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SMM Morning Comment For SHFE Base Metals On February 28

iconFeb 28, 2024 10:05
LME copper prices opened at $8462/mt and closed at $8490/mt in narrow range, a gain of 0.49%, with the low-end of $8457.5/mt and the high-end of $8511/mt.

SHANGHAI, Feb 28 (SMM) –


LME copper prices opened at $8462/mt and closed at $8490/mt in narrow range, a gain of 0.49%, with the low-end of $8457.5/mt and the high-end of $8511/mt. Trading volume was 15,000 lots, and open interest stood at 298,000 lots. SHFE 2404 copper opened at 69070 yuan/mt overnight and fell to a low of 68790 yuan/mt . Trading volume was 14,000 lots, and open interest stood at 150,000 lots. On the macro front, Federal Reserve Board Governor Bowman said that if interest rates are cut too early, interest rates may be raised, which will have a certain suppressive effect on copper prices. However, it is expected to be only slightly lower, driven by the continued pull of oil prices. In terms of fundamentals, from the supply side, inventories have been rising continuously and are expected to remain sufficient. In terms of consumption, although the operating rate has recovered, consumption has not seen significant growth. Only low-price hydro-copper performed better. Downstream consumption is still suppressed by copper price, and most trades were under long-term orders. Overall, supply remains adequate, but consumption growth is lower than expected. If copper prices can continue to fall, consumption may continue to improve. In terms of prices, on the whole, copper prices are under pressure due to the Fed's repeated hawkish speech and the lower-than-expected increase in downstream consumption. However, oil prices continue to rise and are expected to fall only slightly.


Overnight, the most-traded SHFE 2404 aluminium contract opened at 18,845 yuan/mt, with high and low at 18,880 yuan/mt and 18,800 yuan/mt before closing at 18840 yuan/mt, up 5 yuan/mt or 0.03%. LME aluminium opened at $2,185/mt on Tuesday, with its high and low at $2,208.5/mt and $2,185/mt respectively before closing at $2,200/mt, up $18/mt or 0.82%.

Summary: From a macro perspective, US dollar index moved rangebound as investors awaited more US economic data. Inflation data to be released later this week may provide more information on when the Fed will start cutting interest rates. Fundamentally, an aluminium smelter in Inner Mongolia is now resuming production after power outage forced it to shut down on Monday, and the amount of production reduction needs to be confirmed. On the demand, aluminium downstream enterprises are steadily resuming production, with short-term operating rates recovering. The seasonal inventory growth of aluminium ingots continues, but the total volume is at a low level for the same period in recent years, which provides certain support for 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 continued to fluctuate, and we need to pay attention to aluminium supply, recovery of consumption, and the inventory decline of aluminium ingot and aluminium billets.


Overnight, LME lead opened at US$2,097/ton. After the opening, LME lead continued the upward trend of the previous few days. Especially during the European period, after LME lead stocks fell by more than 1,000 tons again, LME lead even rose to US$2,110/ton. Subsequently, the US dollar rebounded, lead and zinc fell simultaneously, and LME lead gave up all its daily gains and fell back to around US$2,080/ton, finally closing at US$2,083/ton, a decrease of 0.74%.

The most active SHFE 2404 lead contract prices opened at 15955 yuan/mt and closed at 15930 yuan/mt, down 0.13%. Open interest decreased 141 lots to 44665 lots.


Overnight, LME zinc prices opened at $2421/mt and closed at $2425/mt, down $4.5/mt or 0.19%. The trading volume decreased to 8070 lots, and the open interest grew 389 to 243,000 lots. LME zinc inventories decreased 125 mt to 268600 mt, a decline of 0.05%. Federal Reserve official Bowman said that cutting interest rates too early may trigger an interest rate increase. The macro is bearish.

Overnight, SHFE 2404 zinc contract opened at 20,650 yuan/ton, and finally closed flat at 20,560 yuan/ton. Trading volume was reduced to 12094 lots, and the open interest increased by 1049 lots to 64119 lots. There was no more news guidance on the spot fundamentals.


SHFE 2403 tin contract rose slightly to 216,600 yuan/mt before closing at 215,960 yuan/mt overnight, up 0.36%.

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 100-700 yuan/mt against SHFE 2403 tin contract, versus discounts of 200 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. Tin prices continued to rise 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 133830 yuan/mt, and closed at 134210 yuan/mt, up 1480 yuan/mt. Trading volume rose 45791 lots, and open interest increased by 79748 lots. From a macro perspective, although RKAB’s review speed has been accelerated, there are still a large number of mining quotas that have not yet been approved. Therefore, SHFE nickel rose strongly yesterday. From a fundamental point of view, downstream companies held back amid high nickel prices while waiting for a more appropriate time to purchase.

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