SMM Morning Comments (May 31): Base Metals Closed Mostly with Losses amid Hawkish Remarks

SHANGHAI, May 31 (SMM) – LME and SHFE base metals closed mostly with losses overnight amid bearish market outlook. On the macro front, news of an emergency meeting of Japanese officials pushed the yen higher and the dollar retreated from its highs on Tuesday. In addition, the U.S. debt ceiling agreement was reached, which will restrict some spending. Market optimism took a toll on the dollar. The market is awaiting US job data due this Friday.

Copper: LME copper prices closed at $8,115/mt last evening, down 0.29%. Trading volume was 16,000 lots and open interest stood at 257,000 lots. The most active SHFE 2307 copper contract prices finished at 64,840 yuan/mt last evening, down 0.14%. Trading volume was 44,000 lots and open interest stood at 197,000 lots. On the macro front, news of an emergency meeting of Japanese officials pushed the yen higher and the dollar retreated from its highs on Tuesday. In addition, the U.S. debt ceiling agreement was reached, which will restrict some spending. Market optimism took a toll on the dollar. The market is awaiting US job data due this Friday. Spot supply was tight and sellers raised their quotes in Shanghai. In south China, due to the large amounts of cargoes under warrants offered for sale and higher SHFE copper prices, sellers sold actively. Spot quotes fell and overall trades were quiet. Some downstream enterprises mainly worked through raw material inventories against high spot quotes. It is expected that copper prices will remain relatively low in the short term.

Aluminium: Overnight, the most-traded SHFE 2307 aluminum contract closed at 17,940 yuan/mt, down 5 yuan/mt or 0.03%. LME aluminum closed at $2,228/mt, a drop of $7.5/mt or 0.67%.

It is estimated that the possibility of the Fed raising interest rates by 25 percentage points in June is about 66%, which would be the 11th consecutive interest rate hike.  Fundamentally, the domestic aluminum supply grew while demand weakened. But stockpiling by downstream producers driven by high aluminium liquid ratio and lower aluminium prices continued to reduce aluminium ingot inventories. Aluminum price may be under pressure and fluctuate around 18,000 yuan/mt.

Lead: Overnight, LME lead opened at $2,070.5/mt and closed at $2,068.5/mt after hitting the lowest point at $2,050/mt and the highest point at $2,075.5/mt, down 0.34%. The open interest increased 1,387 lots to 116,000 lots compared with the previous trading day, and the trading volume decreased 389 lots to 3,444 lots.

Overnight, the most-traded SHFE 2307 lead contract opened at 15,230 yuan/mt and closed at 15,220 yuan/mt after hitting the highest point at 15,235 yuan/mt. The open interest decreased 878 lots to 55,892 lots compared with the previous trading day, the trading volume decreased 21,678 lots to 15,092 lots.

Zinc: LME stocks of zinc decreased 225 mt to 74,325 mt. But the hawkish remarks on the macro front weighed on the market sentiment. Overnight, SHFE zinc prices declined.

Tin: Yesterday night, SHFE 2307 tin contract prices gradually dipped after opening and closed 208,220 yuan/mt after hitting the lowest point at 207,410 yuan/mt, down 0.53%.

Nickel: