SMM Morning Comment For SHFE Base Metals On February 23

SHANGHAI, Feb 23 (SMM) –

Copper

LME copper opened at $8551.5/mt overnight, with its session low and high at $8540/mt and $8608.5/mt before closing up 0.73% at $8608/mt. Trading volume was 22,000 lots, and open interest was 294,000 lots. SHFE 2404 copper contract opened at 69260 yuan/mt overnight, with its session low and high at 69100 yuan/mt and 69520 yuan/mt before closing up 0.25% at 69410 yuan/mt. Trading volume was 28,000 lots, and open interest was 155,000 lots. On the macro front, several officials from the Federal Reserve gave speeches, increasing market expectations for a delay in cutting interest rates. In addition, the number of Americans filing for unemployment benefits and PMI data both showed that the U.S. economy is highly resilient. The situation in the Red Sea remains tense, coupled with the expansion of US sanctions against Russia, the market sentiment is relatively tense. In terms of fundamentals, from the supply side, the demand for deliverable goods in the market has increased. However, due to the release of warehouse receipts and the flow of imported copper into the domestic market, copper supply is still relatively abundant. However, according to SMM, due to the low spot premiums or big spot discounts, the willingness of cargo holders to sell is not high. In terms of consumption, processing companies have gradually resumed work and begun to replenish stocks. However, rising market prices have inhibited some downstream purchasing enthusiasm. Therefore, the overall market transaction is still weak. It is expected that more demand will be released after the Lantern Festival. As of February 22, copper stocks in mainstream areas of China increased by 700 mt from Monday to 286,400 mt, but 39,000 mt below a year ago. Domestic demand has gradually recovered, macroeconomic sentiment remains optimistic, and copper prices remain high.

Aluminium

Overnight, the most-traded SHFE 2404 aluminium contract opened at 18,785 yuan/mt, with high and low at 18,800 yuan/t and 18,685 yuan/mt before closing at 18,740 yuan/mt, down 0.43%. LME aluminium opened at $2,225/mt on Thursday, with its high and low at $2,234.5/mt and $2,187.5/mt respectively before closing at $2,201/mt, down 0.83%.

The US manufacturing PMI hit a new high. Many domestic banks intensively lowered deposit interest rates, and favourable policies were frequently introduced amid loose financial market. In terms of fundamentals, the cost of aluminium increased MoM in January. With work and production continuing to resume after CNY holiday, low inventory and weak inventory growth will support aluminium prices.

Lead

LME lead opened at $2,079/mt on Wednesday, and moved up amid falling US dollar index and overseas inventory erosion after dropping to $2,071/mt, and finally closed up 0.53% at $2,091.5/mt.

Overnight, the most-traded SHFE 2403 lead contract opened up to 15,845 yuan/mt, hitting a high of 15,915 yuan/mt, but crept down to 15,825 yuan/mt amid LME lead price slip, and finally closed down 0.22% at 15,830 yuan/mt.

Zinc

LME zinc opened at $2,399.5/mt on Wednesday, and reached a high of $2,419/mt after dropping to $24384.5/mt, but finally closed down $7/mt or 0.29% at $2,391.5/mt. Trading volume decreased to 7,561 lots. Open interests dipped by 1,653 lots to 239,000 lots. Overnight LME zinc stocks dropped by 400 mt or 0.15% to 268,700 mt. Less people filing for unemployment benefits in the US last week unveiled bullish labor market, thus little likelihood of interest rate cuts by the Fed in H1 2024.

The most-traded SHFE zinc contract opened at a low of 20,385 yuan/mt overnight, and finally closed down 25 yuan/mt or 0.12% at 20,320 yuan/mt. Trading volume decreased to 30,633 lots. Open interests hiked by 3,319 lots to 114,000 lots. SHFE zinc prices gained supports from the 5-day moving average. With bears and bulls in a deadlock, SHFE zinc moved rangebound. Given pick-up of demand next week, zinc prices might go up.

Tin

SHFE 2403 tin contract fluctuated downwards and stabilized at 215,100 yuan/mt before closing at 215,650 yuan/mt overnight, down 0.78%.
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 yesterday, with a small number of downstream companies making purchases as needed. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 128650 yuan/mt, and closed at 131320 yuan/mt, up 3040 yuan/mt. Trading volume rose 34975 lots, and open interest decreased 7372 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 the government aims 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. Overseas, the United States and the European Union have launched a new round of sanctions against Russia, which may affect Russian metals. This boosted nickel price. Therefore, SHFE nickel rose sharply to 3.16% yesterday. From a fundamental point of view, due to the successive resumption of work by downstream plants after the holiday, spot market transactions picked up. Nickel price is expected to swing on a strong note.