SMM Morning Comments (Jun 2): Base Metals Closed Mostly with Gains

SHANGHAI, Jun 2 (SMM) – LME and SHFE base metals closed mostly with gains overnight.

Copper: LME copper closed at $8,231.5/mt last evening, a rise of 1.5%.Trading volume was 20,000 lots and open interest stood at 252,000 lots. The most active SHFE 2307 copper contract finished at 65,760 yuan/mt overnight, up 0.75%. Trading volume was 46,000 lots and open interest stood at 185,000 lots. On the macro front, ADP employment in the US in May was 278,000, compared to the expected 170,000, and the previous reading of 296,000. In addition, the ISM manufacturing index in the United States recorded 46.9 in May, which was lower than that in April and less than expected. It has shrunk for seven consecutive months. The market expected the Fed to pause interest rate hike in June. Sellers in east China raised prices as available cargoes were scarce. Downstream buying interest weakened amid higher SHFE copper prices. Inventories in Guangdong fell for 3 consecutive days, and the sellers raised their quotes. Downstream buyers purchased as required. The overall transaction was weak. Weak domestic demand and a surge in copper futures prices depressed downstream demand. The market expects that the Fed will end the interest rate hike in June, and the pressure on copper prices will weaken.

Aluminium: The most-traded SHFE 2307 aluminium contract opened at 18,305 yuan/mt overnight, with its low and high at 18,240 yuan/mt and 18,480 yuan/mt before closing at 18,410 yuan/mt, up 240 yuan/mt or 1.32%. LME aluminium opened at $2,243.5/mt on Thursday, with its low and high at $2,233.5/mt and $2,292.5/mt respectively before closing at $2,270/mt, up $23/mt or 1.02%.

On the macro level, although Biden and McCarthy have reached an agreement on the debt ceiling issue, the plan still needs to be passed by Congress. At present, many Republican lawmakers have raised objections, and the x-date is gradually approaching. PCE data shows that US prices are still firm. The Fed is expected to raise interest rates in June. Auminum ingot social inventories continued to fall. Auminum prices have climbed above 18,400 yuan/mt, but further rise depends on whether fundamentals can improve.

Lead: Overnight, LME lead prices opened at $2,015/mt and closed at $2,007/mt after hitting the highest point at $,2037/mt and the lowest point at $1,976/mt, down 0.2%. The open interest increased 1,496 lots to 116,000 lots compared with the previous trading day, and the volume increased by 3,285 lots to 9,505 lots.

Overnight, the most-traded SHFE 2307 lead contract opened at 15,080 yuan/mt and closed at 15,050 yuan/mt after hitting the highest point at 15,100 yuan/mt and the lowest point at 15,030 yuan/mt, down 0.53%. The open interest decreased 978 lots to 60,469 lots compared with the previous trading day, and the trading volume decreased 28,208 lots to 38,066 lots.

Zinc: LME zinc moved upwards after opening at $2,252.5/mt on Thursday, closing at $2,277/mt, up $25/mt or 1.11% Trading volume fell to 10,563 lots, and open interest rose 2,265 lots to 196,000 lots. LME zinc met resistance at the 5-day moving average. LME zinc inventory decreased by 50 mt to 87,450 mt.

Overnight, the most-traded SHFE 2307 zinc contract went down after opening at 19,285 yuan/mt, but rallied towards the end of the session and closed at 19,255 yuan/mt, up 165 yuan/mt or 0.86%. Trading volume fell to 87,887 lots, and open interest decreased by 1,802 lots to 131,000 lots. SHFE zinc met resistance at the 5-day moving average. The US dollar index fell sharply. Poor fundamentals will expose zinc prices to downside risks.

Tin: Yesterday night, SHFE 2307 tin contract prices rose slightly after opening, and then fell slightly and hovered sideways, and finally closed at 209,000 yuan/mt, up 1.04%.

Nickel: Traders quoted pure nickel over the SHFE 2307 nickel contract yesterday, and the premiums stood low. NPI traders intended to quote high prices as the nickel futures prices rebounded after Indonesia delayed the tariff policy. On the demand side, according to SMM research, the spot prices of stainless steel in the Wuxi and Foshan markets rose slightly following the futures prices in the afternoon. Traders in these two markets made some purchases amid the growing stainless steel futures prices and the slowly falling social inventory, which pushed up the 300-series prices. The pick-up of spot trades earlier may support the nickel prices.

[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.]