SMM Morning Comments (Apr 28): Base Metals Closed Mostly with Losses on Stronger Rate Hike Bets

SHANGHAI, Apr 28 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, the US dollar index retreated after a surge as weaker-than-expected US economic growth in the first quarter was considered unlikely to prevent the Federal Reserve from raising interest rates next week. The market expects the US Fed to continue to raise interest rates.

Copper: LME copper closed at $8,593.5/mt in overnight trading, a gain of 0.25%. Trading volume was 24,000 lots and open interest stood at 256,000 lots. The most active SHFE 2306 copper contract finished at 66,940 yuan/mt overnight, up 25%. Trading volume was 61,000 lots and open interest stood at 180,000 lots.

In terms of fundamentals, due to the approach of the Labour Day holiday and continuous declines in SHFE copper prices, downstream consumption remained brisk. Some enterprises stood on the sidelines amid concerns over further copper price declines. In addition, the loss of imports has been reduced to less than 100 yuan/mt, and the pressure on the inflow of imported goods has further increased. If copper prices continue to hover at low levels, it is expected that demand will grow in the short term. Affected by the financial market, copper prices are relatively low. And it is expected that there will be no significant recovery in copper prices before the Fed's interest rate hike meeting.

Aluminium: Overnight, the most-traded SHFE 2306 aluminium contract went down to 18,325 yuan/mt after opening at 18,415 yuan/mt, but then rebounded before closing at 18,465 yuan/mt, down 105 yuan/mt or 0.57%. LME aluminium opened at $2,332/mt on Thursday and closed at $2,326/mt, down 0.21%.

On the macro level, various data show that the U.S. economy is likely to slow down in the second half of this year or even fall into recession, and the impact of bank financial risks persists. On fundamentals, this week's aluminium ingot inventory and aluminium billet inventory both declined. The operating rate of leading aluminium downstream processing companies continued to pick up, but may drop after the Labour Day holiday. Downstream enterprises did not show strong interest in stocking up before the holiday. As the Labour Day holiday approaches, more funds may leave the market. Therefore, SHFE aluminium may face downward pressure. Market should pay close attention to whether market demand will recover after the holiday and possible supply cuts in Yunnan.

Lead: Overnight, LME lead opened at $2,109.5/mt and rose to $2,120/mt in light of rising SHFE lead prices, and finally closed at $2,110/mt, down 0.31%.

The most-traded SHFE 2306 lead contract opened at 15,280 yuan/mt and fell to 15,250 yuan/mt, and finally closed at 15,255 yuan/mt, down 0.2%. The open interest dipped 974 lots to 62,625 lots.

Zinc: Overnight, LME zinc opened at $2,649.5/mt and hit a low of $2,591/mt before closing at $2,647/mt, down $1.5/mt or 0.06%. Trading volume was down to 8,405 lots, and the open interest stood at 184,000 lots. LME zinc prices were slightly boosted by the rebounding US stocks, but met resistance before the bell.

The most-traded SHFE zinc contract settled at 21,225 yuan/mt, down 5 yuan/mt or 0.02%.

In general, zinc prices will remain rangebound with constrained risk appetite when investors are cautious before the upcoming Labour Day holiday.

Tin: SHFE 2305 tin contract prices hit the lowest pointa t 205,880 yuan/mt, and then gradually stabilised and closed at 208,080 yuan/mt, up 0.05%.

In the spot market, the discounts remained stable, but the SHFE tin prices rebounded sharply, resulting in significant decline in downstream demand. Overall, the spot transactionsy remained relatively thin.

Nickel: Spot suppliers were active in shipping at the month-end, and the supply shortage of imported pure nickel improved, dragging down spot premiums. NPI market supply was not high. The cargo holders who bore high costs were less willing to ship. According to SMM research, NPI demand from the stainless steel sector grew after the price hike of stainless steel. Recently, the spot stainless steel trades have been slack, while the steel mills have received more orders in May. The downstream sectors are less willing to restock, and the pure nickel supply tightness eases, thus nickel prices are likely to gain weaker support.

[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.]