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SMM Evening Comments (Apr 27): Shanghai Nonferrous Metals Closed Mostly with Losses amid a Possible US Economic Recession

iconApr 27, 2023 18:00
Shanghai nonferrous metals closed mostly with losses in day trading. 

SHANGHAI, Apr 27 (SMM) - Shanghai nonferrous metals closed mostly with losses in day trading. The latest data released by the Fed on Tuesday showed that the M2 money supply (unseasonal-adjusted) in the US was $20.8 trillion in March, a sharp drop of 4.05% year-on-year. This is the largest year-on-year drop since the data was first introduced in 1959, and nearly double the fall in the previous month, while the indicator has also been negative year-on-year for four consecutive months. According to historical data, before and after M2 growth reaches the bottom, the probability of a US economic recession increases. The commodity market mainly traded amid a US economic recession.

SHFE copper closed down 0.80%, aluminium dipped 1.36%, lead fell 0.07%, zinc gained 0.14%, tin slipped 0.42%, and nickel closed up 0.12%.

Copper: SHFE 2306 copper closed down 540 yuan/mt or 0.80% at 66,560 yuan/mt. The open interest gained 3,920 lots to 187,019 lots.

Downstream companies raised the demand as the futures prices continued to fall and the Labour Day holiday is approaching. The transactions of low-priced goods improved within the day. However, as the end of the month and the eve of the holidays approach, the holders were less willing to restock. During the week, the spread between the front-month and next-month contracts widened and the import loss narrowed to less than 100 yuan/mt. The inflow of imported copper further suppressed the spot premiums. It is expected that the premiums will maintain the current trend tomorrow.

Aluminium: SHFE 2306 aluminium dipped 255 yuan/mt or 1.36% to 18,435 yuan/mt. The open interest lost 17,071 lots to 223,462 lots.

On the macro level, the market generally expects the Fed to raise interest rates by 25 basis points in May, and there are renewed concerns about economic recession. On the fundamentals, April is still the peak season for downstream consumption, and the domestic aluminium ingot social inventory remains in a destocking state. Although the aluminium price has dropped below 19,000 yuan/mt, high prices still deterred buyers. Downstream buyers have not shown a strong willingness to stock before the upcoming Labour Day holiday. And risk aversion may emerge before the holiday. As such, SHFE aluminium is likely to move rangebound. It is necessary to continue to pay attention to whether smelters in Yunnan will curtail capacity.

Lead: SHFE 2306 lead dipped 10 yuan/mt or 0.07% to 15,275 yuan/mt. The open interest fell 3,461 lots to 63,599 lots.

SHFE lead prices moved sideways. The spot market saw more goods quoted at discounts, while the downstream companies made average inquiries as they completed their pre-holiday restocking. The small order transactions were slack today. The most-traded SHFE lead contract will move rangebound in the short term on a stable macro front.

Zinc: SHFE 2306 zinc gained 30 yuan/mt or 0.14% to 21,110 yuan/mt. The open interest fell 2,047 lots to 120,585 lots.

Spot prices quoted by traders were slightly higher than the average price. A small number of traders were actively shipping due to financial pressure before the Labour Day, but they refused to ship at lows on low inventory and the possible fall in premiums after the Labour Day holiday. Some downstream enterprises restocked on dips in a small amount, and many enterprises ended their stockpiling, resulting in slack spot transactions today.

Tin: SHFE 2306 tin slipped 870 yuan/mt or 0.42% to 206,050 yuan/mt. The open interest grew 10,010 lots to 52,284 lots.

Nickel: SHFE 2306 nickel closed up 210 yuan/mt or 0.12% at 179,420 yuan/mt. The open interest fell 5,830 lots to 68,357 lots.

On April 27, premiums of Jinchuan nickel were 4,000-4,200 yuan/mt. The average premium stood at 4,100 yuan/mt, flat from the previous trading day. NORNICKEL nickel was quoted at premiums of 2,500-2,800 yuan/mt, with an average of 2,650 yuan/mt, down 600 yuan/mt from a day ago. Spot suppliers were active in shipping at the month-end. The supply shortage of imported pure nickel improved. Nickel briquette prices were 186,200-186,800 yuan/mt, an increase of 50 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.]

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