US Dollar Fell, Crude Oil Plunged, Domestic Market Metals Generally Rose, SHFE Copper, SHFE Tin, and Rebar Up Over 1%, Coking Coal and Coke Hit Daily Limit [SMM Midday Review]

SMM News, May 25:

Metals market:

As of the midday close, base metals on the domestic market mostly rose. SHFE copper gained 1.06%. SHFE aluminum fell 0.47%. SHFE lead rose 0.06%, SHFE zinc rose 0.34%. SHFE tin gained 1.22%. SHFE nickel rose 0.23%.

In addition, the most-traded casting aluminum futures fell 0.54%, the most-traded alumina futures rose 0.37%. The most-traded lithium carbonate futures rose 0.58%. The most-traded silicon metal futures rose 1.07%. The most-traded polysilicon futures rose 0.48%.

Ferrous metals all rose. Iron ore gained 0.25%, rebar rose 1.23%, hot-rolled coil rose 1.03%, and stainless steel edged up. Coking coal and coke: the most-traded coking coal contract and the most-traded coke contract hit the daily limit up with gains of 7.97% and 7.99%, respectively.

Overseas base metals:The London Metal Exchange (LME) was closed on May 25 for the UK bank holiday and will resume trading on May 26.

Precious metals: as of 11:38, COMEX gold rose 0.86% and COMEX silver gained 2.44%. Domestic precious metals: the most-traded SHFE gold futures rose 0.64% and the most-traded SHFE silver futures rose 2.27%.

In addition, as of the midday close, the most-traded platinum futures fell 0.2% and the most-traded palladium futures rose 0.01%.

As of the midday close, the most-traded Europe containerized freight index contract fell 3.36% to 2,901 points.

As of 11:38 on May 25, midday futures quotes for selected contracts:

Spot and fundamentals

Copper:Today, #1 copper cathode spot prices in North China against the front-month contract were reported at an average discount of 360 yuan/mt to a discount of 280 yuan/mt. The average price fell 10 yuan/mt from the previous trading day, and the average transaction price was 105,230 yuan/mt, up 1,035 yuan/mt from the previous trading day.

Macro front

Domestic:

[Huawei Announces Semiconductor Tao's Law]On May 25, Huawei officially announced a new law in the semiconductor field. "Tao's Law" proposes replacing "geometric scaling" with "temporal scaling," achieving new breakthroughs in transistor density and system performance through logic folding technology. This marks the first time China has proposed a new principle guiding industrial development in the global semiconductor field. By 2031, high-end chip transistor density based on this law is expected to reach the equivalent level of the 1.4nm process node. (People's Daily)

[PBOC Reverse Repo Operations Result in Net Injection of 257 billion yuan Today] The PBOC conducted 258 billion yuan of 7-day reverse repo operations in the open market, with an operation rate of 1.40%, unchanged from the previous day. 1 billion yuan of reverse repos matured today.

On the US dollar:

As of 11:38, the US dollar index fell 0.3% to 99.03. Kevin Hassett, chief economic adviser to US President Trump, said he believes that the eventual decline in oil prices will create room for the Fed to cut interest rates. "We again expect that once a deal is reached, energy prices will plunge," Hassett said. "When that happens, the Fed will have plenty of room to take the right action and lower interest rates." He emphasized that he respects the Fed's independence and praised Kevin Warsh, who was sworn in as Fed Chairman last Friday. Although the surge in US fuel prices caused by Iran's closure of the Strait of Hormuz poses a growing political risk to Trump and his Republican Party in the November midterm elections, Hassett believes that the accelerating inflation is mainly driven by energy prices. "If you look at the last few data reports, energy prices are absolutely concerning, but core prices have barely moved at all," he said. "I think once we see energy prices pull back, due to declining energy prices, you may actually see negative inflation." (Jin10 Data)

According to CME's "FedWatch": the probability that the Fed will keep interest rates unchanged in June was 97.3%, and the probability of a cumulative 25-basis-point rate hike was 2.7%. The probability that the Fed will keep interest rates unchanged in July was 84.8%, the probability of a cumulative 25-basis-point rate hike was 14.8%, and the probability of a cumulative 50-basis-point rate hike was 0.3%. (Jin10 Data)

On data:

Today, data including China's year-to-date installed power generation capacity in April and its year-on-year rate will be released. In addition, attention should be paid to: 500 billion yuan of 1-year medium-term lending facility (MLF) and 1 billion yuan of 7-day reverse repos will mature today.

In addition, it is worth noting that due to the Memorial Day holiday, US stock markets will be closed for one day on May 25 (Monday); CME's precious metals and US crude oil futures contract trading will end early at 02:30 Beijing time on the 26th, and US stock and US Treasury futures contract trading will end early at 01:00 Beijing time on the 26th. Due to the Buddha's Birthday holiday, Hong Kong stock markets will be closed for one day on May 25 (Monday), with both southbound and northbound trading suspended; South Korean stock markets will also be closed for one day on the same day. In addition, due to the Spring Bank Holiday, the UK stock market will be closed on Monday, May 25; trading of ICE Brent crude oil futures contracts will end early at 01:30 Beijing time on May 26. Investors are advised to take note.(Jin10 Data)

Overseas exchange closure arrangements are as follows (all in Beijing time):

Crude oil:

As of 11:38, oil prices in both markets fell, with WTI down 5.92% and Brent down 5.32%. Rising expectations of a US-Iran deal boosted global risk sentiment, putting oil prices under pressure. The direct catalyst for the oil price decline was signs of improvement in actual transit conditions through the Strait of Hormuz. According to Iran's Islamic Republic News Agency citing a statement from the Islamic Revolutionary Guard Corps, 33 vessels — including oil tankers, container ships, and other commercial vessels — passed through the Strait of Hormuz within 24 hours on Sunday after receiving authorization from the IRGC Navy. (Wallstreetcn)

The Washington Post reported on May 24 that the US and Iran had reached agreement on a framework for a memorandum of understanding (MOU), which, once signed, would fully restore shipping through the Strait of Hormuz within 30 days. Citing an anonymous senior US government official, the report said the US and Iran had developed an MOU "framework" that includes a 60-day ceasefire extension to allow both sides to reach a "final agreement" on permanently ending hostilities with Iran, during which the Strait of Hormuz would be demined and reopened. The official said the MOU includes a "commitment" that Iran will not possess nuclear weapons. Over the next two months, the US and Iran will discuss the "mechanism" for implementing this commitment. However, neither side signed any agreement on May 24. (Xinhua)

Trump said on social media on Saturday that a US-Iran deal was largely done, including the opening of the Strait of Hormuz, and told US representatives not to rush into a deal. But on Sunday he said the deal was "not fully done yet." US Secretary of State Marco Rubio had previously said there could be "some good news" on the Hormuz issue in the coming hours. Iran remained cautious. Iran's Tasnim News Agency warned that the draft agreement could still collapse due to US obstacles on several key terms — including Iran's demand for unfreezing assets. (Wallstreetcn)

Spot market overview:

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