SMM Morning Comment For SHFE Base Metals On Mar 8

Copper

LME copper prices opened at $8637/mt and closed at $8641.5/mt last evening, up 1.12%, with the high-end of $8680/mt and the low-end of $8622/mt. Trading volume was 27,000 lots and open interest stood at 283,000 lots. The most active SHFE 2404 copper contract prices opened at 69980 yuan/mt and finished at 69810 yuan/mt last evening, up 0.58%, with the low-end of 69719 yuan/mt and the end of 70200 yuan/mt. Trading volume was 41,000 lots, and open interest stood at 154,000 lots. On the macro front, Powell stated that he is fully aware of the risks of cutting interest rates too late and is not far away from having confidence in cutting interest rates. The U.S. dollar index fell sharply, bolstering copper prices. Domestically, in the first two months of this year, China's import and export of goods trade hit a record high for the same period in history, and market optimism was supported. In terms of fundamentals, from the supply side, due to the slow recovery of downstream consumer demand and the rise in copper prices again, the supply of copper has been digested to a limited extent, and the supply is still relatively abundant. Some sellers have converted the supply into warehouse warrants. In terms of consumption, soaring copper prices once again hit market demand. Processing companies have maintained on-demand purchases, and terminal demand has still performed poorly. In terms of price, Powell's dovish remarks combined with optimistic market macro sentiment, will keep copper prices at high levels.

Aluminum

The most-traded SHFE 2404 aluminum contract opened at 19,200 yuan/mt overnight, with its low and high at 19,160 yuan/mt and 19,235 yuan/mt before closing at 19,195 yuan/mt, up 100 yuan/mt or 0.52%. LME aluminum opened at $2,225/mt yesterday, with its high and low at $2,265/mt and $2,225/mt respectively before closing at $2,252/mt, up by $17/mt or 0.76%.

Summary: From a macro perspective, there are growing expectations for overseas interest rate cut. The dovish speeches of Powell have been frequent, and the US dollar index fell sharply, which benefited non-ferrous metals. During the “Two Sessions”, the market had strong expectations for stimulus policies, and exports data was better than expected. Fundamentally, the disturbance in China and overseas supply re-emerged. On the demand, the production resumption after CNY holiday boosted the operating rate of aluminum downstream enterprises. Short-term consumption is still expected to rebound, and spot transactions and outbound performance improved. Aluminum ingots inventory growth slowed down in March. SMM expects domestic aluminum ingot inventories may move between 800,000-900,000 mt in the first half of March, while aluminum billets has been destocked for more than a week. Overall, aluminum prices are likely to grow in traditional peak season in March, and we need to pay attention to aluminum supply, recovery of consumption, and when aluminium ingot and aluminium billets stocks will begin to drop.

Lead

LME lead opened at $2069.5/mt last evening and rose by 1.88% to close at $2108/mt, after hitting the highest point at $2110/mt.

Overnight, the most active SHFE 2404 lead contract opened at 16065 yuan/ton, finally closing at 16075 yuan/ton, an increase of 0.19%.

Zinc

Overnight, LME zinc opened at $2496/mt, hitting a low and high of $2486.5/mt and $2540/mt respectively, and closed at $2529/mt, up $38.5/mt or 1.55%. Trading volume increased to 15249 lots, and open interest decreased 2905 lots to 229,000 lots. LME zinc inventory dropped by 2325 or 0.85% to 272575 mt. Federal Reserve official Powell's dovish speech boosted the market's confidence in interest rate cuts, the US dollar continued to weaken, and the early market optimism has not been fully digested, and the macro boost led to another rise in zinc.

Overnight, the most active SHFE 2404 zinc contract opened higher at 21,210 yuan/ton.It touched a high of 21,235 yuan/ton and a low of 21,135 yuan/ton, and finally closed up at 21,165 yuan/ton, up 205 yuan/ton, or 0.98%. The trading volume decreased to 48,273 lots, and the open interest decreased by 2,372 lots to 91,652 lots. Recently, downstream spot consumption has been poor, and imported zinc ingots continue to flow in, which may make up for the output reduction in maintenance and production shutdowns of some domestic smelters. It is expected that SHFE zinc will have little upside room.

Tin

SHFE 2404 tin contract inched lower to 222,100 yuan/mt before closing at 222,540 yuan/mt overnight, up 0.4%.

Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 700-1,000 yuan/mt against SHFE 2404 tin contract, versus discounts of 500 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 600-700 yuan/mt for Yunxi brand, and discounts of 700-1,000 yuan/mt for imported brand tin ingots. Tin prices remained at highs yesterday, with downstream companies taking a wait-and-see attitude. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 135,950 yuan/mt, and closed at 136,120 yuan/mt, up 880 yuan/mt. Trading volume fell by 85,813 lots, and open interest decreased by 474 lots. From a macro perspective, yesterday's non-ferrous sector mainly benefited from the National Development and Reform Commission saying that with the high-quality development, equipment updates demands will continue to expand, and it is estimated that this is a huge market of more than 5 trillion yuan. Non-ferrous metals, as one of the basic raw materials for the production of various types of equipment, are expected to be the first to benefit. From a fundamental perspective, LME nickel inventory destocked slightly, but trading activities in the spot market were subdued due to rising nickel prices. Nickel prices went up on the back of bullish macro sentiment, but the upside room is likely to be limited since fundamentals have not improved.