SMM Evening Comments (May 10): Shanghai Nonferrous Metals Closed Mostly with Losses amid Release of US CPI Data Tonight

SHANGHAI, May 10 (SMM) - Shanghai nonferrous metals closed mostly with losses in day trading. The US dollar index dropped, but the US debt ceiling negotiations failed to make new progress. The market waited for further guidance from the US CPI data to be released tonight. Economists expect the US core CPI to rise by 5.5% year-on-year in April.

SHFE copper lost 0.24%, aluminium fell 0.08%, lead closed up 0.06%, zinc dropped 0.28%, tin fell 1.80%, and nickel crashed 2.23%.
 

Copper: SHFE 2306 copper lost 160 yuan/mt or 0.24% to 67,240 yuan/mt. The open interest grew 1,222 lots to 180,997 lots.

The spread between the front-month and next-month contracts stood at around 80 yuan/mt in the backwardation structure approaching the delivery of SHFE 2305 copper, but most spot holders were less willing to ship at discounts. If the futures prices and the SHFE copper spread fluctuate only slightly, the spot premiums will hover around 0 yuan/mt in the next two trading days.

Aluminium: SHFE 2306 aluminium fell 15 yuan/mt or 0.08% to 18,295 yuan/mt. The open interest dipped 7,838 lots to 192,621 lots.

Overseas macro sentiment has picked up. The US interest rate hike expectations and the debt ceiling negotiations have all sent positive signals, thus the downward pressure on the aluminium market has eased slightly, but there are still many uncertainties in the future. The exports of aluminium semis declined month-on-month. The overall demand was lower than expected. The domestic aluminium supply maintained a slight growth trend. The cost of the aluminium industry has dropped significantly, and it is difficult to have strong support on aluminium prices. The output and operating rate of aluminium smelters increased in April, driven by production resumption.

In May, the domestic operating aluminium capacity and output are expected to increase further. An increasing amount of molten aluminium has been made into billets rather than ingots, pushing up billet inventory. If the end demand is still lower than expected in the future, smelters may produce more ingots instead of billets. As it takes time for weak consumption to be reflected in inventory, aluminium ingot inventory may remain low and continue to drop in May, thus giving some support to aluminium prices.

SMM expects the short-term aluminium prices to come under pressure, but the downside room may be limited under the support of low inventory. Factors to watch: macro front and supply in Yunnan.

Lead: SHFE 2306 lead closed up 25 yuan/mt or 0.06% at 15,285 yuan/mt, with open interest growing 2,095 lots to 63,335 lots.

SHFE lead bottomed out today, encouraging the spot traders to sell cargoes. The spots delivered from factories were quoted large discounts, but the downstream demand remained poor. Besides, as the delivery of SHFE 2305 lead is approaching, the spots in Jiangsu, Zhejiang and Shanghai markets were still quoted at small premiums, and the trades decreased compared with yesterday. The most-traded SHFE lead contract will move rangebound in the short term on a stable macro front.

Zinc: SHFE 2306 zinc dropped 60 yuan/mt or 0.28% to 21,395 yuan/mt. The open interest lost 2,010 lots to 105,664 lots.

Spot zinc transactions were slack today, and the premiums fell. The downstream companies were still less willing to purchase spots. #1 zinc ingot was traded at 21,410-21,480 yuan/mt today.

Tin: SHFE 2306 tin fell 3,810 yuan/mt or 1.80% to 207,530 yuan/mt. The open interest decreased 4,793 lots to 47,917 lots.

The futures prices once rebounded today, suppressing the downstream demand. The spot trading was extremely sluggish, and only some enterprises witnessed very rare transactions. The overall trading volume did not change much compared with the previous trading day.

Nickel: SHFE 2306 nickel crashed 4,100 yuan/mt or 2.23% to 179,460 yuan/mt. The open interest gained 451 lots to 72,105 lots.

On May 10, premiums of Jinchuan nickel were 8,400-8,800 yuan/mt. The average premium stood at 8,600 yuan/mt, up 150 yuan/mt from the previous trading day. NORNICKEL nickel was quoted at premiums of 6,800-7,200 yuan/mt, with an average of 7,000 yuan/mt, down 150 yuan/mt from a day ago. Nickel prices moved with some declines today. The NORNICKEL nickel premiums were on a downward trend since some spots were cleared, but the trading was still sluggish. Nickel briquette prices were 183,700-184,700 yuan/mt, down 4,150 yuan/mt from the previous trading day. The nickel briquette transactions were slack as it was still traded at premiums over nickel sulphate.
 

[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.]