraw funds, which will drive down the prices.
On the demand side, according to SMM research, a stainless steel mill in east China that suspended production in March may have resumed production now. Another mill in east China stopped production to make steel, and the 300-series output is expected to be cut by about 20,000 mt. In general, the fundamentals of pure nickel remained weak. SMM presumes that nickel prices will remain rangebound.
[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.]
