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SMM Morning Comment For SHFE Base Metals On Mar 5

iconMar 5, 2024 10:23
LME copper prices opened at $8,565/mt on Monday, hitting a high of $8,574/mt, but dropped to a low of $8,506/mt and finally closed at $8,625/mt.



LME copper prices opened at $8,565/mt on Monday, hitting a high of $8,574/mt, but dropped to a low of $8,506/mt and finally closed at $8,625/mt. Trading volumes were 15,000 lots, and open interest was 286,000 lots. The most-traded SHFE 2404 copper contract opened at 69,300 yuan/mt, and hit a low of 69,170 yuan/mt before a high of 69,350 yuan/mt, and finally closed at 69,210 yuan/mt. Trading volume was 16,000 lots and open interest was 150,000 lots.

On the macro front, weak US economic data, a free-fall in US stocks and falling US dollar index underpinned copper prices. In addition, there were market positive expectations for the second session of the 14th National People's Congress to be held on the morning of March 5. In terms of fundamentals, as of March 4, mainstream copper stocks in China increased by 15,500 mt from March 1 to 321,200 mt, 13,100 mt higher than the same period of last year and a record high for the same period in the past four years. From the supply side, sustained inventory hike led some holders to hold back positions, denting supply in circulation, but overall supply avoided tightness. In terms of consumption, high copper prices still hurt demand. According to SMM, demand recovery was less than expected and will remain weak in the short term. In terms of price, players looked forward to seeing policy stimulus from the Two Sessions. Copper prices may remain high in the near future.


The most-traded SHFE 2404 aluminum contract opened at 18,990 yuan/mt overnight, with its low and high at 18,965 yuan/mt and 19,080 yuan/mt before closing at 19,055 yuan/mt, up 75 yuan/mt or 0.4%. LME aluminum opened at $2,235/mt yesterday, with its high and low at $2,242/mt and $2,216.5/mt respectively before closing at $2,238/mt, down $7/mt or 0.31%.

Summary: From a macro perspective, lower-than-expected economic data has strengthened the Fed’s interest rate cut expectations, making it possible to cut interest rates in June, and the US dollar index weakened. However, market opinions are divided over the time for interest rate cuts and its sustainability. Domestic Two Sessions are about to begin, and the State Council released favourable policies to boost the economy and consumer demand, the market had strong expectations for stimulus policies. Fundamentally, the strike in Guinea has been suspended, and an aluminum smelter in Inner Mongolia has resumed power supply and production. In addition, there has been no increase in power in Yunnan and other regions. Aluminum smelters maintained stable production, and supply disturbances in China and overseas have basically eased. On the demand, the production resumption after CNY holiday boosted the operating rate of aluminum downstream enterprises. Short-term consumption is still expected to rebound, and spot transactions and outbound performance improved. Aluminum ingots inventory growth slowed down in the third week after CNY holiday. SMM expects domestic aluminum ingot inventories may move between 800,000-900,000 mt in the first half of March, while aluminum billets inventories has entered destocking cycle for a week. Overall, aluminum prices are likely to grow in traditional peak season in March, and we need to pay attention to aluminum supply, recovery of consumption, and when aluminum ingot and aluminum billets stocks will begin to drop.


LME lead opened at $2,039.5/mt on Monday, hitting a low of $2,031/mt, but hiked to a high of $2,057.5/mt amid falling US dollar index and non-ferrous metal price gain, and finally closed up $17.5/mt or 0.86% at $2,055.5/mt.

Overnight, the most-traded SHFE 2403 lead contract opened at 15,955 yuan/mt, hitting its high of 16,010 yuan/mt and low of 15,950 yuan/mt, and finally closed up 15 yuan/mt or 0.09% at 16,000 yuan/mt.


Overnight, LME zinc opened at $2,423/mt, and moved up a high of $2,465/mt after a brief drop to $2,412/mt, and finally closed up $16.5/mt or 0.68% at $2,449/mt. Trading volume decreased to 8,856 lots. Open interest dipped by 683 lots to 234,000 lots. Overnight LME zinc stocks dropped by 150 mt to 275,800 mt. Shrugging off weak US economic data, LME zinc prices still showed upward reaction to the falling US dollar index.

The most-traded SHFE 2404 zinc contract opened at 20,695 yuan/mt on Monday, and increased to 20,740 yuan/mt after a low of 20,665 yuan/mt, and finally closed up 130 yuan/mt or 0.63% at 20,715 yuan/mt. Trading volume decreased to 38,119 lots. Open interests drop by 3,102 lots to 102,000 lots. Positive expectations for the upcoming Two Sessions and demand hike offered a boost to SHFE 2404.


SHFE 2404 tin contract opened higher and then fell back to 218,880 yuan/mt, and rebounded slightly before closed at 219,460 yuan/mt overnight, up 0.45%.

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 600-800 yuan/mt against SHFE 2404 tin contract, versus discounts of 500 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 500-700 yuan/mt for Yunxi brand, and discounts of 800-1,200 yuan/mt for imported brand tin ingots. Tin prices rose initially and then fell back in early trading yesterday, with most downstream companies taking a wait-and-see attitude.


Overnight, the most-traded SHFE nickel contract opened at 135,500 yuan/mt, and closed at 136,620 yuan/mt, down 450 yuan/mt. Trading volume rose 54,103 lots, and open interest decreased by 1,575 lots. Sharply growing nickel stocks in China and overseas weighed down nickel prices yesterday.

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