SMM Evening Comments (Apr 13): Shanghai Nonferrous Metals Closed Mostly with Gains on Decline in US Dollar Index and Expected Fed Rate Cut at Year-end

SHANGHAI, Apr 13 (SMM) - Shanghai nonferrous metals closed mostly with gains in day trading. The US March CPI rose 5% YoY, with an estimate of 5.1% and a previous reading of 6.0%, and it added 0.1% month-on-month, with an estimate of 0.2% and a previous reading of 0.4%. According to CME’s "Fed Watch tool", the probability of the US Fed hiking the rates by 25 basis points in May to 5.00%-5.25% is 67.4%, and that of maintaining interest rates unchanged by May is 32.6%. The market expected the Fed to cut interest rates at the end of the year, and the US dollar index weakened, which propped up metals prices.

SHFE copper added 0.29%, aluminium climbed 0.27%, lead rose 0.26%, zinc gained 0.05%, tin grew 0.78%, while nickel lost 0.40%.

Copper: SHFE 2305 copper closed up 200 yuan/mt or 0.29% at 69,170 yuan/mt. The open interest gained 3,389 lots to 170,762 lots.

The backwardation structure of the SHFE front-month and next-month contracts stood at around 80 yuan/mt. Spot quotes offered by traders diverged today, but most of the traders held the prices firm. The intraday transactions were thin. Some traders will quote their spots against the SHFE 2305 copper tomorrow. The spot prices will still be greatly affected by the change in the SHFE copper spread.

Aluminium: SHFE 2305 aluminium rose 50 yuan/mt or 0.27% to 18,490 yuan/mt. The open interest dipped 6,123 lots to 175,526 lots.

The US inflation data was lower than expected, thus expectations for interest rate hike in May weakened. This sent the US dollar index lower, boosting base metals. The domestic aluminium supply maintained a small increase, while downstream demand is recovering slowly. On the whole, the short-term aluminium market is intertwined with positive and negative factors, which may keep aluminium prices rangebound. It is necessary to continue to pay attention to the power supply situation in Yunnan, inventory changes, and whether the Federal Reserve will raise interest rate.

Lead: SHFE 2305 lead closed up 40 yuan/mt or 0.26% at 15,320 yuan/mt. The open interest rose 845 lots to 44,894 lots.

SHFE lead prices moved with some ups. Spot holders shipped at premiums on low market supply, while the downstream companies were cautious about purchasing high-priced goods. Therefore, the market transaction was sluggish. The most-traded SHFE lead contract will move rangebound in the short term on a stable macro front.

Zinc: SHFE 2305 zinc climbed 10 yuan/mt or 0.05% to 21,995 yuan/mt. The open interest fell 1,394 lots to 106,597 lots.

As the delivery of SHFE 2304 zinc approached, traders became more willing to ship, which, coupled with the inflow of some imported low-priced spots, dragged down the premiums. Downstream companies still mainly held a wait-and-see sentiment. And spots were mainly traded among traders.

Tin: SHFE 2305 tin added 1,490 yuan/mt or 0.78% to 192,260 yuan/mt. The open interest declined 4,731 lots to 49,002 lots.

Nickel: SHFE 2305 nickel slid 730 yuan/mt or 0.40% to 181,290 yuan/mt. The open interest decreased 2,193 lots to 73,985 lots.

On April 13, premiums of Jinchuan nickel were 7,800-8,000 yuan/mt. The average premium stood at 7,900 yuan/mt, down 350 yuan/mt from the previous trading day. NORNICKEL nickel was quoted with premiums of 7,000-7,500 yuan/mt, with an average of 7,250 yuan/mt, flat from a day ago. Near the delivery of the SHFE 2304 contract, most traders included the NORNICKEL nickel spot in their warrant delivery, hence the premiums stood firm. The suppliers of Jinchuan nickel were much more willing to ship, dragging down the premiums. Nickel briquette prices were 184,700-185,800 yuan/mt, down 200 yuan/mt from the previous trading day. The nickel briquette transactions were slack as it was still traded at premiums over nickel sulphate.

[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.]