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SMM Morning Comments (May 17): Base Metals Closed Mostly with Losses as Market Focused on Debt Ceiling Negotiations

iconMay 17, 2023 10:00
Source:SMM
LME and SHFE base metals closed mostly with losses last night.

SHANGHAI, May 17 (SMM) – LME and SHFE base metals closed mostly with losses last night. On the macro front, the market is closely watching the debt ceiling negotiations to avoid a possible default. If the United States defaults, it may affect the entire asset market and damage confidence in the world's largest economy.

Copper: LME copper prices closed with a drop of 1.87% at $8,120/mt last evening. Trading volume stood at 19,000 lots. Open interest stood at 256,000 lots. SHFE 2306 prices fell slightly copper contract finished at 64,210 yuan/mt last evening, down 0.91%. Trading volume was 49,000 lots, and open interest stood at 178,000 lots.

In terms of fundamentals, delivered cargoes under warrants have not flowed into the market after the delivery of the SHFE May contract. Sellers raised their quotes, but the downstream purchases missed expectations. The market needs to pay attention to the inflow of imported copper. End-user demand can hardly change significantly in the short term. With weak guidance from fundamentals, the market is concerned about US debt negotiations, weighing on copper prices.

Aluminium: The most-traded SHFE 2306 aluminium contract opened at 18,115 yuan/mt overnight, with its low and high at 18,085 yuan/mt and 18,280 yuan/mt before closing at 18,230 yuan/mt, up 115 yuan/mt or 0.63%. LME aluminium opened at $2,265.5/mt on Tuesday, with its low and high at $2237.5/mt and $2,273/mt respectively before closing at $2,265/mt, a drop of $4/mt or 0.18%.

US interest rate hike expectations still exist. There are growing fears of US economic recession. There are many macro uncertainties.

Fundamentals: The domestic operating aluminium capacity continued to increase in May. In terms of cost, the price of SMM prebaked anodes plunged month-on-month in May, and the power cost of smelters with captive power plants also declined. Demand is lower than expected, and new orders at downstream enterprises are weak. Overseas demand for aluminium semis is not good. Consumption will hardly improve in May. Aluminium ingot inventories continue to fall, but inventory of billets and other intermediate aluminium products is still on the rise. It is expected that short-term aluminium prices will fall, but downside room will be limited due to low inventories. 

Lead: Overnight, LME lead prices opened at $2,074.5/mt and hovered between $2,070-2,080/mt, then fell rapidly to the lowest point at $2,044/mt, and finally closed at $2,044/mt, down 1.54%.

Overnight, the most-traded SHFE 2306 lead contract prices opened at 15,185 yuan/mt and plunged to the lowest point at 15,155 yuan/mt under the rising inventory and finally closed at 15,180 yuan/mt, down 0.03%. The open interest fell 767 lots to 51,690 lots.

Zinc: LME zinc opened at $2,530/mt in overnight trading and finished at $2,498.5/mt, down $35.5/mt or 1.04%. Trading volume was 7,483lots, and the open interest lost 1,489 lots to 184,000 lots. The bearish sentiment in the overseas market was fueled by Fed’s officials’ denial of rate cut within the year and the rate hikes of many other countries including Australia, Czechoslovakia and Argentina.

The most active SHFE zinc 2306 contract opened at 20,580 yuan/mt overnight and closed at 20,615 yuan/mt, down 205 yuan/mt or 0.98%. Trading volume was 60,000 lots, and the open interest decreased by 1,695 lots to 100,000 lots. The soured market expectations for consumption, coupled with more supplies, suppressed the growth of SHFE zinc prices.

Tin: Overnight, SHFE tin prices fell to the lowest point at 195,820 yuan/mt after opening and finally closed at 196,320 yuan/mt, down 1.63%.

The offers of traders in the spot market basically remained stable. However, as SHFE tin prices fell after opened at a high level and most enterprises purchased previously, most traders reported that the transactions turned light.

Nickel: NORNICKEL nickel premiums rose slightly yesterday because the low-priced spots were sold out, while Jinchuan nickel premiums stood flat. In terms of NPI, the recent drop in nickel prices has boosted downstream purchases to a certain extent. The NPI suppliers intended to quote high on limited market supply, but the stainless steel mills pushed for lower NPI prices, resulting in a stalemate between buyers and sellers. On the demand side, according to SMM research, the stainless steel futures prices fluctuated downwards, and the spot market transactions were slack. Downstream companies mainly purchased on rigid demand. Short-term stainless steel spot prices will be stable with occasional falls. To sum up, nickel prices stood low as the trades were made amid the economic recession, but the spot trading picked up. The spot supply will grow further with the inflow of spots for warrant delivery.

[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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