SHANGHAI, May 22 (SMM) – Base metals prices closed mostly higher last Friday evening as the US dollar index fell after Federal Reserve Chairman Powell took a moderately dovish stance, contrary to market expectations.
Copper: LME copper prices closed at $8,242/mt last Friday evening, up 1.02%. Trading volume was 17,000 lots and open interest stood at 256,000 lots. The most active SHFE 2307 copper contract finished at 65,320 yuan/mt last Friday evening, up 0.21%. Trading volume was 47,000 lots, and open interest stood at 170,000 lots. On the macro front, Federal Reserve Chairman Powell took a moderately dovish stance, contrary to market expectations, the US dollar index fell. Markets lowered bets on another rate hike after Powell said the Fed might not need to raise rates as much given tighter credit conditions. SMM data shows that as of May 19, SMM copper inventory across major Chinese markets stood at 123,500 mt, down 17,600 mt from May 15 and down 28,500 mt from two Fridays ago. The inventory was up 3,600 mt from the same period last year. Benefiting from the continuous decline in copper prices, the price difference between copper scrap and copper cathode narrowed significantly, boosting copper cathode purchases. This drove down inventory across major markets. In terms of consumption, downstream enterprises are currently more sensitive to price changes. If the price does not fall, it is expected that the demand will not change much. Copper prices are still mainly guided by macro influences. Driven by positive macro and fundamentals, copper prices will have support in the short term.
Aluminium: The most-traded SHFE 2306 aluminium contract opened at 18,530 yuan/mt at last Friday’s night session, with its low and high at 18,350 yuan/mt and 18,560 yuan/mt before closing at 18,350 yuan/mt, down 100 yuan/mt or 0.54%. LME aluminium opened at $2,288/mt last Friday, with its low and high at $2,284/mt and $2,288/mt respectively before closing at $2,286.5/mt, an increase of $2.5/mt or 0.11%.
On the macro level, the US debt ceiling negotiations have dragged on, exacerbating market panic and macro uncertainties. On fundamentals, end-user consumption is still recovering, but aluminium market is still oversupplied. Due to decline prebaked anode and coal prices, aluminium prices have no cost support. Aluminium prices may face downside risks due to headwinds from macro and fundamentals.
Lead: Last Friday, LME lead prices opened at $2,091/mt and hit the highest point at $2,099/mt as US dollar index fell, and finally close at $2,093.5/mt, up $ 2.5/mt or 0.12%.
The most-traded SHFE 2306 lead contract opened at 15,395 yuan/mt and hit the highest point at 15,440 yuan/mt due to the rising LME lead prices, and finally closed at 15,385 yuan/mt, up 0.2%.
Tin: Last week, the Shanghai tin prices fluctuated widely, encouraging downstream enterprises to release demand. As tin smelters maintained normal production, tin ingot social inventory increased only slightly by 13 mt to 11,292mt. However, downstream demand increased limitedly last week, hence domestic tin ingot social inventory is unlikely to fall smoothly in the short term. Tin ore imports in April stood at 18,671 mt, down 14.85% month-on-month and up 18.09% year-on-year. In January-April, the cumulative imports were 74,171 mt, down 29.05% year-on-year. Tin ingot imports in April stood at 2,013 mt, up 6.85% month-on-month and down 38.63% year-on-year. In January-April, cumulative imports were 6,478 mt, up 7.98% year-on-year. Domestic tin ore supply remained tight. The mining and export of Myanmar and Congo (DRC) will be affected by the policy and extreme rainfall, hence the subsequent long-term tin ore supply will remain tight. Driven by high growth of photovoltaic module production, domestic tin demand is still positive in the second half of the year and the fourth quarter.
Zinc: LME zinc moved upwards after opening at $2,458.5/mt last Friday, but then fell back slightly before closing at $2,476.5/mt, up $23.5/mt or 0.96%. Trading volume added 1,074 lots to 9,695 lots, and open interest rose 1,476 lots to 183,000 lots. LME zinc met resistance at the 5-day and 10-day moving averages. LME zinc inventory decreased by 550 mt to 46,975 mt.
The most-traded SHFE 2307 zinc contract opened at 20,740 yuan/mt at last Friday’s night session and closed at 20,515 yuan/mt, down 5 yuan/mt or 0.02%. Trading volume fell 13 lots to 66,250 lots, and open interest rose 5,242 lots to 107,000 lots.
The overall macro atmosphere is bearish, and strengthening US dollar index also suppressed zinc prices. At present, the import loss of zinc ingots is about 200 yuan/mt. Market players should be alert to the impact of the possible inflows of imported zinc. Zinc prices are expected to fluctuate at a low level in the short term.
Nickel: The market paid close attention to the pending US Fed rate increases and the possible global economic recession as the Fed rate hike in the past few months failed to quell the core inflation. On the evening of May 18, many US Fed officials released hawkish remarks, thus the market was betting on 40% odds of rate hike in June. The US Treasury yields rose as a result, and so did the US dollar index. The nickel futures prices, however, rallied from lows on May 19 regardless of the macro pressure, and the spot premiums dropped slightly last week on expanding market supply. The market is bearish on the NORNICKEL nickel premiums as imported nickel may arrive at Chinese ports intensively in early June. NPI plants held their quotes firm amid low in-plant inventory, even though nickel futures prices crashed, but traders who carried some spot stocks slightly cut their quotations. SMM survey showed that some NPI traders became active in picking up and shipping goods, driving up the market supply to some extent. On the demand side, the stainless steel mills were less willing to restock NPI, and some mills planned to cut production on poor stainless steel consumption. According to SMM research, while the spot stainless steel market has been sluggish recently, social inventories did not show obvious accumulation as stainless steel mills reduced their shipments to the market. In general, nickel prices stood low amid economic recession fears.
