SMM Morning Comment For SHFE Base Metals On June 6

SHANGHAI, June 6 (SMM) –

Copper

Overnight, LME copper opened at $9,913/mt, with the initial session low at $9,860/mt. It then fluctuated upwards, reaching a session high of $10,010/mt at the end of the trading session, and finally closed at $10,006.5/mt, with open interest at 342,000 lots. Overnight, the most-traded SHFE copper contract (2407) opened at ¥80,330/mt, initially fluctuating and hitting a session low of ¥80,090/mt, then rising to a session high of ¥80,940/mt at the end of the trading session, and finally closed at ¥80,720/mt, up by 0.2%. Trading volume stood at 63,000 lots and open interest at 177,000 lots. On the macro front, the US ADP non-farm payrolls for May recorded the smallest increase since January, increasing expectations for a rate cut, which supported copper prices. Meanwhile, the Bank of Canada cut rates for the first time in four years, becoming the first G7 central bank to cut rate , and said there is reason to expect further rate cuts. On the fundamentals, copper prices fell sharply together with the approaching Dragon Boat Festival holiday, which led to a partial recovery in downstream purchasing sentiment. Therefore, despite high inventory levels, premiums continued to rise slightly. Current end-user demand has not yet significantly recovered, but if copper prices fall below ¥80,000/mt, a noticeable recovery may be seen. Overall, copper prices continue to lack consumption support and are expected to maintain a fluctuating trend.

Aluminum

Overnight, the most-traded SHFE 2407 aluminum contract opened at 21,090 yuan/mt, with a high of 21,230 yuan/mt, a low of 21,050 yuan/mt, and closed at 21,225 yuan/mt, down 20 yuan/mt, a decrease of 0.09%. The previous trading day, LME aluminum opened at $2,663/mt, with a high of $2,663/mt, a low of $2,615/mt, and closed at $2,635/mt, down $27/mt, a decrease of 1.01%.

Summary: On the macro front, the US "ADP" was lower than expected in May, and the probability of the US Fed holding rates steady in June remains high. The Bank of Canada cut interest rates by 25 basis points, from 5% to 4.75%, in line with market expectations. Canada became the first G7 country to cut rates, initiating a cycle of monetary easing, and the global rate-cutting trend is accelerating. On the fundamentals, domestic aluminium operating capacity continues to rise, with Yunnan's resumption progress being good 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 reduction in orders and operating rates for aluminum processing enterprises. Additionally, as the market transitions 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 aluminum prices to maintain a wide fluctuation range at a high level.

Lead

Overnight, LME lead opened at $2,243.5/mt, briefly touching a high of $2,255/mt during the Asian session before fluctuating downwards. During the European session, it continued to fluctuate downwards, hitting a low of $2,210.5/mt. By the end of the trading session, the US dollar index weakened, and LME lead rebounded, closing at $2,246/mt, up by 0.13%, recording a star candle. Overnight, the most-traded SHFE lead contract (2407) opened at ¥18,670/mt, initially fluctuating downwards to a session low of ¥18,590/mt. Before the close, it was boosted by LME lead, with shorts reducing positions, pushing the price up to a session high of ¥19,030/mt, and finally closed at ¥18,910/mt, up by 0.61%.

Zinc

Overnight, LME zinc opened at $2,935.0/mt, initially hitting a high of $2,937.0/mt. It then fluctuated around $2,925.0/mt, and during the European session, bears exerted pressure, causing LME zinc to fluctuate downwards, operating below the average daily line, with prices falling to around $2,860.0/mt, hitting a low of $2,854.0/mt. By the end of the trading session, LME zinc slightly rebounded to around $2,880.0/mt, finally closing lower at $2,881.0/mt, down by $44/mt, or 1.50%, with trading volume increasing to 14,000 lots and open interest decreasing by 1,372 lots to 242,000 lots. Overnight, LME zinc inventory increased by 3,050 tons to 257,650 tons, up by 1.18%. The US dollar strengthened overnight, causing base metals to generally weaken. However, the US May ADP data falling short of expectations provided some support for base metals. Overnight, the most-traded SHFE zinc contract (2407) opened at ¥23,920/mt, initially fluctuating around the average daily line, hitting a high of ¥24,070/mt. Subsequently, longs reduced positions, causing SHFE zinc to fluctuate downwards to around ¥23,845/mt, hitting a low of ¥23,760/mt. By the end of the trading session, longs exerted pressure, causing SHFE zinc to rebound, with prices rising to around ¥24,015/mt, finally closing lower at ¥24,015/mt, down by ¥130/mt, or 0.54%. Trading volume increased to 111,000 lots and open interest decreased by 1,573 lots to 86,000 lots. Macro sentiment has not yet stabilized, causing zinc prices to weakly adjust. However, improved spot transactions may limit its decline, and zinc prices are expected to mainly fluctuate weakly.

Tin

In the night session yesterday, the SHFE 2407 tin contract closed at 260,830 yuan/mt, down 1,820 yuan/mt, a decrease of 0.69%, with a high of 261,500 yuan/mt and a low of 257,380 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 500 yuan/mt to premiums of 300 yuan/mt for delivery brands, and premiums of 0-500 yuan/mt for Yunxi brand. The continued decline in tin prices prompted downstream companies to make small purchases. SHFE tin warrants decreased by 328 mt to 16,460 mt, while LME tin inventory remained flat at 5,000 mt.

Nickel

On June 5, Jinchuan nickel was at a premium of 1,200-1,500 yuan/mt, with an average of 1,350 yuan/mt, up 250 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 200-400 yuan/mt, with an average of 300 yuan/mt, up 50 yuan/mt compared to the previous trading day. In the morning, as the market continued to decline, the spot market saw a slight improvement in transactions, and the shortage of electro-deposited nickel in the spot market continued. The price of nickel briquette was 140,200-140,600 yuan/mt, down 3,550 yuan/mt compared to the previous trading day. The price gap between nickel briquette and nickel sulphate was about 10,282 yuan/mt (nickel sulphate prices were 10,282 yuan/mt higher than nickel briquette prices).