SMM Morning Comment For SHFE Base Metals On May 22

SHANGHAI, May 22 (SMM) –

Copper

LME copper opened at $10,879/mt overnight, initially rising to a high of $10,982/mt before fluctuating downward. Approaching the end of the trading session, it touched a low of $10,787.5/mt and finally closed at $10,822/mt. Trading volume reached 27,000 lots, and open interest reached 342,000 lots, with a decline of 1.25%. The most active SHFE copper contract opened at 87,680 yuan/mt, initially reaching a high of 87,950 yuan/mt before fluctuating downward. Approaching the end of the trading session, it touched a low of 86,170 yuan/mt and finally closed at 86,550 yuan/mt. Trading volume reached 105,000 lots, and open interest reached 221,000 lots, with a decline of 0.69%.

On the macro front, several US Fed officials made hawkish remarks, causing the US dollar index to fluctuate at high levels, which exerted pressure on copper prices. European Central Bank President Lagarde indicated a high likelihood of a rate cut by the ECB in June. Additionally, the SHFE adjusted the margin requirements and price limits for gold and other futures, affecting market sentiment among speculators.

On the fundamentals, downstream purchasing willingness continues to decline. Subsequent releases of warehouse receipts into the spot market are expected to continue impacting spot premiums and discounts. According to SMM, due to recent significant fluctuations in copper prices, processing enterprises have noticeably slowed their procurement pace. In terms of prices, weak consumption will inhibit the continuous rise of copper prices.

Aluminum

The most-traded SHFE aluminum contract 2407 opened at 21,350 yuan/mt overnight, reaching a high of 21,620 yuan/mt and a low of 21,225 yuan/mt, and closed at 21,370 yuan/mt, up 275 yuan/mt or 1.3%. The previous trading day, LME aluminum opened at $2,628/mt, hit a high of $2,765.5/mt and a low of $2,607/mt, and closed at $2,715.5/mt, up $89/mt or 3.39%.

Summary: On the macro front, a rate cut in Europe may be on the horizon, domestic economic data improved, expectations for a real estate recovery strengthened, and the government is determined to boost demand. On the fundamentals, domestic aluminum operating capacity increased, consumption is transitioning to the off-season, and high aluminum prices inhibited downstream purchasing willingness. Aluminum ingot social inventory grew compared to the same period last year. On the cost side, alumina prices recently surged, driving aluminum prices to spike and then fall overnight. In the short term, the macro fundamentals will be intertwined with bullish and bearish factors, and aluminum prices are expected to continue to fluctuate widely.

Lead

Overnight, LME lead opened at $2335/mt. During the Asian session, LME lead was dragged down by the decline in SHFE lead, fluctuating and falling to around $2320/mt. Entering the European session, LME lead inventories continued to decline, and LME lead resumed its upward trend, reaching a high of $2353.5/mt, a new high since May 6, 2022. By the night session, both longs and shorts took profits, causing LME lead to give back some gains, ultimately closing at $2329/mt, down 0.13%, ending a six-day winning streak.

Overnight, SHFE lead warrant inventories continued to decline by over 4,000 tons. The most active SHFE 2407 lead contract opened at 18,730 yuan/mt, reaching a low of 18,495 yuan/mt. It finally closed at 18,565 yuan/mt, down 1.77%, with open interest at 80,303 lots, a decrease of 1,567 lots from the previous trading day.

Zinc

Overnight, LME zinc opened at $3128.5/mt. At the beginning of the session, LME zinc briefly fell to a low of $3083/mt, then rebounded twice to reach a high of $3185/mt. Subsequently, LME zinc quickly declined and fluctuated at a low level towards the end of the trading session, finally closing lower at $3123/mt, down $12/mt or 0.38%. Trading volume reduced to 12,205 lots, and open interest increased by 1,350 lots to 242,000 lots. LME zinc inventory decreased by 325 tons to 258,525 tons, a drop of 0.13%. Although US Fed officials remain cautious about inflation and rate cuts, market bullish sentiment persists.

Overnight, the SHFE 2407 zinc contract opened at 25,000 yuan/mt. After the opening, SHFE zinc briefly rose to a high of 25,190 yuan/mt. As longs reduced their positions, SHFE zinc quickly declined to a low of 24,620 yuan/mt, finally closing up at 24,775 yuan/mt, up 80 yuan/mt or 0.32%. Trading volume reduced to 165,000 lots, and open interest increased by 1,571 lots to 128,000 lots. Recently, macro sentiment has remained warm, and tight supply of ore supports the continuous rise in zinc prices. However, domestic consumption has not shown significant improvement.

Tin

In the night session yesterday, the SHFE tin 2406 contract closed at 277,760 yuan/mt, up 20 yuan/mt or 0.01%, with a high of 283,590 yuan/mt and a low of 276,360 yuan/mt.

Yesterday, 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 500-1,500 yuan/mt for SHFE 2406 tin contract, versus discounts of 300 yuan/mt to premium of 300 yuan/mt for delivery brands and premiums of 300-600 yuan/mt for Yunxi brand. Yesterday morning, after a significant surge in SHFE tin prices, they fell back. Downstream companies' willingness to inquire increased. Overall, the spot market was relatively active yesterday.

Nickel

On May 21, Jinchuan nickel was at a premium of 600-800 yuan/mt, with an average of 700 yuan/mt, down 150 yuan/mt from the previous trading day. Russian nickel was at a discount of 300-800 yuan/mt, with an average of 550 yuan/mt, down 100 yuan/mt from the previous trading day. Although the market slightly dropped along with the non-ferrous metals sector in the morning, it remained at high levels overall. Downstream demand did not see a significant increase, making spot market transactions scarce. Nickel briquette prices were 153,100-154,300 yuan/mt, up 800 yuan/mt from the previous trading day. The price gap between nickel briquette and nickel sulphate was approximately 8,245.5 yuan/mt (nickel sulphate prices were 8,245.5 yuan/mt lower than nickel briquette prices).