SMM Evening Comments (May 9): Shanghai Nonferrous Metals Closed Mixed as Market Awaited Further Guidance from US Inflation Data

SHANGHAI, May 9 (SMM) - Shanghai nonferrous metals closed mixed in day trading. On the macro front, the US Fed released a report overnight showing that continued pressure on banks could trigger a contraction in credit, one of the main risks facing the US financial system in the near future, which could lead to the US economy falling into recession and the risk of an economic hard landing increasing. The market awaited further guidance from US inflation data that is going to be released this week.

SHFE copper rose 0.06%, aluminium closed down 0.84%, lead lost 0.29%, zinc gained 0.02%, tin dropped 0.06%, and nickel slipped 2.70%.

Copper: SHFE 2306 copper rose 40 yuan/mt or 0.06% to 67,070 yuan/mt. The open interest dipped 4,465 lots to 179,775 lots.

LME copper trading resumed today, and SHFE copper rebounded to around 67,500 yuan/mt. The downstream companies preferred low-priced spots such as hydro-copper and non-registered goods, dragging down the mainstream standard-quality copper transactions and the high-quality copper prices. The spot import losses shrank to around 200 yuan/mt, and the spread between the SFFE front-month and next-month copper stood at 50-70 yuan/mt in the backwardation structure approaching the delivery of the SHFE 2305 copper, resulting in spot premiums standing at around 0 yuan/mt. If the futures prices and the SHFE copper spread fluctuate wildly, the spot premiums will fall to below 0 yuan/mt.

Aluminium: SHFE 2306 aluminium closed down by 155 yuan/mt or 0.84% at 18,275 yuan/mt. The open interest rose 2,366 lots to 200,441 lots.

On the macro front, the uncertainties over US debt default and liquidity risks and the concerns over an economic recession or slowdown still weighed on the aluminum prices. In terms of fundamentals, aluminium billets inventory is at its highest level in the same period in the past three years, while the inventory of aluminum ingots has been in a downward trend. It is expected that the persisting low inventory of aluminium ingots will continue to underpin aluminum prices.

On the whole, SMM expects that aluminium prices will face downward risks due to recent bearish factors, but the decline will be limited thanks to the support of low inventory.

Lead: SHFE 2306 lead lost 45 yuan/mt or 0.29% to 15,245 yuan/mt. The open interest grew 563 lots to 61,240 lots.

SHFE lead moved with some drops today. Spot holders shipped cargo based on specific situations. Quotes of deliverable brands in Jiangsu, Zhejiang and Shanghai remained firm, while the spot discounts for factory-delivered goods in other regions further expanded. Downstream companies mostly held a wait-and-see attitude, but some traders intended to restock low-priced spots, pushing up the small order transactions. The most-traded SHFE lead contract will move rangebound in the short term on a stable macro front.

Zinc: SHFE 2306 zinc gained 5 yuan/mt or 0.02% to 21,450 yuan/mt. The open interest dropped 4,303 lots to 107,674 lots.

The average premium dropped greatly since spot holders were more willing to ship cargo amid the growing market supply. However, the downstream consumption remained poor. It is unlikely that the short-term premiums will crash as the delivery of the SHFE 2305 zinc is coming near.

Tin: SHFE 2306 tin dropped 130 yuan/mt or 0.06% to 208,040 yuan/mt, with open interest falling 3,345 lots to 52,710 lots.

Nickel: SHFE 2306 nickel slipped 4,990 yuan/mt or 2.70% to 179,710 yuan/mt. The open interest grew 1,985 lots to 71,654 lots.

On May 9, premiums of Jinchuan nickel were 8,400-8,500 yuan/mt. The average premium stood at 8,450 yuan/mt, down 450 yuan/mt from the previous trading day. NORNICKEL nickel was quoted at premiums of 7,000-7,300 yuan/mt, with an average of 7,150 yuan/mt, down 250 yuan/mt from the previous trading day. Nickel prices continued to fluctuate, and transactions were acceptable. Nickel briquette prices were 188,200-188,500 yuan/mt, down 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.]