SMM Evening Comments (Apr 6): Shanghai Nonferrous Metals Mostly Closed with Gains amid Expectations of Boosted Demand

SHANGHAI, Apr 6 (SMM) – Shanghai nonferrous metals mostly closed with gains in the first trading day after the 3-day Qingming holiday. Currently, though the actual demand remains weak in China, more supporting policies are expected to come into force in order to achieve the 5.5% annual growth target.

Shanghai copper gained 0.48%, aluminium dropped 0.9%, lead added 0.57%, zinc rose 1.58%, tin advanced 0.97%, and nickel jumped 1.34%.

Copper: The most-traded SHFE 2205 copper closed up 0.48% or 350 yuan/mt at 73,720 yuan/mt, with open interest up 2,514 lots to 155,196 lots.

The manufacturing PMI readings in the US and eurozone were still in the expansion range, but the growth in the eurozone slowed, which stood at 56.5 in March, with an estimate and February reading of 57 and 57 respectively. The manufacturing PMI of Germany and France both dropped.

EU is bringing further sanctions to Russia, and the Baltic countries gave up Russian natural gas imports, while the Russia is expanding the application scope of “ruble-settlement decree”. Russia-Ukraine tension continues.

In China, though the actual demand remains weak, more supporting policies are expected to come into force in order to achieve the 5.5% annual growth target. In the spot market, participants are closely watching the changes in COVID prevention and control measures in Shanghai after the Qingming Festival. Near-term trade market may stay quiet amid extended lockdown in Shanghai. As of April 6, social copper cathode inventory totalled 136,900 mt, down 800 mt from Friday. LME copper inventory stood at 9,493 mt, down 1.09% MoM.

Looking forward, high overseas inflation and pre-stagflation period will support metal prices, and easy policies in China are also bullish for metals. Nonetheless, deteriorating pandemic in China may drag on copper market and contain upside momentum of copper prices.

Aluminium: The most-traded SHFE 2205 aluminium closed down 0.9% or 205 yuan/mt to 22,540 yuan/mt, with open interest down 623 lots to 195,601 lots.

Spot discounts in east China remained at around 90 yuan/mt, and aluminium ingot and billet social inventories both rose slightly during the Qingming Festival. The east China market was still under the influence of pandemic in terms of logistics and downstream operating rates. But overseas market would support the domestic market to some extent.

Lead: The most-traded SHFE 2205 lead closed up 0.57% or 90 yuan/mt at 15,770 yuan/mt, with open interest up 832 lots to 51,029 lots.

Primary lead was generally in discounts of 250 yuan/mt over the benchmark, while secondary lead market has been greatly hit by the pandemic, whose operating rates were below 50%. Lead-acid battery sector saw production cut plans in seasonal off.

Zinc: The most-traded SHFE 2205 zinc closed up 1.58% or 425 yuan/mt at 27,375 yuan/mt, with open interest up 3,698 lots to 112,649 lots.

On the supply side, expectation of natural gas supply cut heightened, and energy issue again pushed up LME zinc, which later pulled up SHFE zinc. On the mine side in China, TCs are expected to drop further. And on the consumption side, the transactions in Shanghai almost stagnated due to continued lockdown. In addition, some downstream companies suspended the production after the Qingming Festival due to poor orders. Social zinc ingot inventory added 4,900 mt from pre-holiday level to 277,700 mt, and high prices would cap zinc prices.

Tin: The most-traded SHFE 2205 tin closed up 0.97% or 3,330 yuan/mt at 346,020 yuan/mt, with open interest down 707 lots to 29,254 lots.

In the spot market, it is reported that market transactions were relatively quiet. SHFE warrants added 88 mt to 2,118 mt, the inventory rose for upcoming delivery of SHFE 2204 next week. Rising LME prices have lowered the SHFE/LME tin price ratio, hence the import window closed for refined tin. The most-traded SHFE tin contract is expected to move rangebound.

Nickel: The most-traded SHFE 2205 nickel closed up 1.34% or 2,950 yuan/mt at 223,300 yuan/mt, with open interest down 2,109 lots to 49,306 lots.

After two great leaps, LME nickel has little liquidity.  Since last week, the daily traded volume was maintained at 1,000 lots to 2,000 lots. LME nickel prices fluctuated between $31,700/mt to $33,600/mt slightly. At present, the Russia-Ukraine conflict has not eased, and the probability that it will affect commodity prices beyond expectations still exists. Besides, due to the pandemic in China, the spot transportation and delivery of pure nickel were delayed. At present, the premiums of battery-grade nickel sulphate against nickel briquette are large because of the high futures prices. Battery-grade nickel sulphate dropped due to the factors analysed in the above price forecast. With the consumption of low-priced goods, it is expected that the discounts will narrow this week. To sum up, at present, nickel prices still maintain a large deviation from the fundamentals.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]