Crude Oil Rose, Metals Saw Overseas Market Outperform Domestic Market, Lithium Carbonate, Polysilicon, and Coke Fell Over 1%, Coking Coal Fell Over 3% [SMM Midday Review]

SMM May 22 update:

Metals market:

As of the midday close, domestic market base metals mostly fell. SHFE copper dropped 0.19%. SHFE aluminum fell 0.1%. SHFE lead rose 0.54%, and SHFE zinc edged up. SHFE tin gained 0.09%. SHFE nickel declined 0.59%.

In addition, the most-traded foundry aluminum futures fell 0.11%, and the most-traded alumina contract rose 0.04%. The most-traded lithium carbonate contract dropped 1.28%. The most-traded silicon metal contract fell 0.59%. The most-traded polysilicon futures declined 1.38%.

Ferrous metals mostly fell. Iron ore rose 0.19%, rebar dropped 0.38%, hot-rolled coil fell 0.76%, and stainless steel gained 0.4%. Coking coal and coke: the most-traded coking coal contract fell 3.07%, and the most-traded coke contract dropped 1.78%.

Overseas market base metals: as of 11:41, LME metals mostly rose. LME copper dipped 0.06%. LME aluminum gained 0.15%, and LME lead edged up. LME zinc rose 0.35%. LME tin gained 0.34%. LME nickel rose 0.16%.

Precious metals: as of 11:41, COMEX gold fell 0.43%, and COMEX silver dropped 0.33%. Domestic market precious metals: the most-traded SHFE gold contract fell 0.13%, and the most-traded SHFE silver contract rose 0.61%.

In addition, as of the midday close, the most-traded platinum futures rose 0.34%, and the most-traded palladium futures gained 0.57%.

As of the midday close, the most-traded Europe containerized freight index contract rose 4.51% to 3,032.5 points.

As of 11:41 on May 22, midday futures quotes for selected contracts:

Spot Prices and Fundamentals

Copper:Today in Guangdong, #1 copper cathode spot prices against the front-month contract: high-quality copper was quoted at a premium of 210 yuan/mt, down 30 yuan/mt from the previous trading day; standard-quality copper was quoted at a premium of 140 yuan/mt, down 25 yuan/mt from the previous trading day; SX-EW copper was quoted at a premium of 70 yuan/mt, down 20 yuan/mt from the previous trading day. The average price of Guangdong #1 copper cathode was 104,570 yuan/mt, down 955 yuan/mt from the previous trading day, and the average price of SX-EW copper was 104,465 yuan/mt, down 950 yuan/mt from the previous trading day...

Macro Front

China:

[NDRC: The supply-demand relationship is expected to further improve, and prices are expected to continue operating within a stable range]Li Chao, Deputy Director of the Policy Research Office of the National Development and Reform Commission (NDRC), stated that prices in April continued the mild rebound trend since H2 last year, releasing positive signals of improving supply-demand dynamics and optimized market order. Despite the continued uncertainty in international energy price trends, China has a solid foundation for maintaining overall price stability. As a series of macro policies are implemented in depth, the supply-demand relationship in the market is expected to further improve, and prices are projected to continue operating within a stable range.

[NDRC: During the 15th Five-Year Plan period, investment of over 5 trillion yuan is expected for new-type power grid construction] The Political Bureau of the CPC Central Committee proposed strengthening the planning and construction of "six networks," including water networks, new-type power grids, computing power networks, next-generation communication networks, urban underground pipe networks, and logistics networks. On May 22, the NDRC held a press conference. At the conference, Li Chao, Deputy Director of the Policy Research Office of the NDRC, stated that during the 15th Five-Year Plan period, investment of over 5 trillion yuan is expected to be allocated for the planning and construction of a number of power transmission corridors and inter-provincial power supply projects, optimizing ultra-high voltage and extra-high voltage AC networks by layer and zone, and implementing a number of urban distribution network renewal projects, power grid renovation projects in weak areas, and rural grid frequent outage remediation projects. Li Chao stated that based on comprehensive analysis, the national peak electricity load this summer is expected to reach approximately 1.6 billion kW, an increase of about 90 million kW over last year, equivalent to adding the electricity load of an entire Henan Province.

