SMM Morning Comment For SHFE Base Metals On June 5

SHANGHAI, June 5 (SMM) –

Copper

Overnight, LME copper opened at $10,004.8/mt, peaked at $10,024.5/mt during early trading, then dipped to a session low of $9,914/mt at the end of the trading session, and finally closed at $9,933.5/mt with open interest at 343,000 lots. Overnight, the most-traded SHFE copper contract opened at ¥80,960/mt, peaked at ¥81,060/mt during early trading, then maintained slight fluctuations throughout, hitting a session low of ¥80,320/mt, and finally closed at ¥80,500/mt, down by 1.9%. Trading volume was 82,000 lots and open interest was 181,000 lots. On the macro front, the US non-farm payrolls data is about to be released. The US dollar index rebounded from recent lows due to elevated sentiment, while domestic demand remained weak in the long run, putting pressure on copper prices. Additionally, US job openings in April fell to their lowest level since 2021. Following the data release, US Fed rate swaps indicated an accelerated pace of rate cuts in 2024. A regulation issued by Indonesia's Ministry of Finance on Tuesday showed a 7.5% export tax on copper concentrate exports, also applicable to two companies currently exempt from the export ban. On the fundamentals side, the supply side saw a continuous arrival of domestic and imported copper, with low-price imported copper also flowing in. On the consumption side, as copper prices dipped and the delivery month approached, the premium continued to rise, but overall demand showed no significant recovery. If copper prices continue to fall, a consumption rebound might be seen. In summary, the rebound of the US dollar index pressured copper prices lower, but with the accelerated pace of rate cuts and slow recovery in demand, copper prices might find support at the bottom. Today, the market will focus on the US non-farm payrolls data.

Aluminum

Overnight, the most-traded SHFE 2407 aluminum contract opened at 21,295 yuan/mt, reaching a high of 21,345 yuan/mt and a low of 21,220 yuan/mt, and closed at 21,275 yuan/mt, down 20 yuan/mt, a decrease of 0.09%. The previous trading day, LME aluminum opened at $2,662/mt, reached a high of $2,686.5/mt and a low of $2,635/mt, and closed at $2,662/mt, down $2/mt, a decrease of 0.08%.

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, indicating that the US Fed is likely to 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 continuously accumulating. From the demand side, recent aluminum prices hit a record high for the year and have shown strong volatility, inhibiting downstream procurement enthusiasm, hurting orders and operating rates. Additionally, as we are currently in the transition phase between peak and off-peak seasons, many sector are showing slight declines in orders, and the overall operating rate is expected to weaken steadily. SMM expects aluminum prices to maintain a wide fluctuation range at a high level.

Lead

Overnight, LME lead opened at $2,292.5/mt, fluctuating around the daily average during the Asian session. Entering the European session, affected by the US dollar's movement, LME lead rose first and then fell, peaking at $2,300.5/mt and dipping to $2,240.5/mt at the end of the trading session, finally closing at $2,243.5/mt, down by 1.82%. Overnight, the most-traded SHFE 2407 lead contract opened lower at ¥18,815/mt, briefly touched a high of ¥18,905/mt during early trading, then trended downward, hitting a session low of ¥18,770/mt at the end of the trading session, and finally closed at ¥18,780/mt, down by 1.11%.

Zinc

Overnight, LME zinc opened at $2,947.0/mt, fluctuated upward to a high of $2,984.0/mt, and hitting a session low of $2,905.0/mt, and finally closing lower at $2,925.0/mt, down by $12/mt or 0.41%. Trading volume reduced to 10,000 lots, and open interest reduced by 3,251 lots to 243,000 lots. LME zinc inventory decreased by 1,325 tons to 254,600 tons, down by 0.52%. US April JOLTs job openings and factory orders data both indicated a weak US economy, weakening macro sentiment and causing LME zinc to fluctuate weakly.

Overnight, the most-traded SHFE zinc contract opened at ¥24,260/mt, peaked at ¥24,270/mt, then fluctuated widely around the daily average amid a tug-of-war between bulls and bears, hitting a session low of ¥24,030/mt, then slightly rebounded to fluctuate around ¥24,160/mt, and finally closed lower at ¥24,160/mt, down by ¥140/mt or 0.58%. Trading volume reduced to 99,000 lots, and open interest reduced by 2,024 lots to 90,000 lots. Affected by overseas futures, SHFE zinc dropped slightly, but the weak supply-demand pattern remained unchanged, and SHFE zinc is expected to remain weak during the day.

Tin

In the night session yesterday, SHFE 2407 tin contract closed at 263,700 yuan/mt, down 3,670 yuan/mt, a decrease of 1.37%. The highest price was 266,200 yuan/mt, and the lowest was 262,360 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 300-700 yuan/mt over SHFE 2407 tin contract, versus discounts of 500 yuan/mt to premiums of 300 yuan/mt for delivery brands and premiums of 0-500 yuan/mt for Yunxi brand. Tin prices moved rangebound yesterday. Downstream companies, mostly having stocked up enough raw materials earlier, barely showed any purchasing interest. Yesterday, SHFE tin warrants decreased by 303 mt to 16,788 mt, while LME tin inventory remained flat at 5,000 mt.

Nickel

On June 4, Jinchuan nickel was at a premium of 1,000-1,200 yuan/mt, with an average of 1,100 yuan/mt, up 300 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 200-500 yuan/mt, with an average of 350 yuan/mt, up 150 yuan/mt compared to the previous trading day. In the morning, as the market continued to decline, the spot market saw a slight recovery in transactions, and there was a shortage of electro-deposited nickel in the spot market. Nickel briquette prices were 143,600-144,300 yuan/mt, down 2,900 yuan/mt compared to the previous trading day. The price gap between nickel briquette and nickel sulphate was about 7,186 yuan/mt (nickel sulphate prices were 7,186 yuan/mt higher than nickel briquette prices).