SMM Evening Comments (May 18): Shanghai Nonferrous Metals All Closed with Losses with Speech on Firm Interest Rate Hike

SHANGHAI, May 18 (SMM) – Shanghai nonferrous metals all closed in the negative zone as US Fed Chair Powell indicated firm interest rate hike in the future until the inflation is contained.

Shanghai copper lost 0.42%, aluminium fell 0.42%, lead dipped 0.94%, zinc shed 1.22%, tin declined 3.91%, and nickel dropped 0.61%.

Copper: The most-traded SHFE 2206 copper closed down 0.42% or 300 yuan/mt at 71,340 yuan/mt, with open interest down 6,599 lots to 133,805 lots.

The supply side was relatively tight amid extensive maintenance of large smelters. Copper scrap supply tightened after copper prices dropped significantly. Nonetheless, copper supply improved marginally with the easing transportation restrictions, added shipments from Shanghai and rising copper imports.

The demand side also revived slightly after copper prices dropped as downstream buyers restocked. However, the demand side has not yet returned to the peak level. The market may walk out of pessimism after pandemic in Shanghai eases.

Aluminium: The most-traded SHFE 2206 aluminium closed down 0.42% or 85 yuan/mt to 20,360 yuan/mt, with open interest down 8,633 lots to 147,161 lots.

SHFE aluminium was pressured when the contract rebounded to 20,500 yuan/mt amid the explode accident of an aluminium smelter in Yunnan, and dropped with the absence of further bullish news. Aluminium prices dropped in light of weak actual demand. The contract is expected to move between 20,000-20,600 yuan/mt.

Lead: The most-traded SHFE 2206 lead closed down 0.94% or 140 yuan/mt at 14,770 yuan/mt, with open interest down 316 lots to 54,783 lots.

SHFE lead kept falling on the back of weakening expectations for supply and consumption recover. LME lead, on the other hand, dropped due to falling US dollar index. SHFE lead is likely to hover around five-day moving average.

Zinc: The most-traded SHFE 2206 zinc closed down 1.22% or 315 yuan/mt at 25,475 yuan/mt, with open interest down 3,195 lots to 86,011 lots.

On the supply side, the SHFE/LME price ratio gradually rose to around 7, opening the import window, and the TCs for imported ore also dropped. However, as sulphuric acid prices rose recently, the smelting cost was lowered, offering less support to zinc prices. Market sentiment improved after the estimated removal of lockdown in Shanghai. Zinc prices are likely to rally in the near term.

Tin: The most-traded SHFE 2206 tin closed down 3.91% or 11,040 yuan/mt at 271,160 yuan/mt, with open interest up 2,754 lots to 34,692 lots.

In the spot market, upstream players quoted 287,500 yuan/mt for refined tin, down 8,500 yuan/mt from yesterday. Imported refined tin were in premiums of 1,000-3,000 yuan/mt over SHFE 2206, serving as a strong competitor over domestic tin. The downstream players were also wait-and-see after tin prices dropped quickly in morning trade. SHFE warrants dropped 548 mt to 2,364 mt.

SHFE/LME price ratio dropped recently, squeezing import profits. The ratio stood at 8.17 as of closing in the afternoon, and import profits were 3,852.6 yuan/mt. The import window for refined tin may gradually close if the current trend sustains.

Nickel: The most-traded SHFE 2206 nickel closed down 0.61% or 1,220 yuan/mt at 198,860 yuan/mt, with open interest down 2,480 lots to 58,303 lots.

On the supply side, SHFE/LME price ratio rose to 7.7 from 7.5 two days ago, and the import turned profit-making.

In terms of NPI, transactions were active after NPI prices dropped along with falling support from cost as well as supply and demand. In the long run, NPI prices are likely to drop, but are unlikely to fall significantly in the near term. Affected by falling LME nickel, nickel sulphate prices dropped with the cost. On the demand side, stainless steel mills have lowered their guide prices two days in a row amid falling NPI prices. And the market was also increasingly wait-and-see.

In terms of alloy, the manufacturers have basically finished restocking for the production of backlog orders, and future demand outlook weakens.

The demand side was weak as a whole due to spreading COVID and high nickel prices. And the market shall watch the imports of pure nickel in the future.

[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.]