SMM Morning Comment For SHFE Base Metals On May 28

Copper

LME copper market was closed. Overnight, the most-traded SHFE 2407 copper contract opened at 83,900 yuan/mt, hitting a session low of 83,860 yuan/mt at the beginning, then reaching a high of 85,010 yuan/mt before closing at 84,940 yuan/mt, with a gain of 1.34%. Trading volume reached 69,000 lots, and open interest reached 208,000 lots. On the macro front, Shanghai issued a notice on optimizing policies for the stable and healthy development of local real estate market, adjusting and optimizing housing purchase restrictions. Additionally, it was reported that the Israeli negotiation delegation would submit a new draft of the hostage exchange and ceasefire agreement to the relevant mediators as early as May 28, which indicated potential ease of geopolitical conflicts, leading to a slight rise in copper prices. On the fundamentals side, the supply side saw an increase in arrivals recently, but market transactions were sluggish. Social inventory hit a new high for the year. As of May 27, SMM copper stocks in China’s major regions increased by 9,400 mt from last Thursday to 424,500 mt. Overall, despite the introduction of favorable policies, consumption remained sluggish, causing social inventory to continue to hit new highs for the year, leaving copper prices lacking subsequent support.

Aluminum

The most-traded SHFE 2407 aluminum contract opened at 20,925 yuan/mt, reached a high of 21,215 yuan/mt, a low of 20,925 yuan/mt, and closed at 21,160 yuan/mt, up 160 yuan/mt or 0.76%. Due to the UK Spring Bank Holiday, the London Metal Exchange (LME) was closed on Monday (May 27) and will resume trading on Tuesday.

On the macro front, despite the latest hawkish comments from US Fed Governor Waller over the weekend, the likelihood of a second rate cut by the European Central Bank in July has increased. Influenced by geopolitical tensions and a weaker dollar, the external macro performance is relatively positive. The China-Japan-South Korea leaders' meeting has resumed after four and a half years, and multiple provinces and cities in China are implementing new real estate policies, boosting expectations of a real estate market recovery. On the fundamentals, domestic aluminium operating capacity continued to rise during the week, with good progress in the resumption of production in Yunnan, which may be completed in June, gradually highlighting supply-side pressure. Social inventory of aluminum ingots has been accumulating continuously, and high aluminum prices are inhibiting inventory consumption. LME aluminum inventory also remains on an upward trend. Alumina spot prices maintained an upward trend during the week, and domestic aluminium production costs continued to rise, with the import window remaining closed, which may provide some support for aluminum prices. However, from the demand side, aluminum prices hit a new high for the year last week, with strong volatility, 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 a slight decline in orders, and the overall operating rate is expected to weaken steadily. SMM expects short-term aluminum prices to hover around the current level.

Lead

Overnight, LME lead was closed on Monday due to the UK Spring Bank Holiday. Overnight, the most-traded SHFE 2407 lead contract opened at 18,625 yuan/mt, initially rose and stabilized at around 18,700 yuan/mt, then consolidated sideways. Before the close, it reached a high of 18,770 yuan/mt and finally closed at 18,755 yuan/mt, up 215 yuan/mt or 1.16%.

Zinc

Overnight, LME zinc market was closed due to the UK Spring Bank Holiday.

Overnight, the most-traded SHFE zinc 2407 contract opened at 24,780 yuan/mt, briefly dipping to 24,710 yuan/mt, then peaking at 24,855 yuan/mt, and finally closed at 24,840 yuan/mt, up 125 yuan/mt, or 0.51%. Trading volume decreased to 63,950 lots, and open interest decreased by 86 lots to 122,000 lots. Overnight, SHFE zinc recorded three consecutive gains, with the upper Bollinger Bands forming resistance and the 5-day moving average turning into support. Due to geopolitical factors and weakening US dollar, prices of precious metals and crude oil surged again amid macro optimism, and non-ferrous metals sector rebounded across the board, with zinc prices shifting higher again.

Tin

Yesterday's night session saw the SHFE 2406 tin contract closing at 277,530 yuan/mt, up 5,610 yuan/mt or 2.06%, with a high of 278,000 yuan/mt and a low of 272,030 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. Tin prices went up yesterday amid sluggish transactions, and most downstream enterprises placed orders at low prices.

Nickel

On May 27, Jinchuan nickel was at a premium of 1,000-1,200 yuan/mt, with an average of 1,100 yuan/mt, down 50 yuan/mt from the previous trading day. Russian nickel was at a discount of 200 to 600 yuan/mt, with an average of 400 yuan/mt, up 50 yuan/mt from the previous trading day. In the morning, the market slightly rebounded along with the overall non-ferrous metals sector, but remained within the range of 150,000-155,000 yuan/mt. The spot market transactions were still mainly driven by essential procurement. Nickel briquette prices were 149,900-150,400 yuan/mt, up 1,050 yuan/mt from the previous trading day. The price gap between nickel briquette and nickel sulphate was about 1,286 yuan/mt (nickel sulphate prices were 1,286 yuan/mt lower than nickel briquette prices).