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SMM Morning Comment For SHFE Base Metals On February 20

iconFeb 20, 2024 10:20
LME copper prices opened at $8,426/mt on Monday, and hiked to a high of $8,466/mt in early week, but retraced down to a low of $8,424/mt towards the closing session, and finally closed at $8,427.5/mt.

SHANGHAI, Feb 20 (SMM) –


LME copper prices opened at $8,426/mt on Monday, and hiked to a high of $8,466/mt in early week, but retraced down to a low of $8,424/mt towards the closing session, and finally closed at $8,427.5/mt. Trading volumes were 17,000 lots, and open interest drooped by 0.53% to 296,000 lots. The most-traded SHFE 2403 copper contract opened at 68,500 yuan/mt, and moved up to a high of 68,600 yuan/mt, but then declined to a low of 68,390 yuan/mt, and finally closed at 68,440 yuan/mt. Trading volume was 11,000 lots and open interest hiked by 0.01% to 115,000 lots.

On the macro front, with intensifying of the Red Sea incidents, crude oil prices stood high. There was little macro information and US stocks closed yesterday, and players awaited more clues. In terms of fundamentals, as of February 19, copper inventories in mainstream regions in China increased by 117,400 mt to 285,700 mt, the largest increase in six years. From the supply side, holders actively shipped stocks. In addition, more copper imports will arrive at the end of the month. Overall supply was ample. In terms of demand, in spite of restart of downstream sectors, demand will still need time to pick up. In terms of copper price, heavy inventory build-up in China weighed down copper prices. Copper prices may have difficulty hiking in a short run.


Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,755 yuan/mt, with high and low at 18,825 yuan/t and 18,715 yuan/mt before closing at 18,760 yuan/mt, down 0.48%. LME aluminium opened at $2,218/mt on Monday, with its high and low at $2,229.5/mt and $2,192/mt respectively before closing at $2,197.5/mt, down 0.92%.

Summary: During the CNY, on the macro front, the US economic data in January exceeded expectations, the Federal Reserve's interest rate cut expectations have not been implemented. LME aluminium inventory picked up, sending LME aluminium down. However, new domestic policies have been implemented amid loose financial market. The implementation of real estate financing projects has accelerated, boosting market confidence. In terms of fundamentals, upstream aluminium smelters continued to produce, pushing up aluminium ingot inventory accumulation after CNY. However, the accumulation of aluminium ingots during CNY was less than expected, with a significant YoY decrease and a historical low in the past six years. On the whole, overseas interest rate cuts have not been implemented, but favourable domestic macroeconomic policies boosted market confidence. Although the aluminium market entered a traditional inventory accumulation, the extent is not as large as in previous years. Downstream processing companies resumed production and demand gradually picked up, which may support aluminium prices after CNY.


LME lead opened at $2,069.5/mt on Monday, and kept dipping amid rising US dollar index and overseas lead inventory hike, and finally closed down 1.64% at $2,036/mt after hitting a low of $2,031/mt towards the closing session.

Overnight, the most-traded SHFE 2403 lead contract opened at 15,860 yuan/mt, and dragged down to a low of 15,825 yuan/mt by LME lead prices, and finally closed down 0.25% at 15,870 yuan/mt.

In terms of fundamentals in spot market, there was post-holiday restart of upstream and downstream sectors. Some medium and large refineries kept production during the holidays, while downstream sectors took holidays. Therefore, lead ingot stocks of refineries piled up aggressively. In addition, lead-acid battery companies resumed production, but most of them had remaining lead ingot inventory. Post-holiday stockpiling will deserve to be monitored. To sum up, lead prices may remain weak in recent days.


Overnight, LME zinc opened at $2,395/mt on Monday, hiked to a high of $2,410/mt after hitting a low of $2,367/mt, and finally closed up $18.5/mt or 0.77% at $2,406.5/mt. Trading volume increased to 9,851 lots. Open interests mounted by 2,920 lots to 248,000 lots. Overnight LME zinc stocks increased by 5,225 mt to 270,050 mt, up 1.97% day on day. LEM zinc prices inched up amid the weakening of the US dollar index, but sustained inventory uptick and probably delayed overseas interest rate cuts curbed the upside.

The most-traded SHFE zinc contract opened at 20,240 yuan/mt on Monday, hitting a high of 20,450 yuan/mt, and closed up 155 yuan/mt 0r 0.76% at 20,420 yuan/mt. Trading volume decreased to 36,765 lots. Open interests dropped by 3,553 lots to 67,055 lots. After the holiday, downstream sectors resumed production, and purchased zinc at bargain prices, improving spot transactions. At the same time, costs offered a big boost to zinc prices.


SHFE 2403 tin contract inched lower and then moved rangebound before closing at 217,400 yuan/mt, down 0.25%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 300-500 yuan/mt against SHFE 2403 tin contract, versus discounts of 200 yuan/mt to premiums of 500 yuan/mt for delivery brands, premiums of 500-800 yuan/mt for Yunxi brand, and discounts of 1000 yuan/mt for imported brand tin ingots. Tin prices went down after opening higher and drifted sideways in early trading yesterday. Most downstream companies resumed work yesterday and took a wait-and-see attitude towards tin prices.


SHFE nickel opened at 126650 yuan/mt overnight and closed at 125900 yuan/mt, down 350 yuan per mt. Trading volume fell 64610 lots and open interest fell 90 lots.

Due to slower than expected drop in US core CPI, expectations for rate cuts cooled. Spot market activities were still limited as many enterprises have not yet fully resumed production. Nickel prices may swing on a soft note.

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