SHANGHAI, May 5 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, ADP said the private sector in the United States added 296,000 jobs in April, exceeding expectations of 148,000 and the previous reading of 145,000. The US labour market remains resilient. In addition, market concerns have deepened about the health of the US banking industry and regional bank stocks as well as other major financial stocks like JPMorgan Chase and Wells Fargo took a hit. Market concerns increased about financial risks.
Copper: LME copper prices closed at $8,535/mt last evening, up 0.54%. Trading volume was 19,000 lots and open interest stood at 256,000 lots. The most active SHFE 2306 copper contract finished at 66,540 yuan/mt overnight, down 0.67%. Trading volume was 51,000 lots, and open interest stood at 182,000 lots.
In terms of fundamentals, on the first trading day after the Labour Day holidays, the performance of the spot market was relatively quiet, mainly due to adequate inventories restocked previously. Most downstream enterprises stood on the sidelines. In addition, recent changes in the SHFE/LME copper price ratio can drive inflows of imported copper. The actual market demand is still not strong. Copper futures prices are still fluctuating at a low level, and macroeconomic factors are expected to continue to weigh on copper prices.
Aluminium: At Thursday’s night session, the most-traded SHFE 2306 aluminium contract opened at 18,410 yuan/mt, with the highest and lowest prices at 18,410 yuan/mt and 18,250 yuan/mt before closing at 18,330 yuan/mt, down 115 yuan/mt or 0.62%.
LME aluminium opened at $2,320/mt on Thursday, with its high and low at $2,334.5/mt and $2,284/mt respectively before closing at $2,295.5/mt, a drop of $25.5/mt or 1.1%.
Shortly after the Fed announced its interest rate decision, the US banking crisis has escalated again. Last night, the European Central Bank’s interest rate hike slowed down as expected, restoring market confidence. However, European Central Bank President Christine Lagarde made it clear that the ECB will not suspend interest rate hikes, thus the uncertainty of interest rate hikes still exists, keeping the market risk aversion strong.
On fundamentals, the domestic aluminium supply maintained a slight growth trend, and the cost of the industry has dropped significantly, which will deprive aluminium prices of cost support. An increasing amount of molten aluminium has been made into billets rather than ingots, driving the social inventory of aluminium ingots to keep falling. The current downstream operating rates diverge from the inventory data. If the end demand is still lower than expected in the future, aluminium billet inventory may grow, which will drive smelters to produce more ingots instead of billets. As it takes time for weak consumption to be reflected in inventory, aluminium ingot inventory may remain low and continue to drop in May, thus giving some support to aluminium prices. To sum up, SMM predicts that aluminium prices will come under downward pressure, but low inventory may limit the downside room.
Lead: Overnight, LME lead prices opened at $2,120/mt and finally closed at $2,127/mt after hitting the highest point at $2,140/mt and the lowest point at $2,099/mt, up $7/mt or 0.33%.
The most-traded SHFE 2306 lead contract opened at 15,310 yuan/mt and finally closed at 15,310 yuan/mt after hitting the highest point at 15,360 yuan/mt.
Zinc: Overnight, LME zinc opened at $2,617/mt and finished at $2,626.5/mt, up $9.5/mt or 0.36%. LME zinc prices consolidated amid macro turmoil. Trading volume was up to 6,981 lots, and the open interest rose by 481 lots to 187,000 lots. LME zinc inventory shed by 400 mt to 52,125 mt.
The most active SHFE zinc contract opened at 21,110 yuan/mt and closed down 30 yuan/mt or 0.14% at 21,120. Trading volume was down to 66,525 lots, and the open interest added by 1,683 lots to 120,000 lots.
The European Central Bank raised the interest rate by 25 basis points as expected while signaling high inflation. The slowdown in ECB's rate hike boosted the US dollar index, which suppressed the zinc prices. This, coupled with upgrading banking crisis, will continue to limit the upward room of zinc prices.
Tin: Spot Transactions are Thin amid Deep Fall in SHFE Tin Prices
The most-traded SHFE 2306 tin contract fell rapidly after the opening and once hit the lowest point at 203,890 yuan/mt, and closed at 205,200 yuan/mt, down 2.16%.
In the spot market, the discounts of tin ingot quoted by small brands stood at 1,000-500 yuan/mt and that quoted by deliverable brands remained flat. Only few deliverable brands sold at premiums of 300-400 yuan/mt. However, according to traders’ feedback, the spot transactions only appeared amid the sharp decline in the prices and the downstream enterprises were unwilling to purchase after the prices rebounded.
Nickel: SHFE nickel surged in the early trading yesterday affected by the overseas nickel futures prices. The spot premiums trended lower, but the absolute prices still stood high. The spot transactions fell short of expectations. NPI traders were less willing to ship cargo amid low market supply and high costs. On the demand side, the spot prices of stainless steel in the Wuxi and Foshan markets rose somewhat yesterday. Stainless steel mills’ slower spot shipments to the market slightly pushed up the spot prices yesterday, but the trades were average. In general, the low spot supply at home and abroad continues to beef up nickel prices. SHFE nickel will move rangebound.
[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.]
