SMM Morning Comments (May 31): Shanghai base metals rose generally after US $6 trillion budget

Published: May 31, 2021 10:00

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Shanghai base metals mostly went up after White House released a $6 trillion budget proposal for infrastructure construction. Meanwhile, their counterparts on the LME were generally higher on the board.

SHANGHAI, May 31 (SMM) — Shanghai base metals mostly went up after White House released a $6 trillion budget proposal for infrastructure construction. Meanwhile, their counterparts on the LME were generally higher on the board.

Shanghai base metals basically closed higher on Last Friday night. copper rose 0.8%, aluminium added 1.28%, lead dipped 0.25%, zinc advanced 0.24%, tin gained 0.48%, and nickel rose 1.35%.

In LME market, copper dropped 0.18%, aluminium increased 0.78%, lead dropped 0.25%, zinc went up 0.36%, and tin gained 2.51%.

Copper: Three-month LME copper dropped 0.18% to end at $10,274.5/mt on Friday May 28, and is likely to trade between $10,220-10,300/mt today. The most-traded SHFE 2107 copper contract climbed up 0.8% to close at 73,940 yuan/mt in overnight trading on May 28, and is expected to trade between 73,600-74,200 yuan/mt today, with spot discounts at 150-60 yuan/mt. The April core PCE price index of US announced last Friday rose 3.1% from the same period last year, the largest increase since 1992. Biden proposed to raise federal spending for the next fiscal year to more than $6 trillion. The strong economic data offset the impact of inflation worries on the market. The US stock market rose for four consecutive months, and the copper futures rose significantly Copper spot prices rebounded vigorously and weighed on the market activity. However, the quotations remained stable, and suppliers held back cargoes to support the prices, while the demand side continued to bargain.

Aluminium: The most-liquid SHFE 2107 aluminium contract rose 1.28% to settle at 18,970 yuan/mt on the night of May 28, and is expected to trade between 18700-19100 yuan/mt today. Aluminium supply declined due to the restrictions on energy and power consumption, while downstream consumption rebounded. The stocks of aluminium ingots decreased. The aluminium consumption in Guangdong is expected to weaken this week amid the power rationing and COVID-19 pandemic. The spots are expected to be offered between the discounts at 30 yuan/mt and premiums at 20 yuan/mt.

Three-month LME aluminium went up 0.78% to close at $2,506/mt last Friday. It is expected to trade between $2,480-2,540/mt today.

Lead: Three-month LME lead dipped 0.25% to close at $2,200/mt in overnight trading on May 28. The US dollar index first rose and then fell last Friday night. The LME non-ferrous metals including LME lead generally stabilised at high levels.

The most-active SHFE 2107 lead contract rose 0.35% to close at 15,565 yuan/mt on the night of May 28. SHFE lead stabilised at high levels amid the general increase of SHFE non-ferrous metals, despite the rising social inventories of lead ingots. The contract will test support from 15,550 yuan/mt today.

Zinc: Three-month LME zinc gained 0.36% to end at $3,073.5/mt on May 28 amid the strong Eurozone CCI and Chicago PMI in May. US infrastructure plan boosted the confidence of the bulls. Zinc stocks across LME-listed warehouses plunged by 2,175 mt or 0.76% to 284,250 mt. LME zinc is expected to fluctuate between $3,050-3,100/mt today.

The most-traded SHFE 2107 zinc contract settled 0.24% higher at 22,950 yuan/mt on last Friday night, with open interest down 347 lots to 107,216 lots. The contract is likely to move between 22,500-23,000 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 50-60 yuan/mt.Zinc smelting in Yunnan is suppressed by the power rationing policy, and the social inventories kept falling, which boosted the bulls’ confidence. However, recent orders of galvanising and die casting weakened, which will limit the price increase. Zinc prices are expected to remain fluctuating at high levels.

Tin: Three-month LME tin ended 2.51% higher at $30,990/mt on last Friday, with open interest increasing 233 lots to 11,486 lots. The US dollar index closed slightly higher to 90.047. Recent US economic data confirmed the economic recovery and inflation, and Fed officials may raise their forecasts for economic growth. Analysts believe that the Federal Reserve will gradually reduce its debt purchases, which will increase longer-term interest rates and support the US dollar. The LME market is closed today for the British bank holiday.

The most-liquid SHFE 2107 tin contract gained 0.48% to settle at 208,890 yuan/mt in last Friday night, with open interest increasing 1,447 lots to 40,619 lots. A lot of tin smelters in Yunnan were suspended due to the power rationing, leading to a short spot supply and rising premiums. The tighter domestic and overseas tin supply supports the prices. SHFE tin is likely to fluctuate between 197,000-210,000 yuan/mt today.

Nickel: The most-active SHFE 2107 nickel contract rose 1.35% to settle at 132,400 yuan/mt on last Friday night, with open interest rising 1,695 lots to 128,000 lots.

The market was still in a cautious wait-and-see stance early last week. However, the White House announcement of the 6 trillion budget for new infrastructure plan once again ignited the enthusiasm of the capital market to speculate on commodity prices, which brought about a rebound of about 5% in LME lead. Although LME nickel gave up its gains during on Friday, it is expected to trend higher amid the rigid production demand by stainless steel and new energy industries. Despite the imported inflation, the domestic commodity prices should gradually stabilise under government’s resolute curb. SHFE nickel is expected to fluctuate between 129,000-136,000 yuan/mt this week, and LME nickel between $17,600-18,500/mt.

Market commentary Copper Aluminium Lead Tin Nickel Zinc

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