SMM Morning Comments (Mar 14): Base Metals Closed Mostly with Gains as Rate Hike Expectations Declined on SVB Collapse

SHANGHAI, Mar 14 (SMM) – LME and SHFE base metals closed mostly with gains last night. On the macro front, although the US authorities took quick actions to control the impact of the sudden collapse of Silicon Valley Bank, the market bet that the Federal Reserve will slow down or even stop raising interest rates to curb inflation in order to reduce the impact on the financial market.

Copper: LME copper closed with a gain of 1.72% at $8,928/mt overnight. Trading volume stood at 36,000 lots. Open interest stood at 244,000 lots. The most active SHFE 2304 copper contract finished at 68,840 yuan/mt overnight, up 0.19%. Trading volume was 78,000 lots and open interest stood at 142,000 lots.

Although the US authorities took quick actions to control the impact of the sudden collapse of Silicon Valley Bank, the market bet that the Federal Reserve will slow down or even stop raising interest rates to curb inflation in order to reduce the impact on the financial market. The US dollar index fell overnight. In terms of fundamentals, as of Monday March 13, copper stocks in major Chinese markets tracked by SMM fell 8,700 mt from last Friday to 262,400 mt. The current total inventory increased 65,800 mt from 196,600 mt before the Chinese New Year holidays. The decline in inventory is mainly due to the limited arrivals of imported copper and the export of domestic copper. In addition, downstream companies are actively replenishing their stocks on the dip for the peak season in March. With the arrival of the peak season and the drop in copper prices, consumption is expected to continue to recover. Due to the impact of macroeconomics, copper prices are expected to run at low levels in the near term.

Aluminium: The most-traded SHFE 2304 aluminium contract opened at 18,270 yuan/mt overnight, and rose above 18,300 yuan/mt before closing at 18,310 yuan/mt, down 125 yuan/mt 0.68%.

LME aluminium opened at $2310/mt on Monday and fell to $2,275/mt before closing at $2,320/mt, up 0.59%.

The recent bankruptcy of Silicon Valley Bank in the United States has lowered market expectations for the Fed to raise interest rates. From a macro perspective, the prices of non-ferrous metals that were under pressure due to interest rate hike expectations may rally slightly, but macro liquidity risks still deserve close attention. In terms of fundamentals, supply was suppressed, while demand was slowly recovering. Aluminium ingot social inventory began to fall, which will support aluminium prices. Decline in smelters’ costs will be limited. In this context, aluminium prices may remain rangebound.

Lead: LME lead opened at $2,069/mt overnight, touching a low and a high at $2,057.5/mt and $2,098.5/mt before closing at $2,082/mt, up 0.68% or $14/mt. The most-traded SHFE 2304 lead contract opened at 15,150 yuan/mt and closed at 15,200 mt, up 50 yuan/mt or 0.33% overnight. Both domestic and overseas lead prices gained with a weaker US dollar

Zinc: Overnight, LME zinc opened at $2,927/mt, touching a low and a high at $2,880/mt and $2,966.5/mt before closing at $2,955.5/mt, up 1.6% or $46.5/mt. Trading volume increased to 10,760 lots, and open interest added 247 lots to 187,000 lots. LME zinc inventory decreased by 300 mt to 38,150 mt, a drop of 0.78%. The overseas expectations for rate hikes slumped with bearish sentiment, and US dollar weakened accompanied by rising non-ferrous metal prices. US CPI to be released today is worth attention.

The most-traded SHFE 2304 zinc contract opened lower at 22,700 yuan/mt and closed at 22,940 yuan/mt, up 110 yuan/mt or 0.48%. Trading volume was reduced to 66,518 lots, and open interest shed by 727 lots to 84,583 lots. LME zinc rose overnight, and found support at the low end of the Bollinger Bands. SHFE zinc prices rallied last night affected by macro factors and strengthened ferrous metals prices.

Tin: The most-traded SHFE 2304 tin contract opened lowered in overnight trading and hovered at lows before closing at 186,960 yuan/mt, down 0.28%.

On the fundamentals, the warrants rose slightly yesterday, but spot tin prices recovered marginally instead of following the decline of SHFE tin contract. Downstream buyers were inclined to stand on the sidelines. In the spot market, the discounts of small brands maintained high. The supply of imported tin was scarce.

In conclusion, a rally in tin prices entails downstream consumption recovery that could accelerate destocking. However, downstream processing enterprises only purchased on dips. Therefore, eyes should be focused on following recovery of consumer confidence.

Nickel: On the supply side, nickel prices continued to fluctuate, with little change in spot premiums, and intraday spot transactions were slack. In terms of NPI, thousands of tonnes of NPI were traded at 1,240 yuan/mtu (tax included, delivery to factory) by a stainless steel mill in east China yesterday. Traders and some NPI plants undercut their prices due to the high inventory and the slack market. On the demand side, according to SMM research, a stainless steel mill in south China announced that it will temporarily not control the sales prices of stainless steel varieties in the Wuxi and Foshan markets, and the prices will be negotiated by each company. Alloy companies mainly purchased on demand amid the poor orders. To sum up, the pure nickel sector faces weak supply and demand, weighing on nickel prices.

[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.]