SMM Morning Comments (Apr 26): Base Metals Closed with Losses on Reignited Concerns over Banking Industry

SHANGHAI, Apr 26 (SMM) – LME and SHFE base metals closed with losses last night. On the macro front, as market risk aversion occurred amid renewed concerns about the banking industry and the global economic outlook, the euro fell and the US dollar index rose.

Copper: LME copper prices closed at $8,528.5/mt last evening, down 2.46%. Trading volume was 38,000 lots and open interest stood at 253,000 lots. SHFE 2306 copper contract prices fell slightly copper contract finished at 66,860 yuan/mt last evening, down 1.92%. Trading volume was 87,000 lots, and open interest stood at 180,000 lots.

In terms of fundamentals, as the import losses narrowed to around 100 yuan/mt, the market are concerned about the inflow of imported copper. However, as the end of the month approached, some traders will make delivery for long-term orders and trades under small orders will decreased. Spot quotes did not fall sharply. Downstream demand may increase in the near future due to lower SHFE copper prices and the approach of Labour Day holidays. Domestic demand is still tepid, and the market is worried about the US economy. Copper prices are under pressure. The market is waiting for a series of US economic data to be released later this week, which may affect the Fed's interest rate hike stance and will guide copper prices.

Aluminium: After opening at 18,690 yuan/mt at yesterday’s night session, the most-traded SHFE 2306 aluminium contract rose initially to 18,745 yuan/mt, but then fell back to 18,610 yuan/mt before closing at 18,650 yuan/mt, down 150 yuan/mt or 0.8%. LME aluminium opened at $2,381/mt on Tuesday and closed at $2,331/mt, down 2.1%.

On the macro level, the market generally expects the Fed to raise interest rates by 25 basis points at next week's meeting, but sluggish consumer confidence index and decline in US manufacturing industry data led to risk aversion. On the fundamentals, April is still the peak season for downstream consumption, and the domestic aluminium ingot social inventory remains in a destocking state. Although aluminium price has dropped below 19,000 yuan/mt, high prices still deterred buyers. 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. It is necessary to continue to pay attention to whether smelters in Yunnan will curtail capacity.

Lead: LME lead prices opened at $2,141.5/mt and hit the lowest point at $2,103/mt with the financial reports implying giants in Europe and the United States performed poorly and indicating a sluggish economic outlook. LME lead prices finally closed at 2,117.5/mt, a decrease of 1.1%.

The most-traded SHFE lead contract prices opened at 15,280 yuan/mt and surged to 15,315 yuan/mt amid the falling inventory of lead ingot, and finally closed at 15,260 yuan/mt, a decrease of 0.13%. The open interest reached 67,353 lots, an increase of 4,115 lots from the previous trading day.

Zinc: Overnight, LME zinc closed at $2,601/mt after touching the lowest level at $2,584.5/mt, down $68.5/mt or 2.57%. The LME zinc inventory shed by 150 mt to 53,350 mt.

The most-traded SHFE zinc contract opened lower and tumbled before rising again. It finally settled at 20,905 yuan/mt, down 405 yuan/mt or 1.90%.

On the macro front, the reinforced expectations for rate hikes, together with reignited concerns over banking industry induced by the poor performance of the stocks of the First Republic Bank, weighed on zinc prices.

Tin: SHFE 2305 tin contract prices gradually stabilised around 205,620 yuan/mt after falling sharply, and finally closed at 205,810 yuan/mt, down 3.18%.

In the spot market, although the discounts of small and medium-sized brands expanded again to 1,000 yuan/ton, the transactions in the trade market did not improve and the transactions of some traders with highere discounts also decreased compared with the previous day. As such, the overall trade market was relatively cold.

Nickel: According to SMM research, some Russian nickel has been cleared recently and flowed into the Chinese market, alleviating the imported pure nickel supply shortage and greatly suppressing NORNICKEL nickel premiums. NPI market supply was not high, while the invisible inventory is expected to be released. Traders might ship at lows after the spread between nickel and NPI narrowed.

On the demand side, according to SMM research, the stainless steel futures prices grew apace overnight, which failed to stimulate the spot prices the next day. Prices of #304 stainless steel stood stable, but the spots could be traded lower. The downstream sectors are less willing to purchase. Nickel prices are likely to gain weaker support from supply tightness.

[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.]