SMM Evening Comments (May 17): Shanghai Nonferrous Metals Closed Mixed on Easing Pandemic Situation in China

SHANGHAI, May 17 (SMM) – Shanghai nonferrous metals closed mixed today. The easing of the pandemic and the news that Shanghai will gradually open weakened the dollar risk aversion, coupled with the falling U.S. stock market, heightening the pressure faced by US economy.

Shanghai copper rose 0.96%, aluminium lost 1.22%, lead inched up 0.1%, zinc jumped 1.3%, tin fell 1.53%, and nickel advanced 1.85%.

Copper: The most-traded SHFE 2206 copper closed up 0.96% or 680 yuan/mt at 71,790 yuan/mt, with open interest down 8,456 lots to 140,404 lots.

On the macro front, the easing of the pandemic and the news that Shanghai will gradually open weakened the dollar risk aversion, coupled with the falling U.S. stock market, heightening the pressure faced by US economy. The dollar index touched nearly 20 years high last week, and then retreated for two consecutive days. The market shall watch the US monthly core retail sales in April due tonight.

In the spot market, the shipment of copper that declared the customs before is queuing up. And short-term imports are likely to be limited as the import window has closed. A number of smelters conduct maintenance in May. Hence domestic supply will be weak. The spot market was revived after copper prices dropped recently, and the demand for copper cathode rose after the spread between copper cathode and scrap narrowed. Spot premiums were firm amid low inventory.

Aluminium: The most-traded SHFE 2206 aluminium closed down 1.22% or 250 yuan/mt to 20,300 yuan/mt, with open interest down 7,539 lots to 155,794 lots.

The demand side became muted after aluminium prices were back to the 20,000 yuan/mt market last week, and the downstream was hesitant to chase high, and purchased cautiously. The market transactions turned subsided.

Lead: The most-traded SHFE 2206 lead closed up 0.1% or 15 yuan/mt at 14,895 yuan/mt, with open interest down 2,006 lots to 55,099 lots.

Market activity picked up slightly from yesterday, but the market was still digesting the impact from continuously falling lead prices last week, and downstream buyers were also cautious for fear of further price drop. Lead prices may still be pressured.

Zinc: The most-traded SHFE 2206 zinc closed up 1.3% or 330 yuan/mt at 25,745 yuan/mt, with open interest down 9,252 lots to 89,206 lots.

On the supply side, though the import window on the mine end open after SHFE/LME price ratio rose to 7.2, domestic supply of ore remained tight considering shipment cycle. On the consumption side, the market sentiment was boosted to some extent after the pandemic situation in Shanghai eases. In the spot market, market transactions were still thin amid slightly rising zinc prices. And spot premiums dropped.

Tin: The most-traded SHFE 2206 tin closed down 1.53% or 4,330 yuan/mt at 279,340 yuan/mt, with open interest down 2,036 lots to 31,938 lots.

In the spot market, upstream participants maintained stable offers as futures prices were also relatively stable in morning trade, and spot quotes fell 3,500 yuan/mt to 296,000 yuan/mt. Some upstream players lowered their offers after futures prices dropped quickly in the day. Imported refined tin was now in premiums of 2,000-4,000 yuan/mt over SHFE 2206, down slightly from yesterday, serving as a strong competitor over domestic tin. Spot transactions were modest as a whole as most downstream players stood wait-and-see. SHFE warrants fell 12 mt to 2,912 mt. According to Indonesia official news, the country exported 9,243.57 mt of refined tin in April, a new single month since 2019.

Nickel: The most-traded SHFE 2206 nickel closed up 1.85% or 3,720 yuan/mt at 204,450 yuan/mt, with open interest down 1,201 lots to 60,783 lots.

On the supply side, LME nickel dropped again yesterday, while SHFE nickel remained stable, repairing SHFE-LME price spread, and the SHFE/LME price ratio stood at 7.5 as of 9:00 pm last night. Spot imports turned profitable. And domestic pure nickel supply tightness would be largely mitigated if the goods in the bonded zone cleared the customs smoothly.

NPI plants reduced the production, and buyers restocked cautiously amid falling NPI prices, hence spot transactions were thin.

For nickel sulphate, salt prices dropped along with the cost, and the production resumption across slat plants were less than expected due to poor instant profits.

On the demand side, the market was generally bearish in light of falling LME and SHFE nickel, NPI and steel prices.

Alloy orders were postponed until May due to extreme nickel price moves earlier, and purchases of alloy companies fell after centralised restocking.

[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.]