SMM Evening Comments (May 11): Shanghai Nonferrous Metals Closed Mostly with Losses on Overseas Economic Recession and Poor Chinese Demand

SHANGHAI, May 11 (SMM) - Shanghai nonferrous metals closed mostly with losses in day trading. The seasonally adjusted US April CPI annual rate was 4.9%, falling below market expectations for ten consecutive times, and the core CPI annual rate without seasonal adjustment in April recorded 5.5%. The slowdown in US inflation has also cemented expectations that the US Fed will pause rate hikes in June. Overseas economic recession and poor Chinese demand weighed on nonferrous metals prices.

SHFE copper lost 2.87%, aluminium fell 1.42%, lead gained 0.13%, zinc dropped 2.08%, tin slipped 0.24%, and nickel crashed 5.36%.

Copper: SHFE 2306 copper lost 1,930 yuan/mt or 2.87% to 65,310 yuan/mt. The open interest rose 18,616 lots to 199,613 lots.

Copper futures once fell below 67,000 yuan/mt, and spot imports could gain some profits. The drop in copper prices and the arrival of some hydro-copper and non-registered copper attracted downstream purchases. Spot prices of high-quality copper stood high amid the supply tightness, while those of standard-quality copper were around 0 yuan/mt. Premiums of different kinds of spots will vary greatly tomorrow amid the upcoming delivery of the SHFE 2305 copper, but the quotes will maintain small premiums driven by the high-quality copper prices.

Aluminium: SHFE 2306 aluminium closed down 260 yuan/mt or 1.42% at 18,030 yuan/mt, with open interest growing 9,032 lots to 201,653 lots.

The US inflation has slowed down, accompanied with positive signals in relation to rate hikes and debt ceiling, which provided some support for aluminium prices. However, the uncertainties over the market still loom large, and it entails great impetus brought by favourable policies for domestic demand to fully recover.

Fundamentally, domestic alumina output is expected to grow, and the aluminium supply has maintained an upward trend with falling cost, which suggests that aluminium prices lack strong cost support. The output and operating rate of aluminium smelters increased in April, driven by production resumption. In May, the domestic operating aluminium capacity and output are expected to increase further. An increasing amount of molten aluminium has been made into billets rather than ingots, pushing up billet inventory. If the end demand is still lower than expected in the future, smelters may 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.

SMM expects the short-term aluminium prices to come under pressure, but the downside room may be limited under the support of low inventory. Factors to watch: macro front and supply in Yunnan.

Lead: SHFE 2306 lead gained 20 yuan/mt or 0.13% to 15,305 yuan/mt. The open interest decreased 170 lots to 63,165 lots.

SHFE lead moved sideways today. Spot holders shipped goods based on specific situations. The supply across various Chinese markets stood high, resulting in large discounts of some spots picked up in factories. However, downstream enterprises only purchased on demand. The small order transactions did not improve today. The market shall pay attention to the release of the US initial jobless claims for the week ending May 6 and the annual and monthly PPI data for April to understand the impact of market sentiment on lead futures.

Zinc: SHFE 2306 zinc dropped 445 yuan/mt or 2.08% to 20,970 yuan/mt. The open interest added 99 lots to 105,763 lots.

Spot zinc premiums lost momentum today. The overall consumption remained weak as the downstream companies held high in-plant inventories of raw materials.

Tin: SHFE 2306 tin slipped 500 yuan/mt or 0.24% to 206,600 yuan/mt. The open interest grew 12,311 lots to 60,228 lots.

As SHFE tin prices fell sharply in the intraday session, many traders and companies said that the trading volume improved significantly, while few companies saw very rare trades. Spot suppliers mainly shipped goods to downstream companies instead of the traders.

Nickel: SHFE 2306 nickel crashed 9,600 yuan/mt or 5.36% to 169,580 yuan/mt. The open interest rose 8,161 lots to 80,266 lots.

On May 11, premiums of Jinchuan nickel were 8,800-9,000 yuan/mt. The average premium stood at 8,900 yuan/mt, up 300 yuan/mt from the previous trading day. NORNICKEL nickel was quoted at premiums of 5,900-6,300 yuan/mt, with an average of 6,100 yuan/mt, down 900 yuan/mt from a day ago. Nickel prices moved with some downward potential today because of the poor downstream demand and trades amid the economic recession. Under this background, nickel warrants rose, and the spot premiums slumped. Nickel briquette prices were 174,600-175,600 yuan/mt, down 9,100 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.]