SMM Morning Comment For SHFE Base Metals On May 30

SHANGHAI, May 30 (SMM) –

Copper

Overnight, LME copper opened at $10,460.5/mt, initially reaching a high of $10,481/mt and hitting a session low of $10,386.5/mt. It finally closed at $10,475/mt, with a decline of 0.56%. Trading volume reached 19,000 lots, and open interest was 347,000 lots. Overnight, the most-traded SHFE copper contract opened at 84,180 yuan/mt, initially hitting a session low of 84,070 yuan/mt then rebounding to a session high of 84,870 yuan/mt. It finally closed at 84,760 yuan/mt, with a decline of 0.18%. Trading volume reached 78,000 lots, and open interest was 205,000 lots.

On the macro front, the US Fed's Beige Book indicated that US economic activity continued to expand, but businesses are increasingly pessimistic about the economic outlook, expecting prices to continue to grow moderately in the near term. The US dollar index rebounded, pressuring copper prices. Additionally, BHP announced on Wednesday that it has no intention of making a formal offer to acquire Anglo American, abandoning a six-month-long acquisition plan. The State Council issued the "2024-2025 Energy Conservation and Carbon Reduction Action Plan," which gradually cancels restrictions on NEV purchases across regions and strictly controls the addition of new smelting capacities for copper and alumina. This may ease the tight supply of copper ore in the future.

On the fundamentals, supply arrivals increased, but on the consumption side, downstream purchasing interest remained low as copper prices continued to rise yesterday, keeping consumption subdued. The strong performance of the US dollar index exerted some pressure on copper prices. Meanwhile, BHP's abandonment of the acquisition and the domestic re-emphasis on controlling new smelting capacities may ease the sentiment of copper ore shortages to some extent. Copper prices are expected to remain at high levels without significant rebounds.

Aluminum

Overnight, the most-traded SHFE 2407 aluminum contract opened at 21,350 yuan/mt, reaching a high of 21,970 yuan/mt and a low of 21,350 yuan/mt, and closed at 21,895 yuan/mt, up 590 yuan/mt, an increase of 2.77%. On the previous trading day, LME aluminum opened at $2,732/mt, reaching a high of $2,798/mt and a low of $2,724/mt, and closed at $2,794/mt, up $62/mt, an increase of 2.27%.

On the macro front, the IMF has raised its forecast for China's economic growth this year, and the State Council has issued an "Action Plan" to optimize the aluminium industry's capacity, aiming for high-quality development. Multiple favorable factors boosted aluminium prices. On the fundamentals, the operating capacity of domestic aluminium continued to rise during the week, with good progress in the production resumption in Yunnan, which may be completed in June. Supply-side pressure may gradually emerge as social inventory of aluminum ingots continues to accumulate, and high aluminium prices inhibit inventory consumption, while LME aluminium inventory slightly declined from its peak. From the demand, aluminium prices hit a new high for the year and have been highly volatile, inhibiting downstream procurement enthusiasm, leading to a decrease in orders and operating rates for aluminium processing enterprises. As the market transitions between peak and off-peak seasons, orders in multiple sectors have shown slight declines, and the overall operating rate is expected to weaken steadily. During the week, spot alumina prices continued to rise, and the cost of domestic aluminium continued to climb, with the import window remaining closed, which may provide some support for aluminium prices. SMM expects short-term aluminium prices to maintain wide fluctuations at a high level, with strong market sentiment for capital chasing in the short term. We need to pay attention to the risk of price volatility after aluminium prices hit new highs.

Lead

Overnight, LME lead opened at $2,336.5/mt, rose to $2,357/mt during the Asian session, and then retreated below the daily average line under the pressure of a stronger US dollar index during the European session, hitting a low of $2,302/mt. It consolidated slightly and finally closed at $2,316.5/mt, down $19/mt, a decrease of 0.81%.

Overnight, the most-traded SHFE 2407 lead contract, dragged down by the weak LME lead, opened with a gap at 18,880 yuan/mt, initially dipped to 18,825 yuan/mt, then rose all the way to a high of 19,060 yuan/mt. It finally closed at 19,020 yuan/mt, up 95 yuan/mt, an increase of 0.5%.

Zinc

Overnight, LME zinc opened at $3,120/mt, rising to a high of $3,150/mt during the European session, and hitting a low of $3,097/mt. By the end of the trading session, it slightly recovered and finally closed lower at $3,112/mt, down $7/mt, a decrease of 0.22%. Trading volume increased to 8,691 lots, and open interest increased by 4,235 lots to 241,000 lots. LME zinc inventory decreased by 3,475 mt to 253,725 mt, a decrease of 1.35%, recording a reduction in LME inventory. The stronger US dollar overnight pressured LME zinc's upward momentum, and attention should be paid to the performance of economic data in the evening.

Overnight, the most-traded SHFE 2407 zinc contract opened low at 25,100 yuan/mt, and finally closed higher at 25,260 yuan/mt, up 190 yuan/mt, an increase of 0.76%. Trading volume decreased to 111,000 lots, and open interest decreased by 3,294 lots to 120,000 lots. Domestic macro policies continued to provide support, together with the expectation of production cuts in smelters in June due to tight supply of mines, zinc prices moved above 25,000 yuan/mt.

Tin

In the night trading session yesterday, the most-traded SHFE tin contract closed at 282,190 yuan/mt, up 2,150 yuan/mt or 0.77%, with the highest at 282,650 yuan/mt and the lowest at 277,300 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 800-1,300 yuan/mt over SHFE 2407 tin contract, versus discounts of 0-1,300 yuan/mt for delivery brands and discounts of 1,000 yuan/mt to premiums of 300 yuan/mt for Yunxi brand. Tin prices continued to climb yesterday, and transactions in the spot market were relatively thin.

Nickel

On May 29, Jinchuan nickel was at a premium of 200-400 yuan/mt, with an average of 300 yuan/mt, down 700 yuan/mt from the previous trading day. Russian nickel was at a discount of 500 to 1,000 yuan/mt, with an average of 750 yuan/mt, down 400 yuan/mt from the previous trading day. In the morning, the market fluctuated, and spot quotes collectively decreased mainly because traders made their quotes based on the SHFE 2407 nickel contract instead. Nickel briquette prices were 152,200-152,500 yuan/mt, down 550 yuan/mt from the previous trading day. The price gap between nickel briquette and nickel sulphate was about 1,214 yuan/mt (nickel sulphate prices were 1,214 yuan/mt lower than nickel briquette prices).