SMM Morning Comment For SHFE Base Metals On June 11

Copper

On Monday, SHFE was closed due to the Dragon Boat Festival holiday. LME copper opened at $9,831/mt, initially rose slightly, then fell back, hitting a low of $9,808/mt during the session. At the end of the trading session, it surged to a high of $9,913/mt and closed at $9,881/mt, with a gain of 0.11%. Trading volume was 56 lots, and open interest was 334,000 lots. On the macro front, US non-farm payrolls data far exceeded expectations, but the unemployment rate in May rose to a two-year high, causing the market to be skeptical about the new non-farm payrolls data and to focus more on the CPI data to be released this week. On the fundamentals side, after the copper price fell, the enthusiasm for procurement by downstream processing enterprises increased to some extent, but since the copper price remained high, a large part of the market was still in a wait-and-see state. Attention will be on whether the copper price can continue to fall. In terms of prices, it is expected that the copper price is unlikely to rise significantly.

Aluminum

Last Friday, SHFE aluminium was closed. On the previous trading day, LME aluminum opened at $2,576/mt, reached a high of $2,586.5/mt, a low of $2,550.5/mt, and closed at $2,582/mt, up $6/mt, an increase of 0.23%.

On the macro front, multiple central banks started cutting interest rates, together with the rising gold prices, providing support for commodity prices. On the fundamentals, domestic aluminium operating capacity increased YoY, while downstream demand remained weak, with only a few sectors showing resilience. The supply-demand relationship on the fundamentals weakened, but the macro support remained strong. It is expected that aluminium prices will fluctuate at high levels.

Lead

Overnight, LME lead opened at $2,202.5/mt. Recently, the US dollar has strengthened, and base metals have generally been suppressed. At the same time, LME lead inventory has gradually accumulated, and LME lead started a fluctuating downward trend, especially during the European session, with the overall center of gravity moving down to a low of $2,180.5/mt, the lowest in nearly a month. Until the end of the trading session, some shorts retreated, and LME lead stopped falling and rebounded, finally closing at $2,209/mt, up 0.78%.

Last Friday, due to the traditional Chinese Dragon Boat Festival, the Shanghai Futures Exchange did not conduct night session trading and was closed for one day on June 10. Normal trading will resume today.

Zinc

Overnight, LME zinc opened at $2,781/mt. At the beginning of the session, longs reduced positions, and LME zinc fell stepwise to a low of $2,737.5/mt. During European trading hours, longs increased positions, and LME zinc fluctuated upwards, moving up to $2,770/mt. Entering the night session, funds continued to enter the market, pushing LME zinc to a high of $2,895/mt, and finally closed up at $2,851/mt, up $79/mt, or 2.85%. Trading volume reduced to 11,921 lots, and open interest decreased by 2,039 lots to 237,000 lots. LME inventory was down 875 tons to 259,950 tons, a decrease of 0.34%. Last Friday, due to the strengthening of the US dollar and stronger-than-expected US employment index, LME zinc fell sharply. Later, due to the turmoil in the Middle East, recent risk aversion sentiment rebounded, and non-ferrous metals generally rose, driving LME zinc to rebound. It is expected that LME zinc will maintain fluctuations today.

Tin

During the early trading session last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0-300 yuan/mt over SHFE 2407 tin contract, versus discounts of 200 yuan/mt to premiums of 400 yuan/mt for delivery brands and premiums of 300-600 yuan/mt for Yunxi brand. Last Friday, tin prices traded sideways at high levels, and the price increase inhibited the purchasing willingness of downstream companies. Overall, the spot market transactions were relatively flat last Friday.

Nickel

Last week, SHFE nickel prices continued to decline, dropping by 5.86% WoW. Nickel prices hit a low of 140,140 yuan/mt during the week and slightly rebounded to 142,770 yuan/mt on Friday. The decline in nickel prices was mainly due to weakened macro support for non-ferrous metals, with an overall downward trend. Prices of various metals returned to fundamentals, and many bulls retreated from the futures market. Specifically, SHFE nickel prices fell from the range of 150,000 yuan/mt to 140,000 yuan/mt; LME nickel prices dropped from the range of $20,000/mt to $18,000/mt, marking the largest decline among the non-ferrous metals sector. However, the spot market performed contrary to the futures market, with spot prices of various brands moving up. Domestic electro-deposited nickel brands like Huayou and Zhongwei saw quotations at a premium, mainly due to downstream demand being inhibited by high raw material prices for a long time, with some companies making no purchases in the past two months. Therefore, the price drop provided an opportunity for downstream companies to purchase and stock up, making the spot market transactions active. Supply side, although nickel production in May and June is expected to be normal with a slight increase, the large price spread between domestic and overseas markets has led many nickel producers to prefer exports to earn foreign exchange. Some nickel producers hardly traded domestically, with most of their production being exported, resulting in tight supply of domestic nickel plates. Additionally, some companies exhausted their production for export demand and downstream demand resumption, further leaving domestic spot cargoes scarce. On the macro side, the European Central Bank held a monetary policy meeting at its headquarters in Frankfurt, Germany last week, deciding to lower the three major key interest rates in the Eurozone by 25 basis points each. This is the first rate cut by the ECB since it stopped raising rates last October, and may guide the US Fed's decision on rate cuts. Although the US Fed currently maintains hawkish rhetoric, market expectations for no rate hikes have increased and those for rate cuts have returned. In summary, nickel prices currently rely on industry fundamentals, but caution is still needed on the overall impact of macro sentiment on non-ferrous metals. It is expected that nickel prices will fluctuate between 135,000-145,000 yuan/mt this week.