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SMM Morning Comment For SHFE Base Metals On February 22

iconFeb 22, 2024 10:25
LME copper prices opened at $8,541.5/mt on Wednesday, reaching a low of $8,535/mt, and kept hiking, hitting a high of $8,604.5/mt and finally closed up 0.18% at $8,546/mt.

SHANGHAI, Feb 22 (SMM) –


LME copper prices opened at $8,541.5/mt on Wednesday, reaching a low of $8,535/mt, and kept hiking, hitting a high of $8,604.5/mt and finally closed up 0.18% at $8,546/mt. Trading volumes were 27,000 lots, and open interest was 289,000 lots. The most-traded SHFE 2404 copper contract opened at 69,230 yuan/mt, and hit a high of 69,530 yuan/mt after a low of 69,110 yuan/mt, and finally closed up 0.44% at 69,160 yuan/mt. Trading volume was 31,000 lots and open interest was 143,000 lots.

On the macro front, most officials noted the risk of cutting interest rates too quickly in the FOMC meeting, and some saw possible inflation stagnation, matching market expectations. However, US retail sales and other data also showed some weakness, and the US dollar index ticked down. In terms of fundamentals, as a slew of warrant stocks may flow into spot market on Thursday after delivery on Monday, copper cathode supply may remain ample. From a consumption perspective, rising copper prices yesterday tamed buying appetites to a certain extent. Moreover, in spite of production resumption of downstream sectors, it will still take time for demand to pick up. In a word, supply surplus may unfold recently. In terms of copper price, optimistic macro sentiment, domestic demand improvement and the release of more data are expected to keep copper prices high in the near future.


Overnight, the most-traded SHFE 2404 aluminium contract opened at 18,960 yuan/mt, with high and low at 18,975 yuan/t and 18,805 yuan/mt before closing at 18,825 yuan/mt, down 0.34%. LME aluminium opened at $2,227/mt on Wednesday, with its low and high at $2,216/mt and $2,269/mt respectively before closing at $2,220.5/mt, up 1.23%.

Summary: From a macro perspective, the United States will announce a "major sanctions package" against Russia on Friday. Domestic favorable policies were frequently introduced. LPR dropped significantly. 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. With work and production continuing to resume after CNY holiday, the demand is expected to pick up. Low inventory and weak inventory growth will support the aluminium prices.


LME lead opened at $2,052.5/mt on Wednesday, reaching a low of $2,046/mt, but hiked to $2,081.5/mt amid falling US dollar index and overseas inventory erosion, and finally closed up 1.22% at $2,080.5/mt.

Overnight, the most-traded SHFE 2403 lead contract opened up to 15,845 yuan/mt, and moved up to a high of 15,920 yuan/mt amid LME lead price gain before falling to a low of 15,840 yuan/mt, and finally closed up 0.06% at 15,850 yuan/mt.


Overnight, LME zinc opened at $2,378/mt on Wednesday, and reached a high of $2,419/mt before dropping to $2,400/mt, and finally closed up $16.5/mt or 0.69% at $2,398.5/mt. Trading volume decreased to 8,935 lots. Open interests dipped by 4,476 lots to 240,000 lots. LME zinc prices saw suppression of the 20-day moving average and supports from the 10-day moving average. Overnight LME zinc stocks dropped by 300 mt or 0.11% to 269,100 mt. Overnight US dollar index dropped. Non-ferrous metal prices hiked. There was little likelihood of an early interest rate cut by the Federal Reserve. Therefore, upside in LME zinc prices was curbed.

The most-traded SHFE zinc contract opened at a low of 20,350 yuan/mt on Wednesday, and reached a high of 20,410 yuan/mt before hitting a low of 20,305 yuan/mt, and finally closed up 15 yuan/mt or 0.07% at 20,310 yuan/mt. Trading volume decreased to 42,675 lots. Open interests hiked by 3,476 lots to 110,000 lots. Boosted by favorable domestic fiscal policies and improved macroeconomic sentiment, SHFE zinc prices hiked, but to a limited extent amid demand to be seen next week and minimal spot transactions.


SHFE 2403 tin contract rose slightly to 218,090 yuan/mt before closing at 217,000 yuan/mt overnight, down 0.64%.

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 100-500 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 600-1,000 yuan/mt for imported brand tin ingots. Tin prices rose slightly in early trading yesterday, with most downstream companies taking a wait-and-see attitude. Few deals were heard among traders.


Overnight, the most-traded SHFE nickel contract opened at 126630 yuan/mt, and closed at 128280 yuan/mt, up 1710 yuan/mt. Trading volume rose 25945 lots, and open interest decreased by 5577 lots. On the macro front, on February 20, the People's Bank of China authorized the National Interbank Funding Center to announce the latest LPR: the 1-year LPR was 3.45%, unchanged, and the 5-year and above LPR was 3.95%, lowered by 25 basis points from the previous month. The sharp drop in LPR sends a clear signal that monetary policy will increase to stabilize growth and promote development, further promote the reduction of financing costs for the real economy, and thus helping to boost market confidence and expectations. Therefore, SHFE nickel rose yesterday. From a fundamental point of view, due to the successive resumption of work by downstream producers after the holiday, transactions in the spot market picked up. Nickel price is expected to swing on a strong note.

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