SMM Evening Comments (Apr 24): Shanghai Nonferrous Metals Closed with Losses amid Market Expectation of the Fed’s 25-basis-point Rate Hike

SHANGHAI, Apr 24 (SMM) - Shanghai nonferrous metals closed with losses in day trading. The resilient US economy enhanced the market expectation that the US Fed would raise rates by another 25 basis points at the next meeting. The US dollar index fell after surging overnight.

SHFE copper fell 0.78%, aluminium dipped 0.92%, lead dropped 0.29%, zinc slip 2.55%, tin declined 1.79%, and nickel closed down 3.24%.

Copper: SHFE 2305 copper fell 540 yuan/mt or 0.78% to 68,370 yuan/mt. The open interest decreased 16,458 lots to 104,561 lots.

Due to the holding of the SMM Copper Summit, the spot trading has weakened recently. The decline in the futures prices encouraged downstream purchases. Some cargo holders were active in shipping amid the month-end and the upcoming Labour Day holiday. As a result, the premiums stood at nearly 0 yuan/mt.

Aluminium: SHFE 2306 aluminium dipped 175 yuan/mt or 0.92% to 18,835 yuan/mt. The open interest declined 2,815 lots to 262,995 lots.

On the macro level, the recovery of the Chinese economy is in stark contrast to stubbornly high inflation in the US. There are growing supply concerns. Aluminium ingot social inventory remains in a state of destocking, with downstream consumption in the peak season. However, the decline in social inventory may slow down as downstream purchases may weaken after aluminium prices have climbed above 19,000 yuan/mt. Capital may flow out of the market due to risk aversion before the upcoming Labour Day holiday. Aluminium prices are expected to lose upward momentum. 

Lead: SHFE 2306 lead dropped 45 yuan/mt or 0.29% to 15,300 yuan/mt. The open interest lost 284 lots to 65,926 lots.

SHFE lead moved sideways. Spot lead supply grew, suppressing the traders’ quotes. The spot market saw some goods quoted at discounts, encouraging downstream companies to restock on dips. The small order transactions were average today. The most-traded SHFE lead contract will move rangebound in the short term on a stable macro front.

Zinc: SHFE 2306 zinc slip 560 yuan/mt or 2.55% to 21,430 yuan/mt. The open interest added 24,436 lots to 118,475 lots.

Zinc prices crashed sharply today. The cautious traders offered quotes at the average price, while downstream companies priced over the futures prices. The overall transactions improved, but slightly lower than expected.

Tin: SHFE 2306 tin declined 3,850 yuan/mt or 1.79% to 211,670 yuan/mt. The open interest dipped 855 lots to 47,554 lots.

The spot trades improved slightly compared with last Friday. SHFE tin warrants grew 256 mt to 8,406 mt today. If the spot prices were quoted at large discounts and still failed to boost downstream purchases, the SHFE warrants may increase further.

Nickel: SHFE 2306 nickel closed down 6,090 yuan/mt or 3.24% at 181,900 yuan/mt. The open interest dropped 4,164 lots to 81,951 lots.

On April 24, premiums of Jinchuan nickel were 4,400-4,800 yuan/mt. The average premium stood at 4,600 yuan/mt, down 300 yuan/mt from the previous trading day. NORNICKEL nickel was quoted at premiums of 4,500-4,600 yuan/mt, with an average of 4,550 yuan/mt, down 150 yuan/mt from a day ago. Today, the price difference between Jinchuan nickel and NORNICKEL nickel was narrow, but the spot trading picked up slightly amid the falling futures prices in the early trading. Nickel briquette prices were 187,900-188,900 yuan/mt, down 5,250 yuan/mt from the previous trading day. The nickel briquette transactions were slack as it was still traded at premiums over nickel sulphate.

[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.]