SMM Evening Comments (May 19): Shanghai Nonferrous Metals Closed Mixed amid a Hawkish US Fed

SHANGHAI, May 19 (SMM) - Shanghai nonferrous metals closed mixed in day trading. On the macro front, the US government may reach an agreement on the debt ceiling issue this Sunday. Some US Fed officials have recently made hawkish remarks, so the market expected that the interest rate might be raised in June. The US dollar index rebounded overnight, weighing on the base metals prices.

SHFE copper climbed 0.14%, aluminium dipped 0.19%, lead gained 0.82%, zinc lost 0.72%, tin grew 0.73%, and nickel rose 0.64%.

Copper: SHFE 2306 copper climbed 90 yuan/mt or 0.14% to 65,690 yuan/mt. The open interest lost 15,064 lots to 144,250 lots.

The intraday spot transactions weakened amid the high premiums. According to SMM data, the inventory in Shanghai dipped 7,600 mt to 69,700 mt, which may enable the spot holders to quote highs. The spread between the SHFE front-month and next-month contracts grew to 200 yuan/mt in the backwardation structure. The market shall pay attention to the arrivals of imported spots.

Aluminium: SHFE 2306 aluminium dipped 35 yuan/mt or 0.19% to 18,450 yuan/mt. The open interest decreased 11,729 lots to 141,857 lots.

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: SHFE 2306 lead gained 125 yuan/mt or 0.82% to 15,380 yuan/mt. The open interest rose 842 lots to 44,545 lots.

Zinc: SHFE 2306 zinc lost 150 yuan/mt or 0.72% to 20,795 yuan/mt. The open interest declined 9,334 lots to 78,568 lots.

Spot premiums rose today amid low market supply and falling futures prices. The market only saw trades among traders, and the downstream companies only restocked a small amount of spots on dips.
Tin: SHFE 2306 tin grew 1,450 yuan/mt or 0.73% to 200,570 yuan/mt. The open interest increased 3,447 lots to 49,072 lots.

With the rebound in SHFE tin prices intraday, the downstream enterprises became less willing to purchase spots. But the overall trading volume improved compared with the previous trading day.

Nickel: SHFE 2306 nickel closed up 1,060 yuan/mt or 0.64% at 167,300 yuan/mt. The open interest fell 2,498 lots to 63,568 lots.

On May 19, premiums of Jinchuan nickel were 11,500-11,800 yuan/mt. The average premium stood at 11,650 yuan/mt, up 450 yuan/mt from the previous trading day. Premiums of NORNICKEL nickel stood at 6,800-7,000 yuan/mt. The average premium was 6,900 yuan/mt, an increase of 500 yuan/mt from the previous trading day. Pure nickel supply tightened today thanks to the improved transactions in the past few days, hence the spot premiums grew. Nickel briquette prices were 166,000-167,000 yuan/mt, down 2,250 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.]