SHANGHAI, May 20 (SMM) - Shanghai and LME base metals all closed with gains due to sharp decline of the US dollar and the expected recovery of demand brought about by the gradual re-opening of Shanghai.
LME copper gained 2.83%, aluminium rose 4%, lead advanced 1.24%, zinc jumped 3.99%.
SHFE copper gained 0.66%, aluminium rose 2.06%, lead advanced 0.78%, zinc jumped 1.29%.
Copper: LME copper opened at $9,238/mt yesterday, and once climbed to $9,447/mt. At last, the prices closed at $9,440/mt, up 2.83%. Trading volume was 14,000 lots, and open interest stood at 244,000 lots.
SHFE 2206 copper contract opened at 71,540 yuan/mt in overnight trading and hovered around the daily moving average. Within the range, the prices once fell to the lowest and highest of 71,540 yuan/mt and 71,940 yuan/mt respectively. At last, the prices closed at 71,810 yuan/mt, up 0.66%. The trading volume was 29,600 lots, and open interest stood at 120,000 lots.
On the macro front, poor US economic data released yesterday made the market worried about the US economy, and the US dollar index continued to fall, closing down by 1.0% to 102.89, a two-week low. Thanks to the sharp decline of the US dollar and the expected recovery of demand brought about by the gradual opening of Shanghai, the copper futures continued to rise.
In the spot market, the spread between the front-month and next-month contracts once again expanded to about 350 yuan/mt in the backwardation structure, which made the premiums fall under pressure. However, as the import window closed again, the market believed the spread between the front-month and next-month contracts to continue to expand, and the premiums stabilised and remained above 350 yuan/mt. As the narrowing of the copper cathode and copper scrap was beneficial to the downstream consumption of copper cathode to a certain extent, the spread among Jiangsu, Zhejiang and Shanghai also stabilised and maintained firmly.
LME copper will trade between $9,380-9,480/mt today; SHFE copper prices are expected to move between 71,500-72,100 yuan/mt. Spot premiums are likely to trade between 300-390 yuan/mt.
Aluminium: The most-traded SHFE 2206 aluminium contract opened at 20,505 yuan/mt overnight and rose to 20,930 yuan/mt before closing at 20,840 yuan/mt, up 420 yuan/mt or 2.06%.
LME aluminium opened at $2,825/mt on Thursday and closed at $2,938/mt, an increase of $113/mt or 4%.
The recent decline in the US dollar index and the domestic economic stimulus policy have encouraged downstream producers to restock and improved market sentiment. Whether the aluminium prices can break through the resistance level of 21,000 yuan/mt in the future depends on whether the recovery of consumption from the pandemic is strong enough to allow aluminium ingot social inventory to extend decline. In the short term, as the market sentiment has improved, the most-traded SHFE 2206 aluminium contract is expected to go up and fluctuate in the range of 20,500-21,200 yuan/mt.
Lead: LME lead ended 1.24% higher at $2,074/mt in the overnight trading after opening at $2,048.5/mt and boosted by the general rise of non-ferrous metals to $2,080/mt. Open interest decreased by 341 lots to 98,153 lots.
The most-traded SHFE lead 2206 contract ended 0.78% higher at 14,935 yuan/mt in the overnight trading. The open interest decreased by 3,480 lots from the previous day to 36,072 lots.
US dollar index moved in a downward trend recently and lead futures gained upward momentum amid the general rise of non-ferrous metals in the overnight trading. Lead prices may rebound and the most-traded SHFE lead contract is expected to rebound to 15,000 yuan/mt.
Zinc: LME zinc closed at $3,730/mt on Thursday, up $143/mt or 3.99%. The open interest fell 1,590 lots to 220,000 lots. LME zinc is expected to move between $3,720-3,770/mt today. Overnight LME inventory fell 300 mt to 86,800 mt, a decrease of 0.34%. Market sentiment improved, shoring up non-ferrous metals prices.
The most traded SHFE 2206 zinc contract closed at 25,825 yuan/mt, up 330 yuan/mt or 1.29% overnight. The open interest fell 1,277 lots to 80,914 lots. SHFE zinc is expected to move between 25,500-26,000 yuan/mt, and domestic Shuangyan zinc will be in premiums of 50-60 yuan/mt over SHFE 2206. On the whole, zinc prices are more greatly affected by the macro front instead of monies. Hence the contract is likely to remain rangebound in the short term.
Overnight, US Fed's George: Market turmoil will not change Fed's tightening monetary policies plans; US dollar's share in global transactions increased to 41.8% in April; SEC commissioner: Regulators need to avoid over-regulation of cryptocurrencies; CNN: Biden to meet Saudi crown prince as early as next month; Foreign media: ECB majority agrees to raise interest rates by 25 basis points twice this year; Ukraine Advisor to the President's Chief of Staff: Negotiations between Ukraine and Russia are not over but suspended; Russian Deputy Prime Minister: Half of the buyers of Gazprom have opened accounts; Ministry of Commerce of China: Consumption is expected to continue the trend of recovery. China's raw coal output rose 10.5% year-on-year from January to April this year.
Tin: Overnight, SHFE tin hovered around its opening price, with capital flowing out of the market. The domestic tin inventory under warrants continued to fall, but at a much slower pace, while the overseas LME tin inventory remained stable. The import profit window remained open. Demand in the spot market improved the spot premiums were lowered sharply. With stabilising spot market and strong wait-and-see sentiment, SHFE tin is likely to continue to trade rangebound.
Nickel: On the supply side, SHFE nickel prices rebounded yesterday. The SHFE/LME price ratio rose from 7.6 the previous day to around 7.8 yesterday, and the import profits expanded. In terms of NPI, the pandemic suppressed the stainless steel downstream demand, so the market transaction was slack, and the upstream quoted lower prices. NPI prices will fluctuate weakly in the short term. In terms of nickel sulphate, due to the influence of LME nickel, raw material prices dropped sharply, putting downward pressure on nickel sulphate. On the demand side, stainless steel prices have dropped for several days, and the manufacturers' mainly held a wait-and-see attitude. On the cost side, NPI prices were stable even though the shipment of nickel ore from the Philippines was hindered. SHFE nickel prices rebounded due to the tight fundamentals, and the import window opened for several days. However, traders were still uncertain about the future market, so the number of imported nickel-based raw materials did not increase significantly. In terms of alloy, the domestic pandemic situation has not completely improved, and the operating rates of downstream manufacturers were less than expected. Besides, the high premiums suppressed the demand. To sum up, the current high nickel prices and the pandemic situation seriously restricted the demand for nickel.
[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.]
