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SMM Evening Comments (May 17): Shanghai Nonferrous Metals Closed Mixed amid Worry about Economic Recession and a Possible Fed Rate Hike

iconMay 17, 2023 18:00
Shanghai nonferrous metals closed mixed gains in day trading.

SHANGHAI, May 17 (SMM) - Shanghai nonferrous metals closed mixed gains in day trading. The US dollar index closed up slightly. Some US Fed officials made hawkish remarks, expressing their hope to reduce inflation and support for a further rate hike if necessary. Data released by the US Census Bureau yesterday showed that retail sales in the US rose by 0.4% month-on-month in April, lower than market expectations of 0.8%. While US consumption is supported by a buoyant labour market, concerns about an economic downturn remain.

SHFE copper lost 0.39%, aluminium added 1.24%, lead ended up 0.10%, zinc climbed 0.14%, tin slipped 0.10%, and nickel plunged 1.04%.

Copper: SHFE 2306 copper lost 250 yuan/mt or 0.39% to 64,550 yuan/mt. The open interest fell 11,749 lots to 170,735 lots.

The intraday spot transactions continued to improve, and the overnight drop in copper futures prices also attracted some downstream buyers to restock, pushing the spot premiums up to over 200 yuan/mt. Besides, the spot supply remained tight as the sources for warrant delivery did not flow into the market.

Aluminium: SHFE 2306 aluminium added 225 yuan/mt or 1.24% to 18,375 yuan/mt. The open interest lost 11,283 lots to 171,469 lots.

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: SHFE 2306 lead ended up 15 yuan/mt or 0.10% to 15,215 yuan/mt. The open interest fell 3,091 lots to 49,366 lots.

Zinc: SHFE 2306 zinc climbed 30 yuan/mt or 0.14% to 20,850 yuan/mt. The open interest declined 7,691 lots to 94,022 lots.

Overall, the tightness of the spot supply intensified, which, coupled with the low futures prices, enabled the holder to quote high. However, the downstream demand was average. Therefore, spot trading did not improve today.

Tin: SHFE 2306 tin slipped 200 yuan/mt or 0.10% to 199,370 yuan/mt. The open interest decreased 2,372 lots to 49,062 lots.

As SHFE tin prices trended lower, the downstream companies were more active in restocking. As a result, the spot trades improved compared with the previous two trading days.
Nickel: SHFE 2306 nickel plunged 1,730 yuan/mt or 1.04% to 165,300 yuan/mt. The open interest lost 1,692 lots to 74,013 lots.

On May 17, premiums of Jinchuan nickel were 10,900-11,500 yuan/mt. The average premium stood at 11,200 yuan/mt, up 50 yuan/mt from the previous trading day. Premiums of NORNICKEL nickel stood at 6,500-7,000 yuan/mt. The average premium was 6,750 yuan/mt, an increase of 250 yuan/mt from the previous trading day. The spot nickel premiums rose on shrinking supply in the market. Nickel briquette prices were 167,700-168,200 yuan/mt, down 3,650 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.]

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