SMM Morning Comment For SHFE Base Metals On Mar 19

SHANGHAI, Mar 19(SMM) –

Copper

LME copper prices opened at a low of $9,069.5/mt on Monday, and hiked to a high of $9,164.5/mt and finally closed up 0.31% at $9,102/mt. Trading volume was 290,000 lots, and open interest was 311,000 lots. The most-traded SHFE 2405 copper contract opened at a low of 73,130 yuan/mt overnight, and moved up to a high of 73,900 yuan/mt and finally closed up 1.53% at 73,460 yuan/mt. Trading volume was 98,000 lots and open interest was 232,000 lots.

On the macro side, data from the National Bureau of Statistics showed that the added value of industries above designated size increased by 7% from January to February 2024, and the total retail sales of consumer goods reached 8,130.7 billion yuan, up 5.5% YoY, assuring market players of bullish impact of pick-up of the macro data in China on copper prices. In terms of supply, large spot discounts earlier in the early stage led holders to convert a large amount of supply into warrant stocks. A focus will be put on impact of delivery of the warrant stocks on spot premiums/discounts. In terms of consumption, SMM understands that many companies had heavy piling-up of raw materials and finished goods. Copper prices will unlikely increase. In addition, as of March 18, SMM copper inventories in mainstream regions in China hiked by 6,300 mt from March 14 to 395,400 mt, the highest level in the past five years. Players will remain cautious before the release of key data. Copper prices may remain high.

Aluminum

Overnight, the most-traded SHFE 2404 aluminum contract opened at 19,285 yuan/mt, with its lowest and highest at 19,245 yuan/mt and 19,425 yuan/mt before closing at 19,345 yuan/mt, up 70 yuan/mt or 0.36%. LME aluminum opened at $2,272.5/mt yesterday, with its high and low at $2,294/mt and $2,261/mt respectively before closing at $2,276.5/mt, down $0.5/mt or 0.02%.

On the macro level, State Council released favourable policies to boost demand. Attitude towards cutting interest rates swung in Europe and the US, which coupled with the US presidential election, bringing uncertainty to aluminum prices. Yunnan aluminium smelters will begin to resume production this week, which is in line with previous expectations and does not have a strong impact on the prices. The arrivals of peak season boosted downstream operating rates. Aluminum ingot inventory rose at a slower pace and is likely to peak, supporting aluminum prices. We need to pay attention to when aluminium ingot inventory will begin to decline and fluctuations in expectations of overseas interest rate cuts.

Lead

LME lead opened at $2,125/mt on Monday. High stocks and strong US dollar index kept bringing LME lead down. LME lead further dropped to a low of $2,085/mt due to a 4,425 mt increase of LME lead stocks on that day and expected US dollar interest rate cut, and finally closed down $2.04/mt at $2,087.5/mt.

Overnight, the most-traded SHFE 2405 lead contract opened at 16,265 yuan/mt, and hiked to 16,325 yuan/mt amid expected maintenance of delivery brands, but dipped to 16,225-16,250 yuan/mt due to severe inventory backlogs and more short positions, and finally closed down 0.22% at 16,220 yuan/mt. Open interest was up 922 lots to 49,263 lots.

Zinc

Overnight, LME zinc opened at $2,557/mt, and crept down to a low of $2,525/mt after hitting a high of $2,576.5/mt, and finally closed down $37.5/mt or 1.46% at $2,528.5/mt. Trading volume increased to 9,154 lots. Open interest dipped by 940 lots to 229,000 lots. Overnight LME zinc stocks added 775 mt or 0.29% to 264,900 mt. US economic data showed resilience, and market participants bet on a delay in interest rate cuts.

The most-traded SHFE 2405 zinc contract opened at 21.335 yuan/mt on overnight, and decreased to a low of 21,275 yuan/mt after a high of 21,500 yuan/mt, and finally closed down 70 yuan/mt or 0.33% at 21,305 yuan/mt. Trading volume decreased to 56,603 lots. Open interests grew 2,981 lots to 106,000 lots. A 10,000 mt rise in social stocks amid muted demand and weak real estate data added bearishness into SHFE 2405 zinc contract prices.

Tin

SHFE 2404 tin contract went up, closing at 232,120 yuan/mt, up 1.85%. 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 600-1,300 yuan/mt over SHFE 2404 tin contract, versus discounts of 1,000 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 200-700 yuan/mt for Yunxi brand, and discounts of 1,100-1,400 yuan/mt for imported brand tin ingots. Tin prices rose to 230,000 yuan/mt and then dropped slightly yesterday, suppressing downstream and terminal companies from purchasing. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 142,030 yuan/mt, and closed at 139,950 yuan/mt, down 1,920 yuan/mt. Trading volume rose 50,346 lots, and open interest increased by 2,737 lots. On the macro front, the number of Americans filing for unemployment benefits stood at 209,000 in the week ending Mar 9, lower than the forecast and previous value, indicating that the US job market recovered. From a fundamental perspective, yesterday’s spot market transactions were weak. However, after nickel prices plunged in the afternoon, downstream buyers began to make purchases. Nickel price is expected to be move rangebound.