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SMM Morning Comment For SHFE Base Metals On May 13

iconMay 13, 2024 10:19
LME copper prices opened at $10049.5/mt and closed at $10040/mt in last Friday evening trading, a gain of 0.9%, with the low-end of $9976.5/mt and the high-end of $10079/mt.

SHANGHAI, May 13 (SMM) –


LME copper prices opened at $10049.5/mt and closed at $10040/mt in last Friday evening trading, a gain of 0.9%, with the low-end of $9976.5/mt and the high-end of $10079/mt. Trading volume was 34,000 lots, and open interest stood at 339,000 lots. The most active SHFE 2407 copper contract prices opened at 80870 yuan/mt and closed at 80720 yuan/mt last Friday evening, up 0.37%, with the high-end of 80980 yuan/mt and the low-end of 80490 yuan/mt. Trading volumes stood at 34,000 lots and open interest stood at 181,000 lots. Data released by the National Bureau of Statistics showed that China’s CPI rose by 0.3% year-on-year in April and increased by 0.1% month-on-month. In the first four months of the year, China added 12.73 trillion yuan in social financing and 10.19 trillion yuan in new RMB loans. In terms of fundamentals, from the supply side, delivery approaches and the amount of domestic copper shipped to warehouses increases. The inflow of imported copper into the spot market is limited. In terms of consumption, copper prices fluctuated at high levels, and the speed at which processing companies placed orders slowed down. Copper prices will remain relatively strong on positive macroeconomic sentiment.


Last Friday night, the most-traded SHFE 2407 aluminum contract opened at 20,615 yuan/mt, with the highest and lowest prices at 20,640 yuan/mt and 20,455 yuan/mt before closing at 20,490 yuan/mt, down 185 yuan/mt or 0.89%. LME aluminum opened at $2,570/mt last Friday, with its low and high at $2,517/mt and $2,589.5/mt respectively before closing at $2,520/mt, down 1.6%.

Summary: On the macro front, the expected one-year inflation rate in the US hit a recent high. The US CPI data will be released this week, providing more data support for the Fed to formulate monetary policy. Meanwhile, positive domestic central bank's new social financing and RMB loan data supported the real economy. Bolstered by real estate and consumption policies, the domestic macro atmosphere is relatively optimistic. Fundamentally, the sharp increase in LME aluminum inventories put pressure on aluminum prices. Domestic inventories of aluminum ingots and billets continued to drop after the holiday, and downstream market's acceptance of high aluminum prices increased. In the short term, the contradiction between domestic supply and demand is not prominent. The increase in aluminum cost and the resilience of consumer demand supported aluminum prices. It is expected that aluminum prices will remain volatile, but due to LME aluminum inventory, there may be adjustment risks.


Last Friday, LME lead fell under pressure at the opening and dropped to a low of $2,219/ton. Later, due to the weakening of the US dollar, LME lead rose to a high of $2,250/ton. During the European session, LME lead came under pressure again due to the strengthening of the US dollar and almost gave up all its gains, finally closing at $2,225.5/ton, a drop of 0.34%.

The most active SHFE 2406 lead contract prices closed at 18055 yuan/mt last Friday evening, with the high-end of 18080 yuan/mt and the low-end of 17955 yuan/mt, an increase of 0.31%.


Last Friday, LME zinc opened at $2917/mt, hitting a low and high of $2902.5/mt and $2959.5/mt respectively, and closed at $2945/mt, up $35/mt or 1.20%. Trading volume increased to 10050 lots, and open interest grew 1464 lots to 240,000 lots. LME zinc stocks fell by 175 mt or 0.07% to 251950 mt. Last Friday, the market revived expectations of a rate cut by the Federal Reserve, and LME zinc performed relatively strongly.

Last Friday evening, the most active SHFE 2407 zinc contract prices opened at 23665 yuan/mt and lost 245 yuan/mt or 1.03% to settle at 23535 yuan/mt. Trading volumes decreased to 64427 lots and open interest decreased 1219 lots to 95583 lots. Macro sentiment is positive, many places have relaxed real estate purchase restrictions, and social inventory has decreased slightly. SHFE zinc has a strong momentum.


SHFE 2406 tin contract fell after opening lower last Friday night, closing at 261,350 yuan/mt, down 0.57%. Last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 700-1,000 yuan/mt for SHFE 2406 tin contract, versus discounts of 600 yuan/mt to premium of 300 yuan/mt for delivery brands and premiums of 100-500 yuan/mt for Yunxi brand. In early trading last Friday, SHFE 2405 tin contract remained stable. Tin prices rose sharply in the afternoon, and downstream companies buying sentiment was sluggish. Few deals were heard among traders.


Nickel prices fluctuated last week. Early last week, nickel prices fell along with the non-ferrous metals market. On May 10, SHFE nickel prices dropped to 144,760 yuan/mt. After the Labour Day holiday, international geopolitical conflicts did not escalate further. However, the core issue continued. There was no new progress in Indonesian nickel ore approval in May. The tight nickel ore supply lingered for three months, gradually affecting the smelting activity. The previously weak nickel fundamentals began to support industrial prices. From a macro perspective, the US Federal Reserve Board announced on May 1 that it would maintain the target range for the federal funds rate at 5.25% to 5.5%, in line with market expectations. This is the sixth consecutive time the Fed has kept interest rates unchanged since September 2023. Market analysts believe that it suggests delayed interest rate cuts amid current high inflation. Fundamentally, China's refined nickel output was 24,700 mt in April, down 1% MoM. However, output is expected to increase in May as production may resume. Demand side, the refined nickel transactions were bleak last week. Downstream postponed purchases amid high nickel prices, waiting for lower prices. The domestic electro-deposited nickel supply plunged due to increased nickel plate exports amid decent export profits. Refined nickel prices were still affected by macro environment and fundamentals. SHFE nickel prices are expected to be 138,000-146,000 yuan/mt this week.

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