SHANGHAI, May 12 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, the dollar rose against the euro and pound yesterday and hit an over one-week high against a basket of major currencies, as markets sought safety haven after a barrage of economic data prompted a reassessment of the outlook for global monetary policy.
Copper: LME copper closed at $8,188.5/mt overnight, a decline of 3.48%.Trading volume was 35,000 lots and open interest stood at 254,000 lots. The most active SHFE 2306 copper contract finished at 64,510 yuan/mt overnight, down 2.76%. Trading volume was 113,000 lots and 198,000 lots. In terms of fundamentals, import losses turned into profits. Meanwhile, due to the decline in the absolute prices of copper, the enthusiasm for downstream procurement has increased, and the market activity has increased significantly. However, according to downstream processing enterprises, the orders from terminal enterprises have not increased significantly, the performance of consumer demand is average, and more market transactions were due to dip buying. As domestic demand has not improved, most companies are cautious. Copper prices will fluctuate at lows amid concerns over economic prospect.
Aluminium: Overnight, the most-traded SHFE 2306 aluminium contract opened at 18,000 yuan/mt, with the highest and lowest prices at 18,030 yuan/mt and 17,830 yuan/mt before closing at 17,940 yuan/mt, down 220 yuan/mt or 1.21%.
LME aluminium opened at $2,275.5/mt on Thursday, with its high and low at $2,282/mt and $2,202/mt respectively before closing at $2,213/mt, a drop of $56.5/mt or 2.49%.
On Friday, the overall macro sentiment suddenly turned bearish again. Expectations of US interest rate hikes, the banking crisis, and debt ceiling negotiations all sent out negative signals, exacerbating the panic in the aluminium market. Domestic demand recovery still requires strong policy support. Aluminium ingot inventory continued to fall, but the overall performance of the downstream operating rates was mediocre, causing aluminium billet inventory to grow. The domestic aluminium output maintained a slight growth trend. The cost of the aluminium industry has dropped significantly. The output and operating rate of aluminium smelters increased in April. Driven by production resumption, the domestic operating aluminium capacity and output are expected to increase further in May. An increasing share of molten aluminium has been made into billets and other intermediate products. If the end demand is still weaker than expected, smelters may raise their share of ingot output. 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. SMM expects the short-term aluminium prices to come under pressure, but the downside room may be limited under the support of low inventory. Factors to watch: macro front and supply in Yunnan.
Lead: Overnight, LME lead prices opened at $2,133.5/mt and closed at $2,105/mt after hitting the highest point at $2136.5/mt and lowest point at $2,105/mt, down 1.01%. The open interest increased 1,819 lots to 113,000 lots from the previous trading day, with trading volume increasing 710 lots to 5,151 lots.
The most-traded SHFE 2306 lead contract opened at 15,270 yuan/mt and closed at 15,260 yuan/mt after hitting the lowest point at 15,240 yuan/mt and the highest point at 15,280 yuan/mt, down 0.23%. The open interest dipped 2,557 lots to 60,608 lots compared with the previous trading day, and the trading volume increased 8,620 lots to 24,828 lots.
Zinc: LME zinc opened at $2,623.5/mt in overnight trading, touching a low at $2,537/mt, and finished at $2,543.5/mt, down $73.5/mt or 2.81%. Trading volume was up to 10,374 lots, and the open interest added by 517 lots to 185,000 lots. LME zinc inventory shed by 1,050 mt or 2.08% to 49,350 mt. The non-ferrous metal prices were suppressed by rising US dollar when the number of Americans filing new claims for unemployment benefits jumped to a 1/2-year high last week and US PPI hit a two-year low.
The most active SHFE zinc 2306 contract opened at 20,820 yuan/mt overnight and closed at 20,870 yuan/mt, down 285 yuan/mt or 1.35%. Trading volume was down to 117,000 lots, and the open interest rose by 1,951 lots to 108,000 lots. China’s social financing data was below expectations, suggesting a great challenge faced by China’s economic development. As a result, SHFE zinc prices weakened.
Tin: Overnight, SHFE 2306 tin contract prices fell rapidly after opening, and closed at 202,610 yuan/mt after hitting the lowest point at 201,300 yuan/mt, down 1.85%.
In the spot market, quotations offered by traders changed little from the previous day. With the deep drop in SHFE tin prices, many traders reported the significant increase in the transactions as the downstream enterprises were more willing to purchase amid falling prices.
Nickel: Nickel prices moved with some downward potential yesterday because of the poor downstream demand and trades amid economic recession. Under this background, nickel warrants rose, and the spot premiums slumped. The NPI market supply gradually grew with more ships from Indonesia arriving at Chinese ports, but the NPI holders who carried low inventory of spots were not in a hurry to ship their goods. On the demand side, stainless steel futures prices plunged following the dropping SHFE nickel prices, and the spot prices then fell slightly. SMM believes that the SHFE nickel will move rangebound today.
[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.]
