SMM Morning Comments (Apr 18): Base Metals Closed Mostly with Losses on Reinforced Expectations for May Rate Hike

SHANGHAI, Apr 18 (SMM) – LME and SHFE base metals closed mostly with losses overnight. On the macro front, New York State in the United States announced that manufacturing activity in April increased for the first time in five months, which strengthened the market's expectations for the Fed's interest rate hike in May. The US index rose, weighing on copper prices.

Copper: LME copper prices closed at $8,955/mt last evening, down 0.98%. Trading volume was 14,000 lots and open interest stood at 262,000 lots. SHFE 2305 copper contract finished at 69,550 yuan/mt last evening, down 0.7%. Trading volume was 32,000 lots, and open interest stood at 171,000 lots.

On the fundamentals, as of Monday April 17, SMM copper inventory across major Chinese markets added 1,500 Inventory mt from last Friday to 191,600 mt, up 52,000 mt from the same period of 2022. Inventories fell in east China mainly due to the increase in direct shipments from refineries to downstream companies, and the supply of domestically produced copper to delivery warehouses did not continue to increase. In south China, due to the approaching delivery, the supply of goods to delivery warehouses increased, growing inventory there. If copper prices continue to fluctuate at high levels, downstream consumption will continue to be under pressure. Copper price fluctuations will be more subject to the macro environment. With expectations of Fed rate hike, copper prices will meet resistance.

Aluminium: Overnight, the most-traded SHFE 2305 aluminium contract opened at 18,780 yuan/mt, and rose to 18,840 yuan/mt, but then pulled back before closing at 18,765 yuan/mt, up 10 yuan/mt or 0.05%. LME aluminium opened at $2,386/mt on Monday and closed at $2,372.5/mt, down $17.5/mt or 0.73%.

The Fed’s interest rate hike seems to be coming to an end, but a deep economic recession has not yet arrived. The Chinese economy is recovering, boosting the aluminium market. On fundamentals, domestic aluminium supply is growing slowly, and power supply situation in Yunnan deserves close attention. Aluminium ingots maintained the destocking cycle.  In view of improving macro environment and slowing demand growth, aluminium prices should move rangebound in the short term.

Lead: Overnight, LME lead prices opened at $2,163/mt and touched a high of $2,167/mt, but then fell to $2,079/mt and finally closed at $2,114/mt due to the rising US dollar index, a drop of 2.02 %. The open interest increased 2,917 lots to 104,000 lots and the trading volume increased 802 lots to 7,469 lots.

The most-traded SHFE lead contract opened at 15,355 yuan/mt and closed at 15,310 yuan/mt, a decrease of 0.42% after hitting the highest point and the lowest point at 15,360 yuan/mt and 15,295 yuan/mt. The open interest decreased 4,736 lots to 37,082 lots and the trading volume decreased 21,689 lots to 31,418 lots.

Zinc: LME zinc opened at $2,850.5/mt overnight and closed at $2,835/mt, down $11/mt or 0.39%. Trading volume stood at 4,863 lots, and open interest added 70 lots to 175,000 lots. The market's concerns about the Fed's subsequent interest rate hikes re-emerged, and the pessimistic macro sentiment still weighed on LME zinc prices.

Last night, the most-traded SHFE zinc 2305 opened at 22,380 yuan/mt and finally settled at 22,350 yuan/mt, down 95 yuan/mt or 0.42%. The trading volume was 42,000 lots, and open interest decreased 2,995 lots to 86,000 lots. Although the recent power rationing in Yunnan has led to a slight decline in the expected production of refined zinc in April, it has little impact on the overall sufficient supply in China. Therefore, it is expected that SHFE zinc prices will hardly trend higher.

Tin: Affected by the news of the suspension of mines of Wa State in Myanmar, the SHFE 2305 tin contract rose strongly and then hovered sideways and finally closed at 222,010 yuan/mt, up 6.93%.

Nickel：Recently, SHFE nickel prices have continued to grow. The spot premiums of NORNICKEL nickel were firm, and the price difference between the Jinchuan nickel and NORNICKEL nickel was narrow. The intraday spot nickel transactions were poor yesterday. Inventory of low-priced NPI dropped. The traders held some spots in their hands, but their quotes were high. On the demand side, according to SMM research, in the past few days, the market witnessed a price ceiling and trading suspension carried out by large stainless steel mills, which boosted the spot stainless steel prices and further drove up the futures prices. Spots were mainly carried by the stainless steel mills and first-level agents, and the market inventory and stocks held by terminal companies stood relatively low. In general, the low market supply beefed up nickel prices, but the fundamentals still weighed on the prices. SMM believes that nickel prices will fluctuate.

[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.]