SMM Morning Comments (Mar 10): Base Metals Closed Mixed with US Jobless Claims Beating Expectations

SHANGHAI, Mar 10 (SMM) – LME and SHFE base metals closed mixed overnight. On the macro front, the data showed that the number of US initial jobless claims last week rose more than expected. The market expects that the weakness in the labour market may reduce the possibility of the Federal Reserve accelerating the pace of interest rate hikes.

Copper: LME copper prices closed at $8,832/mt in overnight trading, a decline of 0.31%. Trading volume was 9,000 lots and open interest stood at 247,000 lots. SHFE 2304 copper contract finished at 69,350 yuan/mt overnight, up 0.07%. Trading volume was 23,000 lots, and open interest stood at 143,000 lots.

On the macro front, the data showed that the number of US initial jobless claims last week rose more than expected. The market expects that the weakness in the labour market may reduce the possibility of the Federal Reserve accelerating the pace of interest rate hikes. The U.S. index fell overnight. In terms of fundamentals, downstream stockpiling in east China continued to improve, and the supply of available cargoes was relatively tight as the delivery of the SHFE front-month copper contract nears. The market expected spot premiums to remain after the delivery. The inventory in south China has dropped for three consecutive days, mainly due to the decrease in arrivals and the increase in outbound shipments. Under the influence of high copper prices, the enthusiasm of downstream and traders to replenish goods was subdued. In terms of consumption, orders were more sensitive to prices. At present, copper prices are fluctuating at high levels, and consumption will continue to show a slow recovery. Affected by the economic data of the Federal Reserve, copper prices fluctuated in a narrow range, and copper prices are expected to continue to rise slightly.

Aluminium: The most-traded SHFE 2304 aluminium contract opened at 18,475 yuan/mt overnight, with its session high at 18,570 yuan/mt before closing at 18,505 yuan/mt, down 10 yuan/mt or 0.05%. LME aluminium opened at $2,361.5/mt on Thursday and closed at $2,319.5/mt, down $34.5/mt or 1.47%.

Recently, the Federal Reserve has frequently made hawkish statements, putting the prices of non-ferrous metals under pressure. It is necessary to continue to pay attention to the US inflation data. Downstream operating rates and orders improved month-on-month, and the market is gradually entering peak season. However, persistently high inventory of aluminium ingots will prevent aluminium prices from going up, which may trade rangebound. 

Lead: Overnight, LME lead opened at $2,092/mt and fell to the lowest point at $2,069/mt under the strong pressure of the US dollar index. As the number of people applying for unemployment benefits in the United States was higher than expected, LME Lead rebounded and finally closed at $2,083/mt, a decrease of 0.29%.

The tug of war between longs and shorts intensified. The most-traded SHFE 2304 lead contract fell to 15,165 yuan/mt after opening at 15,210 yuan/mt overnight, and then moved between 15,165-15,180 yuan/mt before closing at 15,165 yuan/mt, down 0.1%. Open interest fell 73 lots to 67,106 lots.

Zinc: Overnight, LME zinc opened at $2,975.5/mt and closed up $0.5/mt or 0.02% at $2,975.5/mt. Transaction volume rose to 5,486 lots, and open interest decreased by 178 lots to 191,000 lots. LME zinc inventory shed by 325 mt to 38,750 mt. Affected by the macro factors, LME zinc showed a V-shaped trend in last night trading.

The most-traded SHFE 2304 zinc contract opened at 23,250 yuan/mt and finished at 23,375 yuan/mt, up 125 yuan/mt or 0.54%. Trading volume was reduced to 53,066 lots, and open interest gained by 1,403 lots to 83,569 lots.

The number of initial jobless claims and continued jobless claims in the United States was higher than expected last week. The market was less anxious about accelerated interest rate hikes. The slow recovery of domestic consumption has caused market concerns. In the short term, SHFE zinc prices will still consolidate with stable fundamentals. But SMM expects China’s refined zinc output to increase to 560,400 mt in March, which may impose pressure on the supply side.

Tin: The SHFE 2304 tin contract fell and once fell below 190,000 yuan/mt, and closed at 192,210 yuan/mt, down 1.12%.

Fundamentally, the warrants of SHFE increased sharply yesterday, but the spot market continued to be depressed. The spot discounts of deliverable brands remained stable while that of small brands were still high. The market supply of imported goods were still insufficient.

To sum up, demand stimulus policies are expected to be released intensively during the recent "two sessions", but it will take time for the demand to improve. Tin prices may continue to fall.

Nickel: On the supply side, nickel prices continued to weaken. The upstream companies were more willing to ship, and the spot prices declined further. In terms of NPI, thousands of metric tonnes of NPI were traded at 1,250 yuan/mtu by a stainless steel mill in east China yesterday. Traders and some NPI plants undercut their prices due to the high inventory and the slack market. On the demand side, in terms of stainless steel, according to SMM research, affected by the crashing futures prices and the traders’ dumping of goods, intraday spot quotes fell. Purchases from alloy companies picked up slightly amid the falling nickel prices. To sum up, the pure nickel sector faces weak supply and demand. Nickel prices will move rangebound in the short term. 

[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.]