SMM Evening Comments (May 16): Shanghai Nonferrous Metals Closed Mostly with Losses on Slower Recovery of Chinese Manufacturing Industry

SHANGHAI, May 16 (SMM) - Shanghai nonferrous metals closed mostly with losses in day trading. The US dollar index fell slightly. The US Fed officials indicated that they would probably pause rate hikes in June, but they would still struggle to quell the inflation. The recovery of the manufacturing industry in China was not as fast as expected, arousing market worries about demand.

SHFE copper lost 0.72%, aluminium added 0.44%, lead slipped 0.10%, zinc dropped or 1.51%, tin declined 0.66%, and nickel slumped 3.06%.

Copper: SHFE 2306 copper lost 470 yuan/mt or 0.72% to 64,360 yuan/mt. The open interest fell 6,197 lots to 182,484 lots.

On the first trading day of the SHFE 2306 copper, the spots for warrant delivery did not flow into the market. Besides, the imported copper arrivals were limited. The traders held their prices firm since the shipments grew last weekend. Therefore, the spot premiums rose significantly today. However, the downstream companies were less willing to purchase spots. SMM believes that the arbitrage traders will still prefer restocking low-priced sources in the next two trading days and will offer high quotes before the supply increases. The market shall pay close attention to the spread between the SHFE 2306 and 2307 contracts.

Aluminium: SHFE 2306 aluminium added 80 yuan/mt or 0.44% to 18,115 yuan/mt. The open interest dipped 9,940 lots to 182,752 lots.

On the macro front, the US debt crisis is fermenting, and market panic still exists. Aluminium output continued to grow. The cost side has no support to aluminium prices. Despite falling aluminium ingot social inventory, market players are pessimistic over future demand. Spot market performed poorly. SMM expects the short-term aluminium prices to remain under downward pressure. 

Lead: SHFE 2306 lead closed down 15 yuan/mt or 0.10% at 15,185 yuan/mt, with open interest falling 6,762 lots to 52,457 lots.

The decline in SHFE lead slowed down today, and the traders shipped their goods based on specific situations. Some traders who carried low spots held their quotes firm because the delivery of SHFE 2305 lead just ended, but secondary lead was traded at large discounts. Downstream companies purchased only on demand. As a result, small order transactions did not improve greatly today. The most-traded SHFE lead contract will move rangebound with occasional declines in the short term on a stable macro front.

Zinc: SHFE 2306 zinc dropped 315 yuan/mt or 1.51% to 20,605 yuan/mt. The open interest grew 2,555 lots to 101,713 lots.

Zinc prices moved rangebound today. The spot quotations were basically flat from the previous trading day, and the traders' shipment was low. The overall transaction was mediocre.
Tin: SHFE 2306 tin declined 1,310 yuan/mt or 0.66% to 198,110 yuan/mt. The open interest grew 41 lots to 51434 lots.

Downstream demand weakened today as some downstream companies have made restocking. Many traders also indicated that the market transactions decreased compared with the previous trading day, and some quoted low prices. SHFE tin warrant inventory lost 151 mt to 8,499 mt.

Nickel: SHFE 2306 nickel slumped 5,230 yuan/mt or 3.06% to 165,500 yuan/mt. The open interest increased 728 lots to 75,705 lots.

On May 16, premiums of Jinchuan nickel were 10,800-11,500 yuan/mt. The average premium stood at 11,150 yuan/mt, down 100 yuan/mt from the previous trading day. Premiums of NORNICKEL nickel stood at 6,200-6,800 yuan/mt. The average premium was 6,500 yuan/mt, an increase of 250 yuan/mt from the previous trading days because the low-priced spots were sold out. Spot trades were acceptable since the absolute prices were relatively low. Nickel briquette prices were 171,300-171,900 yuan/mt, down 2,600 yuan/mt from the previous trading day. The nickel briquette transactions were slack as it was still traded at premiums over nickel sulphate.
 

[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.]