SHANGHAI, Apr 20 (SMM) - Shanghai and LME base metals closed mixed Tuesday, and the futures markets were pressured after IMF announced to lower its global economic growth forecast. The China National Development and Reform Commission also suggested to further stabilise commodity prices.  

LME copper closed at $10,323.5/mt, aluminium dropped 1.42%, lead added 1.5%, zinc gained 0.31%.

SHFE copper fell 0.77%, aluminium dropped 0.41%, lead lost 0.61%, zinc gained 0.54%, and nickel fell 0.72%.

Copper: Overnight LME copper opened at $10,417/mt, and then fell to a low of $10,268.5/mt before closing at $10,323.5/mt. The open interest stood at 267,000 lots.

SHFE 2205 copper contract opened at 74,760 yuan/mt in overnight trading and dropped to 74,320 yuan/mt after climbing to 74,770 yuan/mt. At last, the contract closed at 74,580 yuan/mt, down 0.77%. Trading volume was 27,000 lots, and open interest stood at 142,000 lots.

On the macro front, the International Monetary Fund (IMF) lowered its economic growth forecast and issued a warning on rising inflation, sparking demand concerns. In addition, in light of geopolitical risks, potentially greater Federal Reserve rate hike, continuously weakening yen and other factors resonate, the dollar index continued to rise on Tuesday, which also pressured copper prices.

In the spot market, spot premiums dropped quickly in the second trading day after the delivery of SHFE 2204, and premiums could hardly sustain in light of high futures prices. Meanwhile, easing transportation restrictions are also likely to contain the premiums. SHFE/LME price ratio rose last week, and the volume that declared the customs rose on narrowing import losses, hence the future sources available in the market may rise. The premiums in Shanghai may fall. While in Zhejiang and Jiangsu, high premiums were supported by rigid demand, with premiums of 400-500 yuan/mt, which are expected to fall if the pandemic situation in Shanghai eases.

LME copper will trade between $10,270-10,370/mt today; SHFE copper prices are expected to move between 74,300-74,900 yuan/mt. Spot premiums are likely to trade between 200-380 yuan/mt.

Aluminium: The most-traded SHFE 2206 aluminium contract opened at 21,835 yuan/mt overnight and rose to 21,895 yuan/mt before closing at 21,825 yuan/mt, down 90 yuan/mt or 0.41%.

LME aluminium opened at $3,295/mt on Tuesday and closed at $3,252/mt, down $47/mt or 1.42%.

On the supply side, domestic aluminium production in April is expected to reach 40.3 milliont mt, which will exceed the level of the same period last year, but the pandemic has continued to disrupt the shipments of aluminium smelters. On the demand side, the downstream producers’ willingness to stock up before the upcoming Labour Day holiday has increased, and inventory of aluminium ingots and aluminium billets continued to fall, giving certain support to aluminium prices. On the whole, SHFE aluminium is expected to show a volatile trend in the short term, and it is necessary to continue to pay attention to the recovery of consumption and changes in inventory under the impact of the pandemic.

Lead: After the end of Easter holidays, coupled with the shortage in supply, LME lead opened at $2,450/mt in the overnight trading with a rapid pull up to $2,488/mt, hitting a new high within one and a half months. However, lacking the support of the long funds, LME lead fell to a low of $2,405/mt and then rebounded in the late trading, finally closing at $2,449/mt, up 1.5%.

The most-traded SHFE lead 2205 contract opened at 15,600 yuan/mt in the overnight trading, but then fell to 15,460 yuan/mt on rising supply. Supporting by the 20-day moving average and the withdrawals of the short funds, SHFE lead rebounded to 15,500 yuan/mt, finally closing at 15,540 yuan/mt, down 0.61% with open interest down 747 lots to 31,303 lots from the previous trading day.

Zinc: LME zinc dropped after opening, but re-gained all the losses after entering European trading hours. The contracted closed at $4,513/mt, up $14/mt or 0.31%. The open interest was relatively stable at 229,000 lots. LME inventory dropped 1,850 m ot 113,750 mt. On the macro front, short squeeze is still probable in the Europe due to low local inventory despite falling natural gas prices.

The most traded SHFE 2205 zinc contract closed at 28,660 yuan/mt, up 155 yuan/mt or 0.54% overnight. The open interest dropped 5,849 lots to 91,660 lots. SHFE zinc is expected to move between 28,400-28,900 yuan/mt, and 0# Shuangyan zinc has no quotations for now. On the fundamentals, zinc smelters refused to purchase imported ore on falling SHFE/LME price ratio, and the mines in Manzhouli, Inner Mongolia were slow in resuming the production, aggravating domestic supply shortage. On the consumption side, domestic consumption was sluggish due to the pandemic, and the export window open briefly. In the spot market, market transactions were light owing to high zinc prices.

Overnight, the China Nation Development and Reform Commission: will increase the efforts to help enterprises and stabilise the prices of commodities; Ukraine's foreign minister: the conflict between Russia and Ukraine will be decided on the battlefield and a truce cannot be negotiated; a region in Ukraine has requested to be temporarily incorporated into Donetsk; the "ultimatum" deadline has passed and Russian troops are forcibly attacking steel mills; the Russian central bank will file a lawsuit over the freezing of foreign reserves.

Tin: Overnight, SHFE tin rallied slightly after the opening, and then fluctuated rangebound. A small amount of capital continued to flow out of SHFE tin market. In terms of fundamentals, inventory of SHFE tin warrants fell as expected, while LME tin inventories accumulated slightly. Spot prices went up, and demand was suppressed. In light of the largely stable supply-demand relationship and small fluctuations of spot prices, SHFE tin is likely to continue to move sideways.

Nickel: SHFE nickel surged up to 244,000 yuan/mt overnight, then fell back. Nickel futures opened at 239,790 yuan/mt at night, extending the trend of yesterday and rising again. However, the driving force was insufficient, so finally, it closed at 239,370 yuan/mt, down 1,740 yuan/mt or 0.72% from the settlement price of the previous trading day. The trading volume of SHFE nickel was 64,300 lots overnight, and the open interest decreased by 3,883 lots to 49,900 lots.

On the whole, it is to reverse the recent upward trend. At present, the domestic nickel is rising to repair the SHFE-LME price spread, while the LME nickel is decreasing. After the continuous rise in the domestic market, the SHFE/LME price ratio is close to favour the import. In terms of fundamentals, at present, the supply of spot pure nickel was tight due to the output cut trend of domestic nickel plates, as well as the long-term import losses of overseas pure nickel. On the demand side, it is difficult to transmit the rising prices of SHFE nickel to the terminal sector, so the manufacturer's procurement demand was low. Besides, the downstream production of alloy, battery and electroplating-grade nickel sulphate reduced due to the high prices of raw materials. To sum up, the current SHFE nickel price remained weak in both supply and demand. However, due to the shortage of pure nickel supply, the SHFE nickel price continues to rise to repair the SHFE-LME price difference. It is expected that the SHFE nickel price may fall after the import window is opened and the supply shortage is improved, while the trend of LME nickel still needs to be obsered.

[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.]

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