SMM Morning Comments (Jun 6): Base Metals Closed Mostly with Losses amid Downbeat ISM’s US Service Index

SHANGHAI, Jun 6 (SMM) – LME and SHFE base metals closed mostly with losses overnight.

Copper: Copper rebounded slightly as the US dollar fell due to slowing services data. LME copper prices closed at $8,328.5/mt overnight, a rise of 0.98%. Trading volumes were 18,000 lots and open interest stood at 250,000 lots. The most active SHFE 2307 copper contract finished at 66,640 yuan/mt overnight, up 0.89%. Trading volume was 57,000 lots and open interest stood at 186,000 lots. On the macro front, data on Monday showed that the US services sector barely grew in May as new orders slowed, snapping an earlier rebound sparked by strong job growth. Weak growth in the US services sector has reinforced bets the Federal Reserve will keep interest rates on hold next week. As of Monday June 5, SMM copper inventory across major Chinese markets stood at 106,900 mt, down 4,200 mt from last Friday and down 2,000 mt from the same period last year. Limited shipments arrivals of imported and domestic copper over the weekend and normal downstream purchasing lowered inventories in both east and south China. More imported copper will enter domestic market this week, while shipments arrivals of domestic copper will change little. The total supply will grow compared with last week. In terms of consumption, demand increased at the beginning of the month, but with high spot premiums, the increase is expected to be limited.

Aluminium: Overnight, the most-traded SHFE 2307 aluminium contract opened at 18,160 yuan/mt, with its low and high at 18,070 yuan/mt and 18,180 yuan/mt before closing at 18,140 yuan/mt, down 135 yuan/mt or 0.74%. LME aluminium opened at $2,267.5/mt Monday, with its low and high at $2,233/mt and $2,273.5/mt respectively before closing at $2,240/mt, a drop of $27.5/mt or 1.21%.

On the macro level, the US ISM service index unexpectedly fell to 50.3 in May, which fell short of the expected level. Overseas economic recession worries still remain. Hydropower generation in Yunnan is gradually picking up, which may allow a small amount of local aluminium capacity to be restarted in late June. Decline in aluminium ingot social inventories may slow down as more cargoes arrive while downstream consumption is in seasonal lull. Short term aluminium prices will move rangebound.

Lead: LME lead opened at $2,030/mt on Monday, and closed down 0.15% at $2,033/mt.

Overnight, SHFE 2307 lead contract opened at 15,090 yuan/mt and almost fell below 15,000 yuan/mt due to rising inventory, but then bounced back on cost support, closing up 0.07% at 15,055 yuan/mt. Open interest rose 167 lots to 59,180 lots.

Zinc: LME zinc fell yesterday and met resistance at the 10-day moving average. LME tin inventories were flat again at 87,450 mt. The ISM’s US service index unexpectedly fell to 50.3 in May, which may help the Fed fight against inflation. SHFE zinc closed with gains overnight. With the influx of imported zinc ingots and no major improvement in consumption, social inventories have increased slightly.

Tin: SHFE 2307 tin contract hit a low of 207,420 yuan/mt overnight, and closed down 0.23% at 208,410 yuan/mt.

Nickel: SHFE nickel futures prices moved range-bound yesterday. The spot premiums of Jinchuan nickel remained firm in the early trading, and the trades were acceptable. In terms of NPI, the stainless steel mills were less willing to restock after a mill in south China made some purchases last week. NPI traders still carried some spots, arousing a bearish sentiment in the market. On the demand side, spot stainless steel trading was slack yesterday, slightly weakening the spot prices. SMM expects that the spot stainless steel prices will be stable in the short term. To sum up, pure nickel supply and demand patterns are stable, but nickel prices will still move range-bound amid the changing macro front. 

[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.]