US dollar declines, domestic metal prices generally fall; lithium carbonate and silicon metal prices hit new lows, with alumina and polysilicon leading the decline [SMM Daily Review]

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SMM, May 26:

Metal Market:

As of the daytime close, domestic market base metals generally declined, with only SHFE copper and SHFE lead rising together. SHFE copper rose by 0.57%, and SHFE lead rose by 0.12%. SHFE zinc fell by 0.52%, while the rest of the metals dropped slightly. The main alumina contract fell by 3.77%, recording three consecutive days of decline.

In addition, the main lithium carbonate contract fell by 2.31%, reaching a new low of 59,920 yuan/mt during the session, the lowest since its futures listing. The main polysilicon contract fell by 3.92%. The main silicon metal contract fell by 3.67%, hitting a record low of 7,605 yuan/mt during the session since its listing. The main European container shipping contract fell by 5.81%.

The ferrous metals series declined collectively. Iron ore and HRC both fell by over 2%, with iron ore dropping by 2.21% and HRC by 2.03%, while rebar fell by 1.67%. In the coking coal and coke segment, coking coal fell by 1.96%, and coke fell by 1.72%.

In the overseas metal market, the LME metal market was closed for the day due to the Spring Bank Holiday.

In precious metals, as of 15:03, COMEX gold fell by 0.78%, while COMEX silver rose by 0.26%. Domestically, SHFE gold rose by 0.29%, and SHFE silver rose by 0.49%.

Market conditions as of 15:03 today

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Macro Front

Domestic Developments:

[8 Departments: Cultivate Around 100 National Leading Enterprises in Digital and Intelligent Supply Chains by 2030] Eight departments, including the Ministry of Commerce, the National Development and Reform Commission (NDRC), the Ministry of Education, the Ministry of Industry and Information Technology, the Ministry of Transport, the Ministry of Agriculture and Rural Affairs, the State Taxation Administration, and the National Data Administration, recently jointly issued the "Special Action Plan for Accelerating the Development of Digital and Intelligent Supply Chains." The "Action Plan" makes forward-looking, comprehensive, and systematic arrangements for the development of digital and intelligent supply chains. It proposes the use of new technologies such as artificial intelligence, the Internet of Things, and blockchain to promote the digital, intelligent, and visual transformation of supply chains with a "one-chain-one-policy" approach. By 2030, a replicable and scalable model for the construction and development of digital and intelligent supply chains will be formed. A deeply embedded, smart, efficient, and autonomous and controllable digital and intelligent supply chain system will be basically established in important industries and key areas. Around 100 national leading enterprises in digital and intelligent supply chains will be cultivated, further enhancing the resilience and security level of China's industrial and supply chains.

[PBOC Net Injection of 247 Billion Yuan in Open Market Operations] The People's Bank of China (PBOC) conducted 382 billion yuan in 7-day reverse repo operations today, with an operating interest rate of 1.40%, unchanged from the previous rate. With 135 billion yuan of 7-day reverse repo operations maturing today, a net injection of 247 billion yuan was achieved.

►The central parity rate of the RMB against the US dollar in the inter-bank foreign exchange market on May 26 was 7.1833 yuan per US dollar.

US dollar:

As of 15:03, the US dollar index fell by 0.29% to 98.81. According to CCTV News, on the 25th (local time), US President Trump stated that the EU had requested an extension of the tariff negotiation deadline until July 9, and he had agreed to this request. Previously, on the 23rd, Trump posted on social media suggesting a 50% tariff on goods from the EU starting from June 1. The annualized total of new home sales in the US in April was 743,000 units, the highest since February 2022. The market had previously expected 693,000 units, with the revised figure for March being 670,000 units and the initial estimate being 724,000 units. Builders have reduced prices to attract buyers, but rising mortgage rates and economic uncertainty remain unfavourable factors for the housing market.

Federal Reserve Governor Cook pointed out on Friday that the high tariffs announced by the US government last month triggered financial market volatility but did not lead to a severe US market failure like that during the COVID-19 pandemic. However, she added that this experience would help "us continuously improve our ongoing assessment of the stability of the financial system." Chicago Fed President Goolsbee said in an interview with CNBC that US companies want to see consistent trade policies before making major investments or other decisions, and that President Trump's new threat to impose a 50% tariff on EU imports is a "terrible" proposal for the supply chain. (Wenhua Comprehensive)

Macro:

Today, the revised reading of the leading indicator change for Japan in March and the year-on-year rate of Spain's PPI in April will be released. In addition, it is worth noting that Fed Chairman Powell will deliver a commencement address at Princeton University's graduation ceremony, and ECB President Lagarde will speak at the Hertie School in Berlin.

On May 26 (Monday), due to the Memorial Day holiday in the US and the Spring Bank Holiday in the UK, trading hours in the financial markets will be adjusted.

The holiday arrangements for overseas exchanges are as follows (all in Beijing time):

Crude oil:

As of 15:03, oil prices in both markets rose together, with US crude oil up 0.29% and Brent crude oil up 0.23%. This follows the extension of the deadline for trade negotiations between the US and the EU by US President Trump, alleviating concerns that US tariffs on the EU could harm the global economy and fuel demand.

"Crude oil and US stock index futures surged this morning after US President Trump extended the deadline," said Tony Sycamore, an IG market analyst. Sycamore noted that trade and tariff news, along with ongoing fiscal concerns, would be the main uncertainties affecting risk sentiment and crude oil prices this week.

In its closely watched report, US energy services firm Baker Hughes said that the number of oil and natural gas rigs operated by US energy firms fell for the fourth consecutive week this week, reaching the lowest level since November 2021. Data showed that the total number of US oil and natural gas rigs, a leading indicator of future production, decreased by 10 to 566 in the week ending May 23, marking the largest weekly decline since September 2023. It was also the first time since September 2024 that the number of active US oil and natural gas rigs had declined for four consecutive weeks. Baker Hughes said this brought the total number of active rigs down by 34, or 6%, YoY.

Oil price gains were capped by expectations that OPEC+, which consists of the Organization of the Petroleum Exporting Countries and its allies, might decide to increase July's oil production by another 411,000 barrels per day (bpd) at its meeting next week. Suvro Sarkar, chief energy analyst at DBS Bank, said that oil was already under pressure from OPEC's strategy of accelerating production increases and a "mini oil price war." He added, "OPEC+'s decision in the coming days could curb oil price gains."

This month, it was reported that OPEC+ might scrap the remaining voluntary production cuts of 2.2 million bpd by the end of October, after having already raised its production targets for April, May, and June by about 1 million bpd. Warren Patterson, head of commodities strategy at ING, wrote in a report to clients that OPEC+'s decision to increase production should keep the market well-supplied in the second half of the year. (Comprehensive report from Wenhua)

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