SMM Evening Comments (May 11): Shanghai Nonferrous Metals Closed Mixed on Falling US Dollar

SHANGHAI, May 11 (SMM) – Shanghai nonferrous metals closed mixed with most metals recorded gains as the US dollar index finally dropped after staying high for some time, and supported metals prices.

Shanghai copper inched up 0.29%, aluminium rose 2.61%, lead slid 1.27%, zinc added 0.14%, tin decreased 3.76%, and nickel jumped 3.15%.

Copper: The most-traded SHFE 2206 copper closed up 0.29% or 210 yuan/mt at 71,580 yuan/mt, with open interest down 3,130 lots to 152,143 lots.

The market recovered from the US Fed’s second interest rate hike this year, and the better-than-expected China trade surplus relieved the market slightly from RMB devaluation. Spot premiums rallied slightly. Though downstream demand was still sluggish, the traders started to build the stocks, hence the industry chain still had support.

Aluminium: The most-traded SHFE 2206 aluminium closed up 2.61% or 515 yuan/mt to 20,265 yuan/mt, with open interest down 5,189 lots to 185,366 lots.

On the supply side, SMM aluminium cost stood at 17,320 yuan/mt in April, allowing some profits. Aluminium smelters will keep ramping up their production in the near term. On the demand side, production resumption accelerated after the COVID eased, boosting market confidence.

Lead: The most-traded SHFE 2206 lead closed down 1.27% or 195 yuan/mt at 15,120 yuan/mt, with open interest up 3,438 lots to 50,884 lots.

The supply of secondary lead recovered to some point as the transportation of raw materials became increasingly smooth. However, the output of primary lead was restricted by tight supply of lead concentrate. The downstream was still in the seasonal low, generating less demand for lead.

Zinc: The most-traded SHFE 2206 zinc closed up 0.14% or 35 yuan/mt at 25,690 yuan/mt, with open interest down 2,338 lots to 104,609 lots.

On the supply side, SHFE/LME zinc price ratio rose to 7.00, and the import window for overseas ore opened theoretically. Hence the support from the cost side may weaken in the future. However, the cost will remain in the near term. On the consumption side, the market was less confident due to persistent COVID. Though zinc prices dropped recently, the performance of orders was not cheering. The spot market was relatively quiet today after the buyers restocked actively in the past few days.

Tin: The most-traded SHFE 2206 tin closed down 3.76% or 11,410 yuan/mt at 291,960 yuan/mt, with open interest up 1,803 lots to 34,375 lots.

In the spot market, upstream offers were still firm, while a few smelters lowered their offers as futures prices fell. The quotes for different brands differed greatly. The transactions were less active than yesterday. SHFE warrants added 70 mt to 1,845 mt, and some manufacturers chose to deliver in the futures market.

Nickel: The most-traded SHFE 2206 nickel closed up 3.15% or 6,290 yuan/mt at 206,030 yuan/mt, with open interest down 980 lots to 59,777 lots.

On the fundamentals, pure nickel supply remained tight. On the supply side, pure nickel imports were still in losses as the SHFE/LME price ratio has not been repaired, though pure nickel production in China has been restored in May.

For NPI, the spread between NPI and pure nickel narrowed as nickel prices fell, and NPI prices fell with weaker support. However, the supply was still tight amid production cuts of NPI caused by sluggish downstream demand. On the demand side, the pandemic situation in Wuxi deteriorated, adding to the uncertainties in the spot market.

Repeating pandemic has brought about production cuts in downstream sectors like nickel sulphate, battery and alloy.

[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.]