SMM Morning Comment For SHFE Base Metals On Apr 29

SHANGHAI, Apr 29 (SMM) –

Copper

LME copper prices opened at $9990.5/mt and closed at $9960/mt in last Friday evening trading, a gain of 0.61%, with the low-end of $9896.5/mt and the high-end of $10012/mt. Trading volume was 27,000 lots, and open interest stood at 337,000 lots. The most active SHFE 2406 copper contract prices opened at 80810 yuan/mt and closed at 80580 yuan/mt last Friday evening, up 0.22%, with the high-end of 81060 yuan/mt and the low-end of 80090 yuan/mt. Trading volumes stood at 84,000 lots and open interest stood at 193,000 lots. On the macro level, the market continued to digest the news of BHP's acquisition of Anglo American. Although Anglo American expressed dissatisfaction with the offer price, it still strengthened the market's optimistic expectations for the future development of the copper market. In addition, copper prices rose sharply due to fund buying. In terms of fundamentals, from the supply side, after a sharp rise in copper prices, the SHFE/LME copper price ratio has remained poor and the inflow of imported copper has decreased. Although many domestic refineries have entered maintenance, there is currently no supply shortage in the market. In terms of consumption, copper prices have repeatedly surged, which has dealt a heavy blow to downstream purchases. But as the Labour Day holiday approaches, downstream companies have a need to replenish inventory. In terms of price, although the market is still optimistic about the copper market, the collapse of Republic First in the United States may trigger market concerns, and copper prices are expected to fall back to a certain extent.

Aluminum

At last Friday’s night session, the most-traded SHFE 2406 aluminum contract opened at 20,625 yuan/mt, with its lowest and highest at 20,575 yuan/mt and 20,770 yuan/mt before closing at 20,670 yuan/mt, up 45 yuan/mt or 0.22%. LME aluminum opened at $2,572.5/mt in the previous trading day, with its high and low at $2,600.5/mt and $2,555.5/mt respectively before closing at $2,560.5/mt, down $10.5/mt or 0.41%.

Summary: Fundamentally, overseas deliverable metals remained tight. The import window closed. Domestic aluminum supply maintained a growth trend. Downstream operating rate remained stable. Aluminum ingot inventories continued to drop. In the short term, low inventory can support aluminum prices, but we should pay close attention to the impact of macro front on market sentiment.

Lead

Last Friday, LME lead opened at US$2,212.5/ton. With the weakening of the US dollar and the tight supply of ore, LME lead rose, reaching a high of US$2,245/ton, setting a new high in five months. In the evening, LME lead inventories rose, once again approaching the 270,000-ton mark. And the dollar strengthened. LME lead prices fell and eventually closed at US$2,204 per ton, down 0.27%.

The most active SHFE 2406 lead contract prices opened at 17380 yuan/mt last Friday evening and finally closed at 17270 yuan/mt, up 0.38%. Open interest decreased 2040 lots to 56286 lots.

Zinc

LME zinc opened at $2848/mt last Friday, touching a high and a low of $2905/mt and $2812/mt respectively. LME zinc rallied and closed up $4/mt or 0.14% at $2853.5/mt. The trading volume grew to 11372 lots, and open interest grew 553 lots to 244,000 lots. LME zinc inventory decreased by 50 mt to 254450 mt, a drop of 0.02%. Overseas inflation data rose and the US consumer confidence index fell short of expectations. LME zinc rose and then fell. But long positions remained strong and LME zinc continued to operate at a high level.

The most active SHFE 2406 zinc contract prices opened at 22820 yuan/mt and fell 20 yuan/mt or 0.09% to close at 22720 yuan/mt with the high-end of 22905 yuan/mt and the low-end of 22760 yuan/mt. Trading volumes decreased to 94533 lots and open interest fell 3547 lots to 97995 lots. Despite ore shortage, as the Labour Day holiday approaches, long positions tend to leave the market for risk aversion. However, considering that LME zinc is still running at a high level, it is expected to continue to drive SHFE zinc and there is limited room for price decline in the short term.

Tin

SHFE 2406 tin contract fell slightly last Friday night, closing at 258,020 yuan/mt, down 1.4%.

Last Friday, 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 600-1,100 yuan/mt for SHFE 2406 tin contract, versus discounts of 0-1,000 yuan/mt for delivery brands and premiums of 200-400 yuan/mt for Yunxi brand. Tin prices rebounded last Friday, and downstream companies restocked only as needed. Transactions cooled down last Friday.

Nickel

Nickel prices continued to rise last week, closing at 145,870 yuan/mt last Friday, up 3.52% WoW, which was attributed to slow Indonesian RKAB approval and general price hikes in non-ferrous metals. No new RKAB quotas in the second week after Lebaran enhanced bullish sentiment as bulls were betting on tight nickel raw material supply. However, according to SMM research, Indonesia approved a small amount of nickel ore quotas in the past one and a half months. It did not exert a substantial impact on supply, but suggested the potential to approve more quotas. The delay in entry of nickel intermediate products due to customs inspections last week caused domestic supply tightness in the short term, which affected nickel sulphate production, thus nickel sulphate prices moved up last Thursday. As an important reference indicator for nickel prices in recent days, nickel sulphate price hikes helped nickel prices have more upward room. On the macro level, the US dollar index rose along with gold prices. The price gap between the US dollar and the Japanese yen continued to widen during the last week and the US intends to maintain the dominance of US dollar. However, as frequent geopolitical conflicts in recent years underlined safe-haven properties of the US dollar, funds flowed to new reliable sectors for risk hedging, ultimately to bulk commodities, especially copper and aluminum with strategic attributes. With the future acceleration of RKAB approval, nickel prices may fall back. The most-traded nickel contract is expected to stay between 135,000-145,000 yuan/mt.