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SMM Morning Comment For SHFE Base Metals On February 29

iconFeb 29, 2024 10:10
LME copper prices opened at $8475.5/mt and closed at $8455/mt overnight, a rise of 0.41%, with the low-end of $8427/mt and the high-end of $8489/mt.



LME copper prices opened at $8475.5/mt and closed at $8455/mt overnight, a rise of 0.41%, with the low-end of $8427/mt and the high-end of $8489/mt. Trading volume was 15,000 lots, and open interest stood at 296,000 lots. The most active SHFE 2404 copper contract prices opened at 68630 yuan/mt and finished at 68700 yuan/mt overnight, with the high-end of 68720 yuan/mt and the low-end of 68580 yuan/mt, up 0.25%. Trading volume was 17,000 lots, and open interest stood at 150,000 lots.

On the macro front, Fed officials unanimously stated that they need to consider data before considering an interest rate cut later this year. U.S. fourth-quarter GDP growth was revised down to 3.2% from 3.3%. The key PCE data in the United States will be released today. If it is close to the inflation target, it will help the Federal Reserve cut interest rates as soon as possible. The data will then provide guidance for copper prices. In terms of fundamentals, from the supply side, imported copper has gradually arrived in Hong Kong to replenish stocks, and the supply has increased to a certain extent. In terms of consumption, traders have a need to withdraw funds at the end of the month and sell goods at low prices. The actual transaction price is lower, and downstream companies take advantage of low prices to replenish their stocks. However, the overall consumption situation in the downstream has not seen a significant improvement, and the operating rate has yet to recover. Overall, supply has increased and downstream companies have taken advantage of dips to replenish their inventories, but the actual increase in consumption is less than expected, and downstream companies are waiting for copper prices to continue to fall. In terms of price, on the whole, Federal Reserve officials emphasized that it is not advisable to cut interest rates prematurely to suppress copper prices. The domestic market has not yet recovered. It is expected to remain low and volatile before the release of PCE data. If the data is released, if it is close to the inflation target, it is expected to form support for copper prices.


Overnight, the most-traded SHFE 2404 aluminium contract opened at 18,765 yuan/mt, with high and low at 18,820 yuan/mt and 18,750 yuan/mt before closing at 18,805 yuan/mt, up 15 yuan/mt or 0.08%. LME aluminum opened at $2,203.5/mt on Wednesday, with its high and low at $2,203.5/mt and $2,177/mt respectively before closing at $2,191, down $9/mt or 0.41%.

Summary: From a macro perspective, this week’s key inflation data, the US core personal consumption expenditures (PCE) price index, will be released on Thursday night. The market currently expects the PCE price index to rise 0.4% MoM. Fundamentally, an aluminium smelter in Inner Mongolia is now resuming production after power outage forced it to shut down on Monday, On the demand, operating rates of aluminium downstream enterprises are 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 continue to move rangebound, 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$2,083.5/ton. Due to the destocking and the strong pressure of the US dollar, LME lead maintained weak consolidation throughout the day, fluctuating between US$2,075-2,085/ton. Entering the European session, the U.S. dollar index climbed to a nearly one-week high, and base metals generally came under pressure, with LME lead as low as $2,065/ton. As the LME lead inventory depletion trend continued, LME lead finally stopped falling and rebounded, finally closing at $2,086.5/ton, an increase of 0.17%.

The most active SHFE 2404 lead contract prices opened at 15905 yuan/mt last evening and finally closed at 15950 yuan/mt, up 0.13%. Open interest decreased 709 lots to 44769 lots.


Overnight, LME zinc prices opened at $2421/mt and closed at $2416/mt, down $4.5/mt or 0.19%. The trading volume inecreased to 10329 lots, and the open interest fell 567 to 242,000 lots. LME zinc inventories decreased 425 mt to 268050 mt, a decline of 0.16%.

Overnight, SHFE 2404 zinc contract opened at 20480 yuan/ton, and finally closed at 2054 yuan/ton, down 60 yuan/ton or 0.29%. Trading volume was reduced to 41442 lots, and the open interest decreased by 1755 lots to 109,000 lots.


SHFE 2403 tin contract rose slightly to 218,590 yuan/mt before closing at 218,180 yuan/mt overnight, up 0.84%.
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 200-800 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 600-1,200 yuan/mt for imported brand tin ingots. Tin prices rose initially and then fell back yesterday, and downstream companies mostly maintained a wait-and-see attitude.


On February 28 evening, the most active SHFE nickel contract prices opened at 135000 yuan/mt and closed at 134290 yuan/mt, an increase of 80 yuan/mt from the closing price of the previous trading day. The trading volume increased by 92272 lots, and the open interest increased by 7924 lots. Market transactions were active, and the power of longs was greater than that of shorts. Both long and short parties were increasing their positions. Bulls were more optimistic about the subsequent rise. From a macro perspective, although RKAB’s review speed has been accelerated, there are still a large number of mining enterprise quotas that have not yet been approved. From a fundamental point of view, affected by the sharp rise in nickel prices last week, although nickel prices declined, the absolute spot price was still at a recent high, and downstream companies were still waiting for a more appropriate time to purchase.

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