SMM Evening Comments (May 16): Shanghai Nonferrous Metals Closed Mostly with Gains amid Warming Macro Front

SHANGHAI, May 16 (SMM) – Shanghai nonferrous metals closed mostly with gains as the market saw more stimulus policies domestically. For example, the People’s Bank of China announced a reduction in the interest rate for first home loans.

Shanghai copper rose 0.95%, aluminium added 2.16%, lead slid 0.23%, zinc jumped 0.79%, tin climbed 0.96%, and nickel advanced 0.77%.

Copper: The most-traded SHFE 2206 copper closed up 0.95% or 670 yuan/mt at 71,270 yuan/mt, with open interest down 6,982 lots to 148,860 lots.

SMM china copper inventory across major markets totalled 126,800 mt as of today, up 7,900 mt from last Friday. The inventory rose due to more shipments to SHFE warehouse, delayed arrival and unloading of goods due to logistics issues and poor weather. The inventory in Shanghai rose due to the arrival of imported copper.

Copper prices rose today amid stimulus from the macro front, with People’s Bank of China indicating more efforts granted to stable monetary policy.

Aluminium: The most-traded SHFE 2206 aluminium closed up 2.16% or 435 yuan/mt to 20,555 yuan/mt, with open interest down 11,770 lots to 163,333 lots.

Downstream consumption has been increasingly less affected by pandemic prevention and control measures, hence market sentiment improved. Coupled with the accident of an aluminium smelter in Yunnan, aluminium prices are correcting in the short term. However, the rally of SHFE aluminium will depend on the recovery of consumption.

Lead: The most-traded SHFE 2206 lead closed down 0.23% or 35 yuan/mt at 14,960 yuan/mt, with open interest up 6,026 lots to 57,105 lots.

Market activities were still active after SHFE 2205 was delivered, and recovery of market supply and demand can be expected. The possibility of US Fed raising interest rate by 50 basis points in June dropped to 91.1%, pushing p LME lead with the release of pressured. SHFE lead is likely to gain support in the short term.

Zinc: The most-traded SHFE 2206 zinc closed up 0.79% or 200 yuan/mt at 25,500 yuan/mt, with open interest down 3,401 lots to 98,456 lots.

On the macro front, the People’s Bank of China announced a reduction in the interest rate for first home loans, and the mortgage rates quoted by commercial banks in the regions were generated by floating on the current benchmark of 4.6%, boosting market confidence to a certain extent.

In the spot market, SMM social zinc ingot inventory across seven markets in China totalled 261,100 mt as of today, down 5,800 mt from last Friday, but was still high compared with last year. And the falling stocks failed offer strong support to futures prices.

Tin: The most-traded SHFE 2206 tin closed up 0.96% or 2,720 yuan/mt at 286,220 yuan/mt, with open interest down 1,463 lots to 33,974 lots.

In the spot market, offers from upstream traders dropped 1,000 yuan/mt on average from last Friday, and stood at 299,500 yuan/mt with few changes. However, some smelters lowered their offers in the day, and non-deliverable brands were still sold at low prices. Downstream buyers were generally wait-and-see, and purchased on demand. SHFE warrants added 804 mt to 2,924 mt today. The market shall watch the changes of SHFE warrants during May 17-19 when SHFE 2205 will be delivered.

Nickel: The most-traded SHFE 2206 nickel closed up 0.77% or 1,550 yuan/mt at 202,070 yuan/mt, with open interest down 1,236 lots to 61,984 lots.

On the supply side, NORNICKEL nickel supply remained tight on long-lasting import losses. And pure nickel supply in China, which relies heavily on imports, is still tight despite improved domestic production compared with April.

The downstream demand for NPI remained poor, and the prices moved rangebound. NPI oversupply is likely to be increasingly obvious with accelerated commissioning of NPI capacity in Indonesia, pushing down NPI prices. On the demand side, stainless steel transactions were sluggish amid firm spot prices and lingering pandemic.

Alloy orders were delayed due to extreme LME nickel market in March and April, and the production gradually returns to normal in May.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]