[NDRC: Guiding domestic large models to intensify efforts in adapting to domestic computing chips] Li Chao, Deputy Director of the Policy Research Office of the NDRC, stated at a press conference on May 22 that core technologies and application demands in the artificial intelligence sector are both exhibiting rapid growth. We have consistently adhered to systematic planning, sector-specific policies, openness and sharing, and safe and controllable development, promoting the broad and deep integration of artificial intelligence with all industries and sectors of the economy and society, guiding domestic large models to intensify efforts in adapting to domestic computing chips, and ensuring independent controllability, development for good, and steady long-term progress while maintaining rapid development, so that all people can share the fruits of AI development. This is also a prominent characteristic of China's AI development.

The PBOC conducted 153 billion yuan of 7-day reverse repo operations in the open market, with the operation rate at 1.40%, unchanged from the previous day. Today, 500 million yuan of reverse repos matured.

US dollar:

As of 11:41, the US dollar index rose 0.05% to 99.25. The White House stated that the swearing-in ceremony for new Fed Chairman Warsh will be held at 11:00 AM on May 22 (23:00 Beijing time). Fed's Barkin stated that the ability of enterprises and consumers to absorb the latest round of supply shocks will determine whether the US central bank can continue to "look through" higher inflation without choosing to raise interest rates. In remarks prepared for a speech in Raleigh, North Carolina on Thursday, Barkin stated: "After inflation has been above our 2% target for more than five consecutive years, we need to consider whether the cumulative effect of so many rounds of shocks could cause the 'anchor' of inflation expectations to loosen."He also stated: "For me, the key question is how much more pressure enterprises, consumers, and inflation expectations can withstand." Barkin also expressed growing concern that the US may have entered a "new phase" in which supply shocks will become more frequent. These shocks could stem from multiple factors, including escalating geopolitical tensions, fragmentation of the trade system, more extreme weather events, rising government debt, and other structural forces. He also noted that, for now, the US Fed's monetary policy stance is "in a good place" to address risks on both the employment and inflation fronts.

According to the CME "FedWatch": the probability of the US Fed holding rates unchanged through June was 96.8%, with a 3.2% probability of a cumulative 25-basis-point rate hike. The probability of the US Fed holding rates unchanged through July was 85.4%, with a 14.2% probability of a cumulative 25-basis-point rate hike and a 0.4% probability of a cumulative 50-basis-point rate hike. In addition, Nomura Securities expects the US Fed to keep rates unchanged in 2026, having previously forecast interest rate cuts in September and December this year. (Jin10 Data)

On the data front:

Data to be released today include the US May University of Michigan Consumer Sentiment Index final reading, the US May one-year inflation expectations final reading, the US April Conference Board Leading Index month-over-month, the UK May GfK Consumer Confidence Index, UK April public sector net borrowing, UK April seasonally adjusted retail sales month-over-month, the Germany June GfK Consumer Confidence Index, Germany Q1 non-seasonally adjusted GDP year-over-year final reading, Germany May IFO Business Climate Index, Japan April core CPI year-over-year, and Canada March retail sales month-over-month.

In addition, 2027 FOMC voter and Richmond Fed President Barkin will deliver a speech, and US Fed Governor Waller will deliver a speech.

On crude oil:

As of 11:41, oil prices in both markets rose, with WTI up 1.21% and Brent up 1.7%. Fluctuating US-Iran developments affected oil price movements, with market doubts over whether US-Iran negotiations could make progress supporting oil prices.

Four sources said that seven major OPEC+ producing countries will most likely agree to a modest raise in the July production target when they meet on June 7, although supply from several of them remains disrupted by the Iran war. The sources said the monthly production target set by the seven core OPEC+ members is expected to be raised by approximately 188,000 barrels per day. In Q1 2026, OPEC+ maintained production unchanged, but since April, the group has raised its monthly production target despite the ongoing war. However, since the UAE's exit from the organization in May, the monthly production increase has been scaled back. Analysts and delegates believe that while the UAE's departure has weakened the organization's influence over the market, it may strengthen its internal cohesion. Additionally, sources said that two other OPEC+ meetings scheduled for June 7 are not expected to result in any policy adjustments.

IEA Executive Director Birol said on Thursday that the arrival of the summer fuel demand peak, combined with the lack of new oil exports from the Middle East and continued inventory drawdowns, could push the oil market into a "danger zone" during July-August, though he did not elaborate further. In his speech, Birol said the world was in a state of oil surplus when the supply crisis triggered by the Iran war broke out, which helped cushion the impact, but inventories are now steadily declining. (Jin10 Data)

Spot Market Overview:

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