SMM Evening Comments (May 8): Shanghai Nonferrous Metals Closed Mostly with Gains amid Resilient US Labour Market and Higher Chance of an Unchanged Rate in June

SHANGHAI, May 8 (SMM) - Shanghai nonferrous metals closed mostly with gains in day trading. On the macro front, the US labour market remained resilient, with data released on May 5 showing that the US unemployment rate fell MoM in April and non-farm payrolls added 253,000 jobs. The US Fed hinted that it might stop raising interest rates at its next meeting, but would still leave room for continued rate hikes later. In addition, it said that a sufficiently restrictive level of interest rates had been reached, but more data was still needed to support it. The market currently sees a 79.5% probability that the Fed will leave rates unchanged in June and a 20.5% chance of a 25-basis-point rate cut.

SHFE copper gained 1.32%, aluminium rose 0.82%, lead dipped 0.26%, zinc grew 1.84%, tin closed up 1.43%, and nickel rose 1.02%.

Copper: SHFE 2306 copper gained 880 yuan/mt or 1.32% to 67,470 yuan/mt. The open interest added 833 lots to 184,240 lots.

The LME copper trading was closed for one day, suppressing the SHFE copper trades today. The spot holders wished to quote high prices because of the low spot liquidity. Besides, a large number of imports were not shipped to China. It is expected that the spot transactions will remain in the existing situation tomorrow.

Aluminium: SHFE 2306 aluminium rose 150 yuan/mt or 0.82% to 18,460 yuan/mt. The open interest fell 6,633 lots to 198,075 lots.

Recently, from a macro point of view, concerns about US debt default have intensified, and rumours of interest rate hikes have resurfaced. The banking crisis has not yet been resolved, and the risk aversion sentiment in the market is still strong, which puts great downward pressure on the aluminium market. On fundamentals, the downstream operating rates will be in downward trend, and the demand performance is not satisfactory. The domestic aluminium supply maintained a slight growth trend, and the cost of the industry has dropped significantly. An increasing amount of molten aluminium has been made into billets rather than ingots. If the end demand is still lower than expected in the future, aluminium billet inventory may grow, which will drive smelters to produce more ingots instead of billets. As it takes time for weak consumption to be reflected in inventory, aluminium ingot inventory may remain low and continue to drop in May, thus giving some support to aluminium prices. To sum up, SMM predicts that aluminium prices will come under downward pressure, but low inventory may limit the downside room. Factors to watch: macro front and supply in Yunnan.

Lead: SHFE 2306 lead dipped 40 yuan/mt or 0.26% to 15,275 yuan/mt. The open interest lost 1,801 lots to 60,677 lots.

SHFE lead moved with some declines today. The spot primary lead and secondary lead supply grew, forcing the cargo holders to lower their quotes. However, the downstream companies remained cautious about purchasing. The market saw few actual transactions. The most-traded SHFE lead contract will move rangebound in the short term on a stable macro front.

Zinc: SHFE 2306 zinc grew 390 yuan/mt or 1.84% to 21,535 yuan/mt. The open interest decreased 8,036 lots to 111,977 lots.

Market traders offered high and firm spot quotes against SHFE 2306 zinc today since the inventory stood low despite the rise in zinc prices. On the other hand, the downstream companies mainly purchased goods on rigid demand. The market generally saw trades between traders.

Tin: SHFE 2306 tin closed up 2,950 yuan/mt or 1.43% to 209,730 yuan/mt, with open interest falling 5,359 lots to 49,365 lots.

Nickel: SHFE 2306 nickel rose 1,870 yuan/mt or 1.02% to 185,130 yuan/mt. The open interest fell 981 lots to 69,669 lots.

On May 8, premiums of Jinchuan nickel were 8,800-9,000 yuan/mt. The average premium stood at 8,900 yuan/mt, up 150 yuan/mt from the previous trading day. Premiums of NORNICKEL nickel stood at 7,200-7,600 yuan/mt. The average premium was 7,400 yuan/mt, an increase of 150 yuan/mt from the previous trading day. Nickel prices moved rangebound. The downstream companies were less willing to restock after the Labour Day holiday, but the spot pure nickel market still saw some trades in the early trading. Nickel briquette prices were 190,500-191,300 yuan/mt, an increase of 2,550 yuan/mt from the previous trading day. The nickel briquette transactions were slack as it was still traded at premiums over nickel sulphate.

[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.]