SMM Morning Comment For SHFE Base Metals On Apr 8

SHANGHAI, Apr 8 (SMM) –

Copper

LME copper prices opened at $9324/mt and closed at $9348/mt overnight, a drop of 0.33%, with the low-end of $9276/mt and the high-end of $9358.5/mt. Trading volume was 18,000 lots, and open interest stood at 318,000 lots. SHFE did not conduct night trading yesterday. On the macro level, the number of non-farm payrolls in the United States in March increased far more than expected to 303,000, and the unemployment rate fell slightly to 3.8% in March. After the data was released, the probability of the Federal Reserve cutting interest rates in June was reduced to nearly 50%. The swap market postponed the date of the Federal Reserve's first rate cut from July to September. Federal Reserve officials sounded hawkishly, and the US dollar index closed slightly higher, which weighed on copper prices. In terms of fundamentals, the arrival of imported copper before the Qingming Festival was relatively small, and the smelters entered a maintenance period in April, so the domestic supply may decrease. However, the arrivals of imported copper are expected to increase in the near future, and the total supply is expected to increase slightly this week. In terms of consumption, as copper prices have surged again, downstream stocking before the holiday was on demand. It is expected that there will be a certain demand for replenishment after the holiday, but if copper prices remain at a high level, downstream purchasing sentiment will remain cautious. On the fundamentals, as of April 3, copper inventory across major Chinese markets decreased by 3,200 mt from last Monday to 388,000 mt. On the whole, the postponement of the expected rate cut and the hawkish remarks of the Federal Reserve officials will weigh on the copper price. During the Qingming Festival, LME copper price once again surged to around US$9,350 per ton. It is expected that the SHFE copper price today will be guided higher by the LME copper price.

Aluminum

At last Wednesday’s session, the most-traded SHFE 2405 aluminum contract opened at 19,885 yuan/mt, with its lowest and highest at 19,810 yuan/mt and 19,965 yuan/mt before closing at 19925 yuan/mt, up 115 yuan/mt or 0.58%. LME aluminum opened at $2,435/mt last Friday, with its high and low at $2,455.5/mt and $2,418.5/mt respectively before closing at $2,451/mt, an increase of $6/mt or 0.25%.

Summary: On the macro level, the US non-farm data for March increased beyond expectations, coupled with a decline in the unemployment rate, the strong employment data further delayed the Fed's expectations of a rate cut. In addition, favourable policies such as "trade-in" and "car loan policies" have been introduced in China, and the macro sentiment is bullish. Fundamentally, domestic aluminum supply slowly increased, but the import window remained closed, reducing the impact of the inflow of overseas aluminum ingots. Demand expectations for new energy vehicles and photovoltaics boosted aluminum consumption expectations, and aluminum ingots inventory continued to drop. Aluminum prices are expected to continue to swing on a strong note.

Lead

Last Friday, LME lead opened at $2,132/mt. During the Qingming Festival, overseas lead inventories surged and then fell. Coupled with the continued decline of the US dollar, LME lead prices rose strongly and ran above all moving averages, reaching a high of US$2,147.5 per ton. At last, the contract closed at $2131/mt, down 0.49%.

Last Wednesday the Shanghai Futures Exchange did not conduct night trading due to the Qingming Festival. Today normal trading will resume.

Zinc

Last Wednesday, the number of new non-farm payrolls in the United States in March exceeded expectations; Federal Reserve officials once again made " hawkish " remarks; is Iran's retaliation imminent? The US is on high alert! ; Gaza multi-party negotiations made important progress; CME raised the margin for gold and silver futures; Saudi Aramco raised the price of Arab crude oil sold to Asia in May; He Lifeng held talks with US Treasury Secretary Yellen; the retail price of pure gold jewelry approached 720 yuan/gram; China's central bank increased its gold holdings for 17 consecutive months. Last week, LME zinc had a strong momentum and rose sharply for two consecutive days, reaching a high of US$2,650/ton, an increase of 6.22%. On Friday, LME zinc closed down at US$ 2,622/ton, down US$14/ton, a decline of 0.53%. Trading volume decreased to 16,367 lots, and open interest increased by 6,438 lots to 252,000 lots. LME inventory decreased by 1,775 tons to 260,200 tons, a decrease of 0.678%. The inventory reduction pushed LME zinc up, but the US job growth in March was better than expected, and the weakening expectation of interest rate cuts suppressed the rise of LME zinc. It is expected that LME zinc will remain rangebound at highs today.

Shanghai Futures Exchange was closed last Friday due to the Qingming Festival.

Nickel

SHFE nickel performed well last week. Since March 28, the nickel price has risen for five consecutive days. As of April 3, it grew to 133,450 yuan/mt. Recently, the nickel ore quota is still the center of attention. The nickel ore approval in Indonesia is slower than expected, leading to no new quota in the past two weeks. Indonesian HPM rose by about $3/wmt in April. On this basis, the local nickel ore premium remained high, with the overall tight supply. As the United States, Japan and the Philippines are estimated to start nickel supply cooperation after the meeting on April 11, the market now has begun to worry about its impact on China’s import price of Philippine ore, and whether it could impact the production of domestic smelters. Currently, the market has speculated on whether the Fed will cut interest rates in June. Aditya Bhave’s analyst team at Bank of America released a research report on Tuesday local time, pointing out that considering the base effect of year-on-year core PCE inflation, the best time to cut interest rates this year may be in the first half. Fundamentally, the nickel plate supply continues to increase. Although imports under long-term orders have decreased compared with last year, imported nickel plates still lead to ample supply. In summary, the nickel price is mainly influenced by the industrial chain and macro environment in the short run, rather than refined nickel market fundamentals.