SMM Evening Comments (May 20): Shanghai Nonferrous Metals All Closed with Gains on Expected Consumption Recovery

Published: May 20, 2022 19:00 (GMT+8)

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Shanghai nonferrous metals all closed with gains as the rapidly falling US dollar index relieved the market from heavy pressure before, and the expected recovering consumption in China also offered support.

SHANGHAI, May 20 (SMM) – Shanghai nonferrous metals all closed with gains as the rapidly falling US dollar index relieved the market from heavy pressure before, and the expected recovering consumption in China also offered support.

Shanghai copper rose 0.78%, aluminium advanced 1.96%, lead added 1.25%, zinc gained 0.75%, tin climbed 2.2%, and nickel jumped 4.81%.

Copper: The most-traded SHFE 2206 copper closed up 0.78% or 560 yuan/mt at 71,900 yuan/mt, with open interest down 9,900 lots to 116,011 lots.

Market transactions improved approaching the weekend, and rapidly falling US dollar index also reduced the pressure faced by the market. In the spot market, premiums rallied to around 400 yuan/mt, indicating warming downstream demand. The downstream operating rates are also rallying, while copper scrap supply was relatively tight.

Aluminium: The most-traded SHFE 2206 aluminium closed up 1.96% or 400 yuan/mt to 20,820 yuan/mt, with open interest down 13,752 lots to 122,450 lots.

Falling US dollar index, coupled with China policy support to the consumption side, improved market confidence, which led to concentrate restocking demand. As such, aluminium prices rose to some extent.

Lead: The most-traded SHFE 2206 lead closed up 1.25% or 185 yuan/mt at 15,005 yuan/mt, with open interest down 7,313 lots to 32,239 lots.

Lead transactions were relatively sound as downstream purchased on rigid demand, and secondary lead was reported in discounts as its profitability improved. Traders held firm to the prices amid limited sources available in the market.

Zinc: The most-traded SHFE 2206 zinc closed up 0.75% or 190 yuan/mt at 25,685 yuan/mt, with open interest down 5,197 lots to 76,994 lots.

SMM China zinc ingot social inventory across seven regions totalled 265,800 mt as of today, up 4,700 mt from Monday May 16 and down 1,100 mt from last Friday May 13, indicating that the market players still stood on the sidelines concerning future demand.

Tin: The most-traded SHFE 2206 tin closed up 2.2% or 6,110 yuan/mt at 284,190 yuan/mt, with open interest down 3,648 lots to 29,134 lots.

In the spot market, quotes from upstream sellers changed little from yesterday, and stood mostly at 288,500 yuan/mt, up 500 yuan/mt from yesterday. Premiums dropped though futures prices rose today, while spot prices remained unchanged. The difference between domestic non-deliverable brands and imported refined narrowed, with the premiums of the latter dropped to 1,000 – 0 yuan/mt. Spot transactions were still thin on weak demand.

SHFE warrants dropped 409 mt to 1,832 mt, and fell 288 mt in the past week. SHFE tin inventory declined 351 mt in the week to 2,156 mt as of Friday. As of closing, SHFE/LME price ratio based on SHFE 2206 stood at 8.24, and import profits remained unchanged from a day ago at 9,819.79 yuan/mt.

Nickel: The most-traded SHFE 2206 nickel closed up 4.81% or 9,770 yuan/mt at 212,800 yuan/mt, with open interest down 880 lots to 55,667 lots.

On the supply side, SHFE nickel rebounded again yesterday, and SHFE/LME price ratio was raised from 7.6 the day before to around 7.8 yesterday, expanding import profits. In terms of NPI, the downstream demand from stainless steel was weak due to the impact of the pandemic, and market transaction was thin. As such, the upstream held less firm to their quotes, and the prices of NPI have been falling in the near term. In terms of nickel sulphate, the raw material prices were significantly lowered along with falling LME nickel, and the downward pressure on nickel sulphate prices were relatively huge. From the demand side, the prices of stainless steel have been falling for several days, and steel mills were quite cautious when purchasing raw materials. On the cost side, due to the news that nickel ore supply in the Philippine was hindered, NPI prices stabilised and SHFE nickel rallied on relatively tight supply. However, nickel-based raw material imports did not improve significantly amid uncertainties over market prospect. In terms of alloys, the domestic pandemic has not yet been completely controlled, and the operating rates of downstream manufacturers were lower than expected. The demand remained poor coupled with high spot premiums. To sum up, the current nickel prices are still high, which, coupled with the persistent pandemic, seriously restricts the demand for nickel.

[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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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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