SMM Morning Comments (Apr 13): Base Metals Closed with Gains on Lower-than-expected US Inflation Data

SHANGHAI, Apr 13 (SMM) - LME and SHFE base metals closed with gains last night. On the macro front, the United States announced that the increase in CPI in March was lower than expected, making the market expect that the Fed may stop further rate hikes after raising interest rates in May, and the U.S. index dived lower, which is good for copper prices.

Copper: LME copper prices closed at $8,960/mt overnight, a rise of 0.78%. Trading volumes were 15,000 lots and open interest stood at 249,000 lots. The most active SHFE 2305 copper contract finished at 69,410 yuan/mt overnight, up 0.64%. Trading volume was 38,000 lots and open interest stood at 169,000 lots.

In terms of fundamentals, due to the narrowing of the price difference between the SHFE April copper contract and the May contract as the delivery approached, sellers raised their quotes. Most of the purchases were made on the dip yesterday. The overall trading was quiet. At present, the speed of domestic inventory destocking has slowed down. The support from fundamentals for copper prices has weakened. But the market optimism over domestic consumption improvement underpinned copper prices. The market expects that the United States will soon end the interest rate hike, and the pressure on copper prices will weaken. It is expected that copper prices still have room to rise.

Aluminium: Overnight, the most-traded SHFE 2305 aluminium contract opened at 18,440 yuan/mt, with its lowest and highest at 18,415 yuan/mt and 18,505 yuan/mt before closing at 18,480 yuan/mt, up 40 yuan/mt or 0.22%. LME aluminium opened at $2,306.5/mt on Wednesday, with its high and low at $2,333/mt and $2,290.5/mt respectively before closing at $2,324/mt, an increase of $21/mt or 0.91%.

The US inflation data was lower than expected, thus expectations for interest rate hike in May weakened. This sent the US dollar index lower, boosting base metals. The domestic aluminium supply maintained a small increase, while downstream demand is recovering slowly. On the whole, the short-term aluminium market is intertwined with positive and negative factors, which may keep aluminium prices rangebound. It is necessary to continue to pay attention to the power supply situation in Yunnan, inventory changes, and whether the Federal Reserve will raise interest rate.

Lead: Overnight, the LME lead prices opened at $2,092/mt and hit the highest point at $2,139/mt amid the lower-than-expected US inflation, up $42/mt, or 2.02%.

The most-traded SHFE lead contract opened at 15,330 yuan/mt and closed at 15,315 yuan/mt after hitting the highest point at 15,355 yuan/mt, an increase of 35 yuan/mt or 0.23%.

Zinc: LME zinc opened at $2,771.5/mt at last night’s session, hitting a low of $2,734.5/mt and a high of $2,796/mt, and closed at $2,793/mt, up $6.5/mt or 0.23%. Trading volume was reduced to 5,843 lots, and open interest lost 1,936 lots to 176,000 lots. LME zinc inventory decreased by 25 mt or 0.06% to 44,675 mt. The US CPI released last night was lower than expected, but the core CPI remained resilient, leading to a weaker dollar and rallying LME zinc prices.

Overnight, the most-traded SHFE 2305 zinc contract opened at 21,980 yuan/mt and closed at 22,065 yuan/mt, up 80 yuan/mt or 0.36%. Trading volume was down to 45,330 lots, and open interest shed 1,267 lots to 107,000 lots. SHFE zinc prices rose slightly trailing the growing LME zinc prices. However, its momentum will be insufficient amid slack downstream demand.

Nickel：On the supply side, downstream demand picked up slightly, but the spot premiums fell amid the rising futures prices. Imports of pure nickel still suffered losses. There are still some NPI inventories that have not been released, but the overall stocks decreased slightly, especially the inventory held by traders. On the demand side, there have been a lot of transactions in the market recently, which are mainly the pick-up of cargoes without B/L. The terminal companies restocked raw materials in a small amount each time. In general, pure nickel demand grew slightly, which may curb the nickel prices from further dropping.

[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.]