SMM Morning Comment For SHFE Base Metals On Apr 18

SHANGHAI, Apr 18 (SMM) –

Copper

LME copper prices opened at a low of $9,509/mt on Wednesday, and hiked to a high of $9,616.5/mt, but finally closed down at $9,548/mt. Trading volume was 23,000 lots, and open interest was up 0.78% at 335,000 lots. The most-traded SHFE 2406 copper contract opened at 77,290 yuan/mt, and dipped to a low of 77,020 yuan/mt after reaching a high of 77,840 yuan/mt, and finally closed at 77,110 yuan/mt. Trading volume was 77,000 lots and open interest was 220,000 lots.

On the macro front, China reduced its holdings of US Treasury bonds by $23 billion in February. Lowering US bond yields amid big sell-off and falling US dollar index pushed up copper prices. In terms of fundamentals, copper imports shrank significantly due to losses of 800 yuan/mt, while domestic copper supply appeared ample. In terms of consumption, downstream processing enterprises only purchased copper for hand-to-mouth use. Transactions were thin. In terms of price, macro market sentiment remained strong recently. Copper prices may remain high.

Aluminum

Overnight, the most-traded SHFE 2406 aluminum contract opened at 20,405 yuan/mt, with its lowest and highest at 20,360 yuan/mt and 20,495 yuan/mt before closing at 20,375 yuan/mt, up 75 yuan/mt or 0.37%. LME aluminum opened at $2,550/mt in the previous trading day, with its high and low at $2,597/mt and $2,549/mt respectively before closing at $2,570/mt, up $10.5/mt or 0.41%.

Summary: On the macro level, the recent strong employment data and high inflation data further delayed the Fed's interest rate cut expectations, and favourable policies such as "trade in" in China have been introduced. Consumption is optimistic. However, the situation in Middle East intensified on weekends. UK and the US imposed greater sanctions on Russian aluminum, triggering turbulence in global metals market. Fundamentally, the supply pressure is limited due to Yunnan's electricity supply and the continued closure of the import window. On the demand, high aluminum price suppressed downstream purchasing enthusiasm and operating rate. The spot discounts sustained, but driven by the destocking expectation of aluminum ingots, the discounts may narrow. Overall, aluminum prices were more influenced by growing expectations of macroeconomic recovery and positive fundamentals, and may swing on a strong note. We need to pay attention to the risk of falling back from highs. High prices on downstream procurement and changes in domestic inventory deserved attention.

Lead

Overnight, LME lead opened at $2,150/mt, with its lowest and highest at $2,135/mt and $2,176/mt due to weak US dollar before closing at $2,168/mt, up 0.95%.

The most-traded SHFE 2406 lead contract opened at 16,960 yuan/mt overnight, with its high at 17,030 yuan/mt. Then, entry of bears pushed SHFE lead down to 16,915 yuan/mt before closing at 16,935 yuan/mt, down 0.18%.

Zinc

Overnight, LME zinc opened at $2,751.5/mt, and hit a low of $2,741.5/mt, but moved up to a high of $2,842/mt due to short selling, and finally closed up $67/mt or 2.43% at $2,825.5/mt. Trading volume decreased to 12,481 lots. Open interest dipped by 9,412 lots to 241,000 lots. LME zinc prices ceased falling and hiked, gaining supports from the 10-day moving average. Overnight LME zinc stocks shrank by 275 mt or 0.11% to 257,975 mt. Moreover, pick-up of macro sentiment, rising ferrous metal prices, tight zinc ore supply and low processing fees also kept offering a boost to LME zinc prices.

The most-traded SHFE 2406 zinc contract opened at 22,700 yuan/mt on Wednesday, increasing to 22,875 yuan/mt after a brief drop, and then moved up to a high of 22,990 yuan/mt, owing to short selling, and finally closed up 210 yuan/mt or 0.94% at 22,665 yuan/mt. Trading volume decreased to 137,000 lots. Open interests shrank 1,215 lots to 120,000 lots.

SHFE zinc prices made gains after a slight dip, as the NDRC’s statement on start-up of all additional government bond issuance projects before the end of June this year injected stimulants into market demand.

Tin

SHFE 2405 tin contract went up and then fell, closing at 256,300 yuan/mt, up 1.19%.

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 900-1,100 yuan/mt for SHFE 2405 tin contract, versus discounts of 0-900 yuan/mt for delivery brands and premiums of 200-400 yuan/mt for Yunxi brand. Tin prices experienced a slight correction after bottomed out, leaving downstream companies on the sidelines. Few deals were heard among traders.

Nickel

On Wednesday, the most-traded SHFE nickel contract opened at 134,890 yuan/mt, and closed at 136,100 yuan/mt, up 1,560 yuan/mt compared with the last trading day. Trading volume fell by 95,085 lots to 184,585 lots, and open interest decreased by 2,602 lots to 54,981 lots. The most-traded SHFE nickel contract fluctuated downward to the lowest at 133,780 yuan/mt before rebounding. In the afternoon, it moved sideways, with the final decrease of 0.07%.