SHANGHAI, May 19 (SMM) – LME and SHFE base metals closed mostly with losses overnight. On the macro front, the United States announced solid economic data, further reducing market bets on the Fed's easing policy. In addition, the US dollar index rebounded on expectations that the United States will reach a debt ceiling agreement to avoid a potential default.
Copper: LME copper prices closed at $8,158.5/mt last evening, down 1.8%. Trading volume was 15,000 lots and open interest stood at 256,000 lots. SHFE 2306 copper contract finished at 65,190 yuan/mt last evening, down 0.62%. Trading volume was 34,000 lots, and open interest stood at 153,000 lots.
In terms of fundamentals, as cargoes under warrants have not been offered for sale after delivery in the Shanghai market on Thursday, the supply of available goods in the market was extremely tight. Spot quotes rise. Consumption in south China improved even as copper prices rebounded. The market needs to pay attention to whether the inflow of imported copper can alleviate the tight spot supply. In terms of price, although the debt ceiling issue of the United States has eased, the market is still worried about the financial market. With weak fundamental support, copper prices are expected to continue to remain low.
Aluminium: The most-traded SHFE 2306 aluminium contract opened at 18,475 yuan/mt overnight, with its low and high at 18,300 yuan/mt and 18,485 yuan/mt before closing at 18,405 yuan/mt, down 70 yuan/mt or 0.38%. LME aluminium opened at $2,300.5/mt on Thursday, with its low and high at $2,264.5/mt and $2,309/mt respectively before closing at $2,282/mt, a drop of $18/mt or 0.78%.
The pace of cooling of US inflation is not enough for the Federal Reserve to suspend interest rate hikes, and the debt ceiling agreement has not yet been reached, thus there are many macro uncertainties. Fundamentals: The domestic operating aluminium capacity continued to increase in May. In terms of cost, the average 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. However, with the rapid decline in global aluminium ingot inventories, the risk of overseas short squeeze has increased. Rising spot premiums in east China should support SHFE aluminium prices.
Lead: Overnight, LME lead prices opened at $2,058.5/mt and declined to $2,040/mt under the pressure of rising US dollar index, and then Shanghai lead strong drive, but then rebounded and finally closed at $2,062/mt supported by the strong SHFE lead prices, up 0.59%.
Overnight, the most-traded SHFE 2306 lead contract opened at 15,290 yuan/mt. Under the dipping inventory, SHFE lead prices hit the highest point at 15,375 yuan/mt and finally closed at 15,370 yuan/mt, up 0.75%. The open interest increased 2,690 lots compared with the previous trading day to 46,393 lots.
Zinc: LME zinc opened at $2,522/mt in overnight trading and finished at $2,453/mt, down $71/mt or 2.81%. Trading volume was 8,621 lots, and the open interest added by 339 lots to 181,000 lots. The risk appetite tightened amid liquidity crisis when global demand slipped on expectations for persisting rate hikes or rate cut delay.
The most active SHFE zinc 2306 contract opened at 20,670 yuan/mt overnight and closed at 20,465 yuan/mt, down 350 yuan/mt or 1.68%. Trading volume was 54,000 lots, and the open interest rose by 7,165 lots to 97,000 lots. The weaker consumption led to thin trades in the spot market, and zinc prices weakened as a result.
Tin: SHFE 2306 tin contract prices stabilized after falling sharply to 197,630 yuan/mt and closed at 196,150 yuan/mt, down 1.49%.
In the spot market, SHFE tin prices rebounded, driving up the market transactions. But then prices stopped rebounding and the market turnover gradually turned light. According to traders’ feedback, the market turnover was worse than the morning session. However, there were still some traders with lower discounts said that their shipments were better than the previous day.
Nickel: The spot nickel premiums dropped slightly yesterday on expanding supply. The market is bearish on the NORNICKEL nickel premiums as imported pure nickel may arrive at Chinese ports intensively in early June. NPI plants held their quotes firm amid low in-plant inventory even though nickel futures prices crashed, but some traders cut their quotations slightly. The spot supply grew somewhat as some traders began to restock and ship. Recently, due to the poor stainless steel consumption, stainless steel mills have plans to reduce production, and they are less willing to purchase goods. On the demand side, according to SMM research, the spot stainless steel market has been sluggish. With stainless steel mills reducing the shipments of goods, the social inventory did not grow. To sum up, nickel prices stood low as the trades were made amid an economic recession, but the spot trading picked up. The spot supply will grow further with the inflow of spots for delivery of SHFE 2305 nickel.
[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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