SMM Morning Comments (May 23): Base Metals Closed Mostly with Losses on US Macro Headwinds

SHANGHAI, May 23 (SMM) – LME and SHFE base metals closed mostly with losses overnight on macro headwinds from the US. On the macro front, the market is waiting for new data to find signs of whether the Fed may continue to raise interest rates. The hawkish speech of Fed officials made the market more worried. At the same time, attention should be paid to the debt ceiling issue. The US index fluctuated higher on Monday.

Copper: LME copper prices closed at $8,144/mt overnight, a decline of 1.21%. Trading volume was 15,000 lots and open interest stood at 256,000 lots. SHFE 2307 copper contract finished at 64,770 yuan/mt overnight, down 0.52%. Trading volume was 37,000 lots, and open interest stood at 185,000 lots. On the macro front, the market is waiting for new data to find signs of whether the Fed may continue to raise interest rates. The hawkish speech of Fed officials made the market more worried. At the same time, attention should be paid to the debt ceiling issue. The US index fluctuated higher on Monday. As of Monday May 22, SMM copper inventory across major Chinese markets stood at 122,700 mt, down 800 mt from last Friday but up 12,900 mt from the same period last year. Spot premiums in east China were high last Friday, and shipments arrivals of both imported and domestic copper increased. This drove up inventories in Shanghai and Jiangsu. In Guangdong, shipments arrivals decreased over the weekend while shipments leaving Guangdong increased, significantly reducing local inventories. In terms of consumption, downstream demand is more sensitive to changes in copper prices, and overall consumption is in a relatively weak. Most market participants are bearish and domestic demand is weak. It is expected that copper prices will remain low in the short term.

Aluminium: The most-traded SHFE 2306 aluminium contract opened at 18,220 yuan/mt overnight, with its low and high at 18,110 yuan/mt and 18,250 yuan/mt before closing at 18,230 yuan/mt, up 40 yuan/mt or 0.22%. LME aluminium opened at $2,288/mt on Monday, with its low and high at $2,249.5/mt and $2,289.5/mt respectively before closing at $2,263.5/mt, a drop of $20.5/mt or 0.9%.

On the macro level, the US debt ceiling negotiations have failed to reach an agreement for now, adding to macro uncertainty. End-user consumption is still recovering, but aluminium supply remains in a surplus. Falling prebaked anode and coal prices weakened cost support to aluminium prices. Macro headwinds and poor fundamentals will expose the short-term aluminium prices to downside risks.

Lead: Overnight, LME Lead opened at $2,097/mt and closed at $2,093/mt after hitting the highest point at $2,097/mt and the lowest point at $2,077/mt, up 0.1%.

The most-traded SHFE 2306 lead contract opened at 15,355 yuan/mt and closed at 15,315 yuan/mt after hitting the highest point at 15,370 yuan mt and the lowest point at 15,270 yuan/mt, down 0.45%.

Zinc: LME zinc went down after opening at $2,476.5/mt on Monday, closing at $2,425.5/mt, down $51/mt or 2.06%. Trading volume added 8,013 lots to 1,682 lots, and open interest rose 423 lots to 183,000 lots. LME zinc inventory decreased by 700 mt to 46,275 mt, a drop of 1.19%. The US index hovered at a two-month high, sending LME zinc down.

Overnight, the most-traded SHFE 2307 zinc contract opened at 20,265 yuan/mt. The contract rose at first and then fell back before closing at 20,170 yuan/mt, down 2,155 yuan/mt or 1.05%. Trading volume fell 35,622 lots to 67,485 lots, and open interest rose 3,138 lots to 123,000 lots. SHFE zinc met resistance at the 5-day moving average. Downstream consumption is not strong.
Tin: Yesterday night, SHFE 2306 tin contract prices dipped slightly after opening and stabilized at 195,610 yuan/mt, and finally closed at 196,210 yuan/mt, down 1.63%.

In the spot market, small and medium-sized enterprise sold at discounts of 500-300 yuan/mt and the deliverable brands mainly sold at 100-500 yuan/mt. However, the transactions did not change much. Although the price drop boosted the spot transactions, the active procurement in the previous stage limited the improvement.

Nickel: On the supply side, NORNICKEL nickel premiums grew yesterday on active market trades and shrinking supply. NPI prices offered by stainless steel mills generally stood at or below 1,120 yuan/mtu (delivery to factory), while the prices quoted by domestic NPI plants remained firm. On the demand side, according to SMM research, stainless steel futures prices crashed following overseas futures prices. However, the spot prices were firm yesterday. A stainless steel plant in east China announced that it would reduce the shipments of cold-rolled coils to the market and would continue to control the hot-rolled coil shipments. Another stainless steel mill in east China announced the closure of long-shaped product deals at noon. Since there is no obvious accumulation of social inventory, the market players are cautious about shipping and quoting. Short-term stainless steel spot prices will fall. It is expected that nickel prices will gain some support from the low market inventory in the near term.