SMM Morning Comments (May 12): Shanghai base metals performance mixed as investors remained cautious over inflation worries

SHANGHAI, May 12 (SMM) — Shanghai base metals traded mixed on on Wednesday morning as investors remained cautious over growing inflation worries. Meanwhile, their counterparts on the LME rose for the most part.

Shanghai base metals closed mixed in overnight trading. Aluminium slid 0.48%, zinc declined 0.24% and lead weakened 0.32%, while nickel climbed 0.56%, tin rose 0.81% and copper increased 0.34%.

The LME complex ended mostly higher on Tuesday. Copper added 1.54%, aluminium rose 0.1%, tin increased 0.67%, zinc went up 0.55% and nickel strengthened 1.49%, while lead fell 0.02%.

Copper: Three-month LME copper rose 1.54% to end at $10,556/mt on Tuesday, and is likely to trade between $10,500-10,580/mt today.

The most-active SHFE 2106 copper contract went up 0.16% to close at 76,120 yuan/mt in overnight trading, and it is expected to move between 75,800-76,400 yuan/mt today, while spot premiums will be seen at 130–30 yuan/mt.

The number of job vacancies in the US surged in March, hitting a record high of 8.12 million. Many officials of the Federal Reserve said that there were still risks in the economic recovery. They reiterated that the Fed's stance of maintaining easing policy remains unchanged, dispelling investors' worries about policy tightening under inflation. The US dollar index hit a low of more than two months in the night trading, and the April CPI data should be monitored today. On the fundamentals, due to the slowdown of overseas refining work, sulfuric acid was in short supply, and the market was worried that the continuous shortage of sulfuric acid will affect the production of major copper mines in Chile. Under the background of sustained recovery of overseas economy, potential supply concerns provided some support for copper prices. On the spot side, it is expected that with the further approach of delivery, if the contract shows a fluctuating trend in the week, the downstream buying power will pick up slightly, driving the premium and discount to rise slightly.

Aluminium: Three-month LME aluminium rose 0.14% to close at $2,533/mt on Tuesday. It is expected to trade between $2,530-2,580/mt today.

The most-liquid SHFE 2106 aluminium contract fell 0.53% to settle at 19,840 yuan/mt on Tuesday night, and is likely to trade between 19,600-20,100 yuan/mt today.

Zinc: Three-month LME zinc rose 0.68% to close at $3,015/mt on Tuesday. Zinc stocks at LME-listed warehouses fell 1,800 mt to 288,700 mt. Many Fed officials believed that the economic prospects were bright, while there were still risks, which made the market risk investment preference cool down slightly, and US consumer price index in April should be monitored in the near term. The contract is likely to trade between $2,960-3,010/mt today.

The most-liquid SHFE 2106 zinc contract fell 0.24% to end at 22,420 yuan/mt in overnight trading. In the monetary policy report of the first quarter, the People's Bank of China emphasized that there was no basis for long-term inflation or deflation in China, and short position sentiment warmed up. On the fundamentals, there was a slight surplus of materials on the supply side in May, and affected by the high prices of steel and zinc on the consumer side, more galvanized enterprises decreased and suspended production, and there was no increase in die casting and zinc oxide with insufficient overall fundamental support. The impact of macro sentiment on zinc prices will be monitored in the near term. The SHFE zinc contract is expected to move between 22,300-22,800 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be flat.

Lead: Three-month LME lead settled 0.02% lower at $2,218.5/mt on Tuesday. The contract will test support from $2,200/mt today.

The most-active SHFE 2106 lead contract went down 0.32% to close at 15,600 yuan/mt on Tuesday night. Secondary lead was shipped at a large discount yesterday, smelter discount maintained, the intention of warehouse delivery did not decline, and the bulk order transaction was tepid. The expectation of social inventory accumulation will be monitored this week. The support from five-day moving average will be monitored today.

Tin: Three-month LME tin closed up 0.67% at $30,000/mt on Tuesday. The contract is expected to keep fluctuating at high in the near term. Pressure above will be seen from $30,500/mt today. Support below will be seen from $29,000/mt today.

The most-liquid SHFE 2107 tin contract rose 0.3% to close at 195,380 yuan/mt on Tuesday night. It is expected that the contract will keep fluctuating under pressure from increasing supply in the near term. Pressure above will be seen from 198,000 yuan/mt today. Support below will be seen from 191,000 yuan/mt today.