SMM Morning Comment For SHFE Base Metals On Apr 16

SHANGHAI, Apr 16 (SMM) –

Copper

LME copper prices opened at $9451.5/mt and closed at $9568/mt in last evening trading, a gain of 1.71%, with the low-end of $9451.5/mt and the high-end of $9631/mt. Trading volume was 33,000 lots, and open interest stood at 333,000 lots. The most active SHFE 2406 copper contract prices opened at 77290 yuan/mt and closed at 77490 yuan/mt last evening, up 0.53%, with the high-end of 77570 yuan/mt and the low-end of 76520 yuan/mt. Trading volumes stood at 88,000 lots and open interest stood at 205,000 lots. On the macro front, commodity prices moved higher as Iran's unprecedented attack on Israel sparked concerns about escalating tensions in the Middle East. In addition, the market continued to pay attention to the news of sanctions on Russian metals, which also boosted copper prices. In terms of fundamentals, from the supply side, copper prices fluctuated upward, and many refineries expressed inventory pressure. In addition, the SHFE/LME copper price ratio has continued to fall, and many refineries have begun to plan exports. It is expected that a lot of goods will leave China. In terms of consumption, except for some downstream companies that have an urgent need to replenish stocks, most buyers are in a wait-and-see state. On Fundamentals, as of Monday April 15, SMM copper inventories across major Chinese markets stood at 399,000 mt, down 6,200 mt from last Friday and 207,400 mt higher than the same period last year. On the price side, copper prices are expected to remain high amid geopolitical tensions.

Aluminum

Overnight, the most-traded SHFE 2406 aluminum contract opened at 20,585 yuan/mt, with high and low at 20,720 yuan/mt and 20,330 yuan/mt before closing at 20,475 yuan/mt, down 385 yuan/mt or 1.85%. LME aluminum opened at $2,550/mt in the previous trading day, with its high and low at $2,728/mt and $2,535/mt respectively before closing at $2,548.5/mt, up $63.5/mt or 2.55%.

Summary: On the macro level, the recent strong employment data and high inflation data further delayed the Fed's interest rate cut expectations, and favourable policies such as "trade in" in China have been introduced. Consumption is optimistic. However, the situation in Middle East intensified on weekends. UK and the US imposed greater sanctions on Russian aluminum, triggering turbulence in global metals market. Fundamentally, the supply pressure is limited due to Yunnan's electricity supply and the continued closure of the import window. On the demand, high aluminum price suppressed downstream purchasing enthusiasm and operating rate. The spot discounts sustained, but driven by the destocking expectation of aluminum ingots, the discounts may narrow. Overall, aluminum prices were more influenced by growing expectations of macroeconomic recovery and positive fundamentals, and may swing on a strong note, but the risk of falling back from highs deserved attention. We need to pay attention to high prices on downstream procurement and changes in domestic inventory.

Lead

LME lead opened at $2185/mt overnight and rose by 0.18% to close at $2172.5/mt with highest at $2198/mt and the lowest point at $2153.5/mt.

The most active 2406 lead contract prices opened at 16770 yuan/mt last night with the high-end of 16815 yuan/mt and the low-end of 16720 yuan/mt, and closed at 16780 yuan/mt, a decrease of 0.09%.

Zinc

LME zinc opened at $2850/mt last evening, and hit a high of $2897/mt before falling back to a low of $2711/mt, and closed at $2775/mt, a decrease of $27/mt or 0.98%. The trading volume decreased to 19907 lots, and open interest grew 1576 lots to 254,000 lots. LME inventory remained the same as the previous day. U.S. retail sales increased by 0.7% month-on-month in March, far exceeding the expected 0.4%, hitting a new high since September last year. The previous value was revised up significantly from 0.6% to 0.9%. The market's expectation for the Fed's interest rate cut has been further postponed, and the macro sentiment has exerted bearish pressure on LME zinc.

The most active SHFE 2406 zinc contract fell to a low of 22270 yuan/mt after opening at 22755 yuan/mt, and finally closed at 22545 yuan/mt, down 495 yuan/mt or 2.15%. Trading volume was down to 182,000 lots, and open interest fell by 3222 lots to 126,000 lots.

Tin

SHFE 2405 tin contract fluctuated downwards and bounced back overnight, closing at 256,500 yuan/mt, up 0.53%.

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 800-2,000 yuan/mt for SHFE 2405 tin contract, versus discounts of 0-800 yuan/mt for delivery brands and premiums of 0-400 yuan/mt for Yunxi brand. Tin prices rose sharply yesterday, leaving downstream companies on the sidelines. Few deals were heard among traders.

Nickel

On Monday, the most-traded SHFE nickel contract opened at 138,300 yuan/mt, and closed at 139,240 yuan/mt, up 990 yuan/mt compared with the last trading day. Trading volume increased by 56,688 lots to 340,848 lots, and open interest decreased by 5,153 lots to 66,135 lots. The most-traded SHFE nickel contract quickly reached the highest at 140,850 yuan/mt after the opening, and then fluctuated downward to the lowest before rebounding, with the final increase of 1.35%.