SMM Morning Comment For SHFE Base Metals On May 14

SHANGHAI, May 14 (SMM) –

Copper

LME copper prices opened at $10118/mt and closed at $10206/mt in last evening trading, a gain of 1.65%, with the low-end of $10091/mt and the high-end of $10206/mt. Trading volume was 22,000 lots, and open interest stood at 341,000 lots. The most active SHFE 2407 copper contract prices opened at 81750 yuan/mt and finished at 82230 yuan/mt overnight, up 1.61%, with the low-end of 81650 yuan/mt and the high-end of 82320 yuan/mt. Trading volume was 38,000 lots and open interest stood at 195,000 lots. On the macro level, the domestic Ministry of Finance issued ultra-long-term government bonds, which provided a positive stimulus to consumption and investment. In addition, buying funds are still pushing up copper prices, and cross-market arbitrage is also promoting the rise of LME copper to a certain extent. In terms of fundamentals, from the supply side, domestic refineries have entered maintenance, and domestic copper supply has declined on a month-on-month basis. As delivery approaches, the amount of copper sent to warehouses has increased. In addition, due to the weakening import price ratio, there are differences in the acceptable prices between buyers and sellers, and only some of the goods slated to arrive soon at the port are sold at low prices. In terms of consumption, downstream processing companies are still mainly replenishing stocks on demand against high copper prices. On the fundamentals, as of Monday May 13, SMM copper inventory across major Chinese markets decreased 2,100 mt from last Thursday to 400,100 mt, up 259,000 mt YoY. Due to the strong market optimistic sentiment, copper prices will move at highs.

Aluminum

Overnight, the most-traded SHFE 2407 aluminum contract opened at 20,680 yuan/mt, with the highest and lowest prices at 20,745 yuan/mt and 20,635 yuan/mt before closing at 20,665 yuan/mt, up 155 yuan/mt or 0.76%. LME aluminum opened at $2,520.5/mt in the previous trading day, with its low and high at $2,508/mt and $2,556.5/mt respectively before closing at $2,547.5/mt, up 1.07%.

Summary: On the macro front, the expected one-year inflation rate in the US hit a recent high. The US CPI data will be released this week, providing more data support for the Fed to formulate monetary policy. The domestic Ministry of Finance issued ultra-long-term special government bonds, and market funds are expected to be introduced into real enterprises to support the real economy. Fundamentally, the sharp increase in LME aluminum inventories will bring pressure on aluminum prices. Domestic inventories of aluminum ingots and billets continued to drop after the holiday, but inventory of aluminum ingots only decreased by 10,000 mt YoY. Domestic supply and demand contradictions may gradually emerge. Combined with macro sentiment and rising aluminum costs, it is expected that aluminum prices will fluctuate at high levels.

Lead

Overnight, the US dollar rose first and then fell. LME lead fell to US$2,215/ton. During the European session, it touched a high of US$2,259.5/ton and finally closed at US$2,249.5/ton, an increase of 1.08%.

The most active SHFE 2406 lead contract prices closed at 18340 yuan/mt, an increase of 1.33%, with the highest of 18395 yuan/mt and the lowest of 18220 yuan/mt.

Zinc

LME zinc opened at $2930/mt last evening, and hit a high of $2960/mt, and closed at $2997.5/mt, up $52.5/mt or 1.78%. Trading volume grew to 11614 lots, and open interest increased by 175 lots to 240,000 lots. LME zinc inventory fell by 550 tons to 251,400 tons, a decrease of 0.2%. LME inventory continued to decline, pushing up LME zinc prices. However, the Federal Reserve's one-year inflation expectations hit a new high, hitting expectations of a rate cut. Be careful of a fall in zinc prices in the near term.

The most active SHFE 2407 zinc contract rose 385 yuan/mt or 1.63% to settle at 23990 yuan/mt in overnight trading. Trading volumes decreased to 77926 lots and open interest grew 4461 lots to 105,000 lots. According to SMM research, as of Monday (May 13), the total zinc ingot inventory of SMM seven markets in China was 214,600 tons, and domestic inventory increased. Be alert to the risk of subsequent price declines.

Tin

Overnight, SHFE 2406 tin contract moved up after opening higher, closing at 270,780 yuan/mt, up 3.41%.

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 500-700 yuan/mt for SHFE 2406 tin contract, versus discounts of 500 yuan/mt to premium of 300 yuan/mt for delivery brands and premiums of 200-500 yuan/mt for Yunxi brand. In yesterday's early trading, SHFE 2405 tin contract bottomed out due to sharp decline. Downstream companies buying sentiment was sluggish. Few deals were heard among traders. Transactions were poor yesterday.

Nickel

On May 13, the most-traded SHFE nickel contract opened at 143,920 yuan/mt, and closed at 143,510 yuan/mt, down 1,250 yuan/mt compared with the last trading day. Trading volume fell by 576 lots to 207,092 lots, and open interest decreased by 5,134 lots to 79,961 lots. The most-traded SHFE nickel contract fell rapidly to the lowest at 142,000 yuan/mt after opening, and then rose. In the afternoon, it fluctuated at a relatively stable range, with a final increase of 0.37%.