SMM Morning Comment For SHFE Base Metals On May 29

SHANGHAI, May 29 (SMM) –

Copper

Overnight, LME copper opened at $10,456/mt, rose to $10,563.5/mt at the beginning of the session, then dropped to a low of $10,440.5/mt. It finally rebounded to close at $10,499/mt. Overnight, the most-traded SHFE copper contract opened at ¥84,870/mt, rose to ¥85,330/mt at the beginning of the session, then dropped to a low of ¥84,130/mt. It finally rebounded to close at ¥84,650/mt, with a decline of 0.12%. Trading volume reached 78,000 lots, and open interest reached 20,600 lots. On the macro level, US Fed officials made hawkish remarks, indicating that the possibility of an interest rate hike is very low but not excluded, putting some pressure on copper prices. Domestically, the National Financial Regulatory Administration stated that it will meet the reasonable financing needs of real estate projects and strongly support the construction of affordable housing and other "three major projects." Meanwhile, Guangzhou and Shenzhen have also adjusted the down payment ratio for first-time homebuyers, canceling or lowering the interest rate floor. On the fundamentals side, in terms of supply, the inflow of imported goods increased significantly during the week, and sellers' cargoes also increased. It is reported that some warehouses in Shanghai are nearly full, and some sellers are adjusting prices to sell, but due to the rebound in copper prices, consumption has not seen a significant increase. Overall, the US dollar index dropped slightly, but favorable domestic real estate policies have boosted copper prices, which are expected to remain strong.

Aluminum

The most-traded SHFE 2407 aluminum contract opened at 21,250 yuan/mt overnight, reaching a high of 21,300 yuan/mt, a low of 21,125 yuan/mt, and closed at 21,205 yuan/mt, up 20 yuan/mt or 0.09%. LME aluminum opened at $2,667/mt in the previous trading session, reaching a high of $2,741.5/mt, a low of $2,667/mt, and closed at $2,732/mt, up $74/mt or 2.78%.

Summary: On the macro front, the US Fed took a hawkish stance again mid-week, but due to the impact of geopolitical tensions and a weakening US dollar, the external macro performance remained bullish. The China-Japan-South Korea leaders' meeting resumed after four-and-a-half-year, and multiple provinces and cities in China implemented new real estate policies, boosting expectations of a real estate recovery. On the fundamentals, domestic aluminum operating capacity continued to increase during the week, with good progress in resuming production in Yunnan, which is expected to be completed in June. Supply pressure may gradually become prominent, with aluminum ingot inventories continuing to accumulate, and high aluminum prices inhibiting inventory consumption. However, LME aluminum inventories fell slightly from highs. During the week, spot alumina prices continued to rise, domestic aluminum costs continued to climb, and the import window remained closed, which may provide some support for aluminum prices. However, from the demand, recent aluminum prices hit a record high for the year and showed strong volatility, inhibiting downstream delivery enthusiasm and leading to a decline in orders and operating rates for aluminum processing enterprises. In addition, the current stage is the transition from the off-season to the peak season, and orders from multiple sector show signs of a slight decline. The subsequent comprehensive operating rate is expected to weaken. SMM predicts that aluminum prices will hover around the current level in the short term.

Lead

Overnight, LME lead opened at $2,307/mt, rising to a high of $2,351/mt, and finally dropped slightly before closing at $2,335.5/mt, up $30.5/mt, or 1.32%. Overnight, the most-traded SHFE lead contract opened at ¥18,870/mt, rose to ¥18,975/mt at the beginning of the session, then dropped to a low of ¥18,795/mt, and finally rebounded to close at ¥18,890/mt, up ¥85/mt, or 0.45%.

Zinc

Overnight, LME zinc opened at $3,071.5/mt, initially fluctuated around the average daily line, then rose to $3,095/mt during the European session, and finally surged to a high of $3,133/mt during the night session, before slightly retreating and closing at $3,119/mt, up $60.5/mt, or 1.98%. Trading volume increased to 6,982 lots, and open interest increased by 682 lots to 237,000 lots.

Overnight, LME inventory decreased by 25 tons to 257,200 tons, a decline of 0.01%. Overnight, the most-traded SHFE zinc contract opened at ¥24,930/mt, surged to ¥25,185/mt at the beginning of the session, then retreated to ¥24,850/mt, and finally closed at ¥24,880/mt, down ¥10/mt, or 0.04%. Trading volume decreased to 128,000 lots, and open interest increased by 1,571 lots to 120,000 lots. The weak consumption is putting pressure on zinc prices, making it difficult for SHFE zinc to gain upward momentum.

Tin

The closing price of the SHFE 2406 tin contract in the overnight session yesterday was 277,250 yuan/mt, up 130 yuan/mt or 0.05%. The highest price reached 280,860 yuan/mt, and the lowest was 275,580 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 0-500 yuan/mt over SHFE 2406 tin contract, versus discounts of 0-500 yuan/mt for delivery brands and premiums of 300-500 yuan/mt for Yunxi brand. During the morning session yesterday, SHFE tin prices fluctuated at high levels, and downstream companies showed a strong sentiment of wait-and-see. Overall, the spot market was relatively quiet yesterday.

Nickel

On May 28, Jinchuan nickel was at a premium of 700-1000 yuan/mt, with an average of 850 yuan/mt, a decrease of 250 yuan/mt compared with the previous trading day. Russian nickel was at a discount of 200 to 800 yuan/mt, with an average of 500 yuan/mt, a decrease of 100 yuan/mt compared with the previous trading day. In the morning, the market rose along with the overall non-ferrous metals sector. Spot prices saw adjustments, with traditional brands decreasing and new brands increasing, mainly due to the shortage of domestic spot electro-deposited nickel. However, overall spot market transactions were still dominated by rigid demand purchases. Nickel briquette prices were 152,500-153,300 yuan/mt, an increase of 2,750 yuan/mt compared with the previous trading day. The price gap between nickel briquette and nickel sulphate was about 2,900 yuan/mt (nickel sulphate prices were 2,900 yuan/mt lower than nickel briquette prices).