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SMM Morning Comment For SHFE Base Metals On February 27

iconFeb 27, 2024 10:05
LME copper prices opened at $8537.5/mt and closed at $8449/mt overnight, a drop of 1.29%, with the low-end of $8444/mt and the high-end of $8545/mt.

SHANGHAI, Feb 27 (SMM) –


LME copper prices opened at $8537.5/mt and closed at $8449/mt overnight, a drop of 1.29%, with the low-end of $8444/mt and the high-end of $8545/mt.Trading volume was 19,000 lots, and open interest stood at 297,000 lots. SHFE 2404 copper opened at 68800 yuan/mt overnight and fell to 68690 yuan/mt after rising to 68950 yuan/mt, closing at 68790 yuan/mt, down 0.51%. The trading volume was 24,000 lots, and open interest stood at 151,000 lots. On the macro front, the slight strengthening of the U.S. dollar last night combined with rising Chinese inventories suppressed copper prices. However, under the news of sanctions, oil and natural gas prices have both risen, which is expected to have a driving effect on copper prices. The market will keep an eye on key inflation data on Thursday. On the fundamentals, as of Monday February 26, SMM copper inventories in major Chinese markets grew 11,900 mt to 298,300 mt compared with last Thursday. In terms of consumption, the downstream operating rate has recovered this week, driving certain demand, but the overall increase in consumption is limited, mainly long-term orders and rigid demand replenishment. Overall, both supply and consumption continued to grow. In terms of price, on the whole, as the domestic downstream operating rate gradually recovers and consumption continues to improve, copper prices are expected to rise slightly driven by oil prices and natural gas.


Overnight, the most-traded SHFE 2404 aluminum contract opened at 18,800 yuan/mt, with high and low at 18,850 yuan/mt and 18,765 yuan/mt before closing at 18,785 yuan/mt, down 10 yuan/mt or 0.05%. LME aluminium opened at $2,182/mt on Monday, with its high and low at $2,195/mt and $2,175/mt respectively before closing at $2,182/mt, down $2/mt or 0.09%.

Summary: From a macro perspective, we need to focus on the US core PCE index this week. Inflation data may provide more information on when the Fed will start cutting interest rates. In terms of fundamentals, the strike in Guinea had limited impact on bauxite; the domestic aluminium smelters maintained stable operations. On the demand, aluminium downstream companies are steadily resuming production. With the end of rain and snow and the arrival of the peak season, short-term consumption is expected to continue to improve. Low inventory and weak inventory growth will also somehow support aluminium prices. However, the aluminium ingots supply increased, which coupled with recent opening of import window may inhibit the upward room of aluminium prices. Overall, aluminium prices continue to fluctuate, and we need to pay attention to the impact of the strike in Guinea bauxite, the recovery of consumption, and the inventory decline of aluminium ingot and aluminium billets.


Overnight, LME lead prices opened at $2,098/mt. Against the background of continuous destocking in the past week, the overall focus of LME lead prices moved upward. After entering the European session, the destocking of ingots and the fall of the US dollar once again boosted the lead price. During the period, LME lead prices reached a maximum of $2102/mt, and finally closed at $2098.5/mt, down 0.05%.
The most active SHFE 2404 lead contract prices opened at 15955 yuan/mt with the high-end of 15970 yuan/mt, and finally closed at 15960 yuan/mt, up 0.47%. Open interest increased 37 lots to 44204 lots.


Overnight, LME zinc opened at $2408/mt, hitting a low and high of $2398/mt and $2436/mt respectively, and closed at $2425/mt, up $8.5/mt or 0.35%. Trading volume increased to 9665 lots, and open interest grew 4999 lots to 242,000 lots. Macroeconomic sentiment has improved, and the market has increased its bets on the United States to cut interest rates starting in June.

The most active SHFE 2404 zinc contract prices opened at 20545 yuan/mt and gained 190 yuan/mt or 0.93% to settle at 20600 yuan/mt, with the high-end of 20645 yuan/mt. Trading volumes decreased to 54652 lots and open interest fell 3664 lots to 116,000 lots. Expectations over output cuts at smelters bolstered SHFE zinc.


SHFE 2403 tin contract fell to 214,040 yuan/mt and then rebounded, before closing at 214,980 yuan/mt overnight, down 0.71%.
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 100-600 yuan/mt against SHFE 2403 tin contract, versus discounts of 300 yuan/mt to premiums of 500 yuan/mt for delivery brands, premiums of 700-900 yuan/mt for Yunxi brand, and discounts of 600-1,000 yuan/mt for imported brand tin ingots. Yesterday, tin prices continued to fall. Downstream companies were more enthusiastic about purchasing.


Overnight, the most-traded SHFE nickel contract opened at 136000 yuan/mt, and closed at 132730 yuan/mt, down 2890 yuan/mt. Trading volume fell by 52673 lots, and open interest decreased by 12820 lots. On the macro front, the sanctions imposed by the United States and the European Union on Russia barely involve nickel, and market sentiment has been digested over the weekend. In addition, Indonesia's RKAB review pace has picked up, and expectations of tight nickel ore supply have also weakened. Therefore, SHFE nickel fluctuated widely yesterday. From a fundamental point of view, affected by the sharp rise in nickel prices last week, downstream companies held back from purchasing amid the current high nickel price. Nickel price is expected to swing on a soft note.

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