SMM Morning Comments (Apr 26): Base Metals Closed Mostly with Losses with Market Confidence Being Rattled_SMM | Shanghai Non ferrous Metals

2022-05-22 01:33:06 By : Ms. Alisa Xiong

SHANGHAI, Apr 26 (SMM) - Shanghai and LME base metals closed mostly with losses Monday as the market confidence was rattled by the constant hawkish signals from the US Fed to raise the interest rate more quickly and the prolonged COVID lockdown in Shanghai.

LME copper fell 2.31%, aluminium dropped 5.01%, lead declined 1.68%, zinc lost 1.48%.

SHFE copper fell 1.78%, aluminium dropped 3.53%, lead declined 0.8%, zinc lost 3.22%.

Copper: LME copper opened at $9,859/mt yesterday and hit the highest and lowest price of $9,916.5/mt and $9,756.5/mt respectively. At last, the prices closed at $9,836.5/mt, down 2.31%. Trading volume was 22,000 lots, and open interest stood at 261,000 lots.

SHFE 2206 copper contract opened at 73,170 yuan/mt in overnight trading, and fell to 72,500 yuan/mt after rising to 73,350 yuan/mt. At last, the prices closed at 73,340 yuan/mt, down 1.78%. Trading volume was 132,000 lots, and open interest stood at 144,000 lots.

On the macro front, affected by the US Fed officials’ hawkish speech, the US dollar continued to surge to a new high of 101.86 since March 25, 2020, overnight, putting huge pressure on copper futures. In addition, due to the multiple blows of the soaring US dollar, the worrying demand prospect and the news that the Libyan oil minister said that he would resume oil production in a few days, the overnight crude oil futures recorded two drops, with the US oil and Brent Crude once falling more than 6%, which is bearish for copper prices.

In terms of spot, yesterday was the last trading day of long-term orders in April. In early April, the pandemic hindered the trading activity of long-term orders in the market, resulting in a sluggish market on the last trading day. In addition, with the sharp correction of the futures, the buying interest in the market picked up obviously. 

LME copper will trade between $9,960-9,960/mt today; SHFE copper prices are expected to move between 72,600-73,200 yuan/mt. Spot premiums are likely to trade between 320-400yuan/mt.

Aluminium: The most-traded SHFE 2206 aluminium contract opened at 20,600 yuan/mt overnight and rose to 20,705 yuan/mt before closing at 20,515 yuan/mt, down 750 yuan/mt or 3.53%.

LME aluminium opened at $3,230/mt on Monday and closed at $3,082/mt, down $162.5/mt or 5.01%.

From the perspective of supply, domestic aluminium smelters are actively resuming production, and the overall supply has increased year-on-year. From the demand side, the downstream willingness to stock up is relatively high in the short term. On Monday, SMM statistics showed that the social inventory of aluminium ingots declined 23,000 mt from last Thursday to 1.02 million mt. On the whole, downstream buyers purchased mainly on dips based on rigid demand. The actual consumption recovery is not as fast as production resumption, and the short-term aluminium price may continue to decline.

Lead: LME lead open at $2.385/mt and went downward during the Asian trading hours, and went upward after declining to $2,326.4/mt during the European trading hours, and finally dropped and closed at $2,347/mt, down 1.68%. The open interest increased by 282 lots from the previous day to 114,000 lots.

The most traded SHFE 2206 lead contract opened at 15,685 yuan/mt last night, hitting the lowest point at 15,555 yuan/mt, and closed at 15,560 yuan/mt, down 0.8%. The open interest decreased by 4,137 lots from the previous trading day to 56,064 lots.

Zinc: LME zinc closed at $4,189.5/mt Monday, down $203.5/mt or 4.63%. The open interest rose 1,189 lots to 227,000 lots. LME zinc is expected to move between $4,140-4,190/mt today. Overnight LME inventory dropped 1,525 mt to 101,725 mt, a drop of 1.48%.

The most traded SHFE 2206 zinc contract closed at 27,170 yuan/mt, down 905 yuan/mt or 3.22% overnight. The open interest dropped 2,588 lots to 135,000 lots. SHFE zinc is expected to move between 27,000-27,500 yuan/mt, and 0# domestic zinc in premiums of 10 yuan/mt over SHFE 2205. In China, the consumption has been weak amid spreading COVID and high cost from raw materials. The weekly operating rates of downstream manufacturers dropped. Zinc prices are likely to fall in the near term due to macro factors.

Tin: Overnight, SHFE tin fell towards 320,000 yuan/mt, but then rebounded before moving sideways. Investors continued to roll their positions onto the 2206 contract. The domestic tin inventory under warrants fell sharply, while the overseas inventory remained stable. The mainstream spot transaction prices of domestic brands fell to below 340,000 yuan/mt, and spot premiums rose significantly. The overall bearish market sentiment sent the price of tin lower. However, as there has not been a major contradiction between supply and demand in the short term, SHFE tin is likely to move rangebound at highs.

Nickel: Nickel futures fell sharply yesterday. In addition to macro factors such as the expected impact of the Fed's interest rate hike and the shrinking of the balance sheet, the fundamental factors, for example, the suppressed demand by the pandemic and high nickel prices, also contributed to the dropping of nickel prices.  On the supply side, the supply tightness of pure nickel has not been eased. On one hand, the operating rates of refined nickel maintains low. On the other hand, social inventories do not increase sharply because of the import losses. Therefore, nickel prices dropped yesterday. The market should still pay attention to the above factors after the macro-level stabilises. The expectation of a sharp drop in nickel prices is not high when there is no obvious change.

[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.]

For queries, please contact Frank LIU at liuxiaolei@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn