SMM Morning Comment For SHFE Base Metals On May 31

SHANGHAI, May 31 (SMM) –

Copper

Overnight, LME copper opened at $10,180.5/mt, dropped slightly to a session low of $10,058.5/mt at the beginning of the session, then rebounded to an intraday high of $10,201/mt, and subsequently maintained consolidation, finally closing at $10,125/mt, with a decline of 3.34%. Trading volume reached 34,000 lots, and open interest reached 346,000 lots. Overnight, the most-traded SHFE 2407 copper contract opened at ¥82,000/mt, reaching an intraday high of ¥82,530/mt at the beginning of the session and a session low of ¥81,830/mt at the end of the trading session, finally closing at ¥82,130/mt, with a decline of 2.02%. Trading volume reached 82,000 lots, and open interest reached 195,000 lots.

On the macro front, the revised value of the US Q1 GDP annualized rate was lowered to 1.3%, the lowest since Q1 2023, with both consumer spending and inflation declining. US Fed officials reiterated that it is too early to consider rate cuts. Concerns over high copper prices and interest rates inhibiting consumption demand prompted funds to sell off long positions to take profits, causing copper prices to break support levels and fall.

On the fundamentals side, supply continues to increase, and on the consumption side, lower copper prices have led to a slight recovery in consumption, with downstream restocking on a just-needed basis. However, the unexpected rise in premiums has suppressed overall purchasing. As of Thursday, May 30, SMM copper stocks in major markets in China increased by 19,000 mt from Monday to 443,500 mt, up 28,400 mt from last Thursday, continuing to hit a new high for the year.

In summary, social inventories continue to hit new highs for the year, demand remains weak, and longs are taking profits. However, given the optimistic outlook for medium and long-term demand, copper prices are unlikely to continue declining significantly. Today, attention will be on China's manufacturing PMI.

Aluminum

Overnight, the most-traded SHFE 2407 aluminum contract opened at 21,360 yuan/mt, reaching a high of 21,540 yuan/mt and a low of 21,280 yuan/mt, and closed at 21,460 yuan/mt, down 280 yuan/mt, a decrease of 1.29%. On the previous trading day, LME aluminum opened at $2,787.5/mt, reached a high of $2,799/mt and a low of $2,683/mt, and closed at $2,705/mt, down $89/mt, a decrease of 3.19%.

On the macro front, the IMF recently raised its forecast for China's economic growth this year, and US GDP data has renewed market confidence in rate cuts, leading to a decline in the US dollar index. The State Council issued the "Action Plan" to guide the optimization of the aluminum industry's capacity, achieving high-quality development, and multiple favorable factors boosted aluminum prices. On the fundamentals, domestic aluminum operating capacity mainly maintained an upward trend during the week, with good progress in the production resumption in Yunnan, which may be completed in June. Supply pressure may gradually emerge, with social inventory of aluminum ingots continuously grew. High aluminum prices inhibited inventory consumption, while LME aluminum inventory slightly declined from its peak. From the demand, recent aluminum prices hit a record high for the year and have been highly volatile, inhibiting downstream procurement enthusiasm, leading to a reduction in orders and operating rates for aluminum processing enterprises, and PMI has fallen below 50%. Additionally, as it is currently the transition period between peak and off-peak seasons, many enterprises have seen a slight decline in orders, and the overall operating rate is expected to weaken. During the week, spot alumina prices continued to rise, domestic aluminum costs continued to climb, and the import window remained closed, which may provide some support for aluminum prices. SMM expects aluminum prices to maintain a wide fluctuation, with strong market sentiment for capital chasing. We need to pay attention to the risk of price volatility after aluminum prices hit new highs.

Lead

Overnight, LME lead opened at $2,312/mt, and fell to a low of $2,274/mt, finally closing at $2,279.5/mt, down $37/mt, a decrease of 1.6%.

Overnight, the most-traded SHFE 2407 lead contract opened at 18,750 yuan/mt, initially fell to a low of 18,665 yuan/mt, then slightly rose and stabilized at the 18,700 yuan/mt line, finally closing at 18,740 yuan/mt, down 150 yuan/mt, a decrease of 0.79%.

Zinc

Overnight, LME zinc opened at $3,110/mt. Approaching the end of the overnight session, the focus shifted down to $3,045/mt, with a low of $3,035/mt. LME zinc then slightly recovered upward, finally closing lower at $3,061/mt, down $51/mt, a decrease of 1.64%. Trading volume increased to 10,482 lots, and open interest increased by 3,834 lots to 245,000 lots. Overnight, LME zinc inventory decreased by 1,950 mt to 251,775 mt, a decrease of 0.77%.

Overnight, the most-traded SHFE 2407 zinc contract opened at 24,580 yuan/mt. At the end of the trading session, it reached a high of 24,870 yuan/mt, finally closing lower at 24,845 yuan/mt, down 250 yuan/mt, a decrease of 1%. Trading volume decreased to 90,336 lots, and open interest decreased by 603 lots to 108,000 lots. Macroeconomically, the increased expectation of a US Fed rate cut supported the overnight prices to recover upward. Fundamentally, SMM social inventory decreased by 1,000 mt to 209,400 mt, limiting the decline in zinc prices. SHFE zinc is expected to continue to run at high levels.

Tin

In the night trading session yesterday, the most-traded SHFE tin contract closed at 273,570 yuan/mt, down 5,160 yuan/mt or 1.85%, with the highest at 275,860 yuan/mt and the lowest at 273,010 yuan/mt.

Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 800-1,300 yuan/mt over SHFE 2407 tin contract, versus discounts of 0-1,300 yuan/mt for delivery brands, and discounts of 1,000 yuan/mt to premiums of 300 yuan/mt for Yunxi brand. Tin prices fell yesterday, and some downstream enterprises placed orders. Transactions were active yesterday.

Nickel

On May 30, Jinchuan nickel was at a premium of 200-400 yuan/mt, with an average of 300 yuan/mt, flat compared to the previous trading day. Russian nickel was at a discount of 500 to 1,000 yuan/mt, with an average of 750 yuan/mt, also flat compared to the previous trading day. In the morning, as the market fluctuated downward, the spot transactions showed improvement. Nickel briquette prices were 150,400-151,400 yuan/mt, down 1,450 yuan/mt from the previous trading day. The price gap between nickel briquette and nickel sulphate was about 236.4 yuan/mt (nickel sulphate prices were higher than nickel briquette prices by 236.4 yuan/mt).