SMM Morning Comment For SHFE Base Metals On June 4

Published: Jun 4, 2024 10:07

Source: SMM

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Overnight, LME copper opened at $10,078/mt, hitting a session low of $10,066/mt and a session high of $10,202.5/mt, and finally closed at $10,193/mt.

SHANGHAI, June 4 (SMM) –

Copper

Overnight, LME copper opened at $10,078/mt, hitting a session low of $10,066/mt and a session high of $10,202.5/mt, and finally closed at $10,193/mt. Open interest was 340,000 lots. Overnight, the most-traded SHFE 2407 copper contract opened at 81,960 yuan/mt, surging to a session high of 82,460 yuan/mt at the beginning, then fluctuating downwards to a session low of 81,600 yuan/mt, and finally closed at 82,010 yuan/mt, up 0.34%. Trading volume was 66,000 lots and open interest was 183,000 lots. On the macro front, the US May ISM Manufacturing PMI fell to 48.7, marking the second consecutive month of decline. Meanwhile, the Federal Reserve Bank of Atlanta lowered US Q2 GDP growth forecast, increasing the likelihood of a US Fed rate cut later. In China, the May Caixin Manufacturing PMI rose to 51.7, the highest since July 2022, indicating an accelerated expansion in manufacturing production and operation. Copper prices were lifted by the expectations of a Fed rate cut and domestic manufacturing data. On the fundamentals, supply continued to increase, and downstream purchase appetites significantly rebounded after copper prices fell, with strong sentiment for dip buying. However, due to the inventory inflow during the weekend, the premium had minimum upward room. If copper prices hold stable, consumption is expected to continue to recover. As of June 3, SMM copper stocks in major regions increased by 5,300 mt from last Thursday to 448,800 mt, continuing to refresh the yearly high. In summary, copper prices have some support.

Aluminum

Overnight, the most-traded SHFE 2407 aluminum contract opened at 21,280 yuan/mt, hit a high of 21,310 yuan/mt, a low of 21,160 yuan/mt, and closed at 21,215 yuan/mt, down 65 yuan/mt, a decrease of 0.31%. The previous trading day, LME aluminum opened at $2,662.5/mt, hit a high of $2,691/mt, a low of $2,637.5/mt, and closed at $2,664/mt, up $9/mt or 0.34%.

Summary: On the macro front, recent data shows that the US economy is gradually slowing down, with manufacturing and construction spending data weaker than expected. This suggests that the US Fed may start cutting interest rates later this year. The market is now looking forward to Wednesday's ADP employment report and Friday's US non-farm payrolls data. On the fundamentals, domestic aluminum operating capacity continues to rise, with Yunnan's resumption progressing well and expected to be completed in June, which may gradually highlight supply-side pressure. Aluminum ingot social inventory has been accumulating continuously. From the demand side, recent aluminum prices hit a record high for the year and have been highly volatile, inhibiting downstream procurement enthusiasm, leading to a decline in orders and operating rates for aluminum processing enterprises. Additionally, as we are currently in the transition phase between peak and off-peak seasons, many sectors are seeing slight declines in orders, and the overall operating rate is expected to weaken steadily. SMM expects short-term aluminum prices to fluctuate wildly at a high level.

Lead

Overnight, LME lead opened at $2,279/mt, fluctuated downward during the Asian session to a low of $2,272/mt. In the European session, LME lead inventories continued to decline together with increased expectations of a US Fed rate cut, leading shorts to reduce positions. LME lead fluctuated upward to a high of $2,300/mt, dropped slightly in the night session, and closed at $2,284.5/mt, up 0.48%.

Overnight, the most-traded SHFE lead contract 2407 opened at 18,860 yuan/mt, briefly touched a low of 18,840 yuan/mt at the beginning of the session, then was boosted by the upward movement of LME lead, rising to a high of 19,055 yuan/mt. Longs increased positions, and SHFE lead hovered around a high level, closing at 18,960 yuan/mt, up 0.9%.

Zinc

Overnight, LME zinc opened at $2,984/mt, plummeting to around $2,950/mt, then reaching a high of $2,995.5/mt, hitting a low of $2,935/mt before closing at $2,937/mt, down $48/mt, a decrease of 1.61%. Trading volume increased to 11,000 lots, and open interest reduced by 1,353 lots to 247,000 lots. Overnight, LME zinc recorded four consecutive bearish candlesticks. The 20-day moving average above formed resistance, while the 40-day moving average below provided support. The KDJ indicator expanded downwards. LME zinc inventory decreased by 1,100 mt to 255,925 mt, a drop of 0.4%. The US May ISM Manufacturing PMI declined for the second consecutive month, indicating a weakening overseas economy. The base metals collectively retreated amid weak macro sentiment.

Overnight, the most-traded SHFE 2407 zinc contract opened at 24,320 yuan/mt, reaching a high of 24,435 yuan/mt, then hitting a low of 24,095 yuan/mt, and closed at 24,200 yuan/mt, down 260 yuan/mt, a decrease of 1.06%. Trading volume reduced to 109,000 lots, and open interest increased by 620 lots to 98,000 lots. Overnight, SHFE zinc recorded a small bearish candlestick. The middle track of the Bollinger Bands below provided support, and the KDJ indicator expanded downwards. Affected by the weakness in LME zinc, SHFE zinc moved downwards after a higher opening overnight. However, with frequent positive domestic economic news and continuously declining TCs at smelters, the decline in SHFE zinc was limited.

Tin

In the night session yesterday, the most-traded SHFE 2407 tin contract closed at 266,400 yuan/mt, down 5,140 yuan/mt, a decrease of 1.89%. The highest price was 269,800 yuan/mt, and the lowest was 264,860 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 0-600 yuan/mt over SHFE 2407 tin contract, versus discounts of 800 yuan/mt to premiums of 500 yuan/mt for delivery brands and premiums of 0-500 yuan/mt for Yunxi brand. Tin prices continued rose slightly and then fell yesterday, and remained at a low level recently, with downstream companies showing high purchasing enthusiasm. SHFE tin warrants decreased by 71 mt to 17,091 mt, while LME tin inventory increased by 5 mt to 5,000 mt.

Nickel

On June 3, Jinchuan nickel was at a premium of 700-900 yuan/mt, with an average of 800 yuan/mt, up 100 yuan/mt from the previous trading day. Russian nickel was at a discount of 300-700 yuan/mt, with an average of 500 yuan/mt, up 50 yuan/mt from the previous trading day. In the morning, the market fluctuated downward, and the spot market transactions showed some improvement. Nickel briquette prices were 146,700-147,000 yuan/mt, down 1,200 yuan/mt from the previous trading day. The price gap between nickel briquette and nickel sulphate was about 4,286 yuan/mt (nickel sulphate prices were 4,286 yuan/mt higher than nickel briquette prices).

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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