SHANGHAI, Apr 25 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, the market generally expects the Fed to raise interest rates at next week's policy meeting, and will turn its attention to this week's economic data, which may affect the Fed's next policy decision and the path of subsequent interest rate hikes. The US index fell all the way overnight.
Copper: LME copper prices closed at $8,744/mt last evening, down 0.42%. Trading volume was 18,000 lots and open interest stood at 252,000 lots. The most active SHFE 2306 copper contract finished at 68,090 yuan/mt overnight, down 0.45%. Trading volume was 52,000 lots and open interest stood at 165,000 lots.
On the fundamentals, As of Monday April 24, SMM copper inventory across major Chinese markets decreased 6,600 mt from last Friday to 176,900 mt, up 62,000 mt YoY. Specifically, copper prices fell at the end of last week, and downstream replenishment enthusiasm increased, resulting in a decline in inventories. In addition, after the delivery of the April contract was completed, the willingness of the smelter to ship to the warehouses has also declined. This, combined with the cargoes under registered warrants offered for sale, lowered inventories. Expectations over Fed rate hike will give significant pressure on copper prices.
Aluminium: Overnight, the most-traded SHFE 2306 aluminium contract went down to 18,700 yuan/mt after opening at 18,825 yuan/mt, but then rebounded before closing at 18,830 yuan/mt, down 70 yuan/mt or 0.37%. LME aluminium fell after opening at $2,399/mt on Monday, but rebounded towards the end of the day and closed at $2,385/mt, a drop of 0.73%.
On the macro level, the market generally expects the Fed to raise interest rates by 25 basis points at next week's meeting, or to suspend interest rate hikes in June. Market is awaiting the core personal consumption expenditures price index, which is the key inflation measure indicator, and the quarterly US GDP growth rate to be released later this week.
On the fundamentals, April is still the peak season for downstream consumption, and the domestic aluminium ingot social inventory remains in a destocking state. At the same time, there are concerns that aluminium smelters in Yunnan may face additional production cuts. However, downstream buyers have not shown strong willingness to stock before the upcoming Labour Day holiday. And risk aversion may emerge before the holiday. As such, SHFE aluminium likely to move rangebound amid strong cautious sentiment.
Lead: Overnight, LME lead prices opened at $2,154/mt and fell to $2,124/mt amid the falling SHFE lead prices, and finally closed at $2,141/mt, a decrease of 0.46%.
The most-traded SHFE 2306 lead contract prices opened at 15,255 yuan/mt and fell to 15,230 yuan/mt under the backdrop of off-season and expected supply increase. While the falling lead ingot inventory provided some support and thus SHFE lead prices hovered sideways between 15,285-15,295 yuan/mt, and finally closed at 15,295 yuan/mt, a decrease of 0.07%. The open interest reached 65,361 lots, a decrease of 284 lots from the previous trading day.
Zinc: Overnight, LME zinc closed at $2,669.5/mt, down $48.5/mt or 1.78%. The LME zinc inventory saw no change.
The most-traded SHFE zinc contract opened lower and then jumped before retreating and finishing at 21,440 yuan/mt, up 10 yuan/mt or 0.05%.
The reinforced expectations for rate hikes and sinking global consumption prevent investors from risk seeking. In domestic market, the previous slump in zinc prices and the disruption to the refined zinc supply have led to wild fluctuations in the spread between front-month and next-month contracts.
Tin: The SHFE 2305 tin contract prices fell rapidly after opening, then rebounded after reaching the lowest point at 209,950 yuan/mt and finally closed at 213,790 yuan/mt, up 0.09%.
In the spot market, premiums of traders did not change much compared with last Friday. Overall, the transactions in the trade market remained flat, but slightly improved compared with last Friday.
Nickel: The price gap between Jinchuan nickel and NORNICKEL was still small in yesterday’s morning session, and it is expected the high premiums NORNICKEL will ease at the end of this month. In terms of NPI, the social inventory was not high, but there is a potential that the invisible inventory will flow into the market at low prices after the price spread between nickel and NPI narrowed on slumping nickel prices.
Regarding demand, SMM survey shows that the futures prices tumbled and hovered at lows last Friday, which resulted in thin trades in the spot market over weekend. Although the spot prices dropped slightly yesterday, the market remained quiet with only a few terminal enterprises purchasing as needed. In summary, the weak downstream demand will provide insufficient support for nickel prices.
[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.]
