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SMM Evening Comments (May 19): Shanghai Nonferrous Metals Closed Mixed on Hawkish US Rate Hike and China Consumption Recovery
May 19, 2022 19:00CST
Source:SMM
Shanghai nonferrous metals closed mixed as the hawkish US Fed’s stance on interest rate hike pressured the market, while estimated recovery of production from COVID in Shanghai gave some support to the market.

SHANGHAI, May 19 (SMM) – Shanghai nonferrous metals closed mixed as the hawkish US Fed’s stance on interest rate hike pressured the market, while estimated recovery of production from COVID in Shanghai gave some support to the market.

Shanghai copper lost 0.28%, aluminium rose 0.76%, lead added 0.68%, zinc shed 1.03%, tin climbed 2.02%, and nickel jumped 1.74%.

Copper: The most-traded SHFE 2206 copper closed down 0.28% or 200 yuan/mt at 71,530 yuan/mt, with open interest down 7,894 lots to 125,911 lots.

The macro sentiment was relatively pessimistic regarding the US Fed’s relatively hawkish stance. In China, on the other hand, the production will be promoted and resumed in two phases. The consumption is worth of attention when the country is recovering from COVID.

According to the National Bureau of Statistics, China copper cathode output stood at 898,000 mt in April, down 1% YoY, and the output is likely to fall further in May amid concentrated maintenance. LME copper inventory continued to rise, and added 4,350 mt to more than 180,000 mt yesterday.

In the spot market, SMM #1 copper cathode prices stood at 71,650-71,900 yuan/mt, with an average of 71,775 yuan/mt, and the premiums over SHFE 2206 stood at 340-380 yuan/mt, which dropped 30 yuan/mt from a day ago.

Aluminium: The most-traded SHFE 2206 aluminium closed up 0.76% or 155 yuan/mt to 20,560 yuan/mt, with open interest down 10,959 lots to 136,202 lots.

SMM China aluminium ingot social inventory totalled 965,000 mt, down 38,000 mt from a week ago, which boosted the confidence of shorts. The market shall watch how easing COVID situation would support the aluminium market.

Lead: The most-traded SHFE 2206 lead closed up 0.68% or 100 yuan/mt at 14,905 yuan/mt, with open interest down 15,231 lots to 39,552 lots.

Lead prices rallied boosted by the broad market as non-ferrous metals prices generally rose, and the market shall watch if the contract could maintain its momentum at around 14,900 yuan/mt.

Zinc: The most-traded SHFE 2206 zinc closed down 1.03% or 265 yuan/mt at 25,505 yuan/mt, with open interest down 3,840 lots to 82,191 lots.

On the supply side, the SHFE/LME price ratio dropped slightly to 6.99, and the import window should have opened, and the import data in June can be expected in consideration of the shipping cycle. In the spot market, as manufacturers that had rigid demand before have completed their restocking, market transactions were relatively thin, and traders were no longer firm to their prices and lowered the premiums to clinch a deal.

Tin: The most-traded SHFE 2206 tin closed up 2.02% or 5,620 yuan/mt at 283,190 yuan/mt, with open interest down 1,910 lots to 32,782 lots.

In the spot market, futures prices changed little from yesterday in morning trade, and the offers of upstream traders also remained largely unchanged at 288,000 yuan/mt, up 500 yuan/mt from a day ago. According to market response, market shipments picked up slightly from a day ago, while traders mostly purchased on rigid demand. SHFE warrants dropped 123 mt to 2,241 mt. As of closing today, SHFE/LME price ratio rebounded to 8.37 along with rising futures prices, and the import profits also widened to 9,868.76 yuan/mt.

Nickel: The most-traded SHFE 2206 nickel closed up 1.74% or 3,520 yuan/mt at 205,770 yuan/mt, with open interest down 1,756 lots to 56,547 lots.

On the fundamentals, LME nickel kept correcting today, while SHFE nickel rose, hence the import profit stayed in the positive range with SHFE/LME price ratio rising to 7.7 from 7.5 yesterday. In terms of NPI, transactions were made in large amount after the prices dropped along with contracting cost. NPI prices may fall substantially in the long run, but are likely to drop significantly in the short term.

Affected by falling LME nickel, nickel sulphate prices dropped further following contracting cost. On the demand side, stainless steel mills lowered their guide prices for two days in a row amid falling NPI prices, and the market participants were increasingly wait-and-see.

In terms of alloy, relating manufacturers may reduce their purchasing after centralised restocking.

To sum up, the demand side was sluggish amid spreading COVID and high nickel prices, and the market shall keep an eye on pure nickel imports.

[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.]

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