SMM Morning Comments

Category:-Metal | 26-May-2023 08:02 AM

SHFE and LME base metals closed mostly with gains except for zinc. SHFE zinc prices fell to 18,600 yuan/mt at one point, refreshing a new low since July 2020.

Copper: LME copper prices closed at $7,990/mt last evening, up 1.25%. Trading volume was 18,000 lots and open interest stood at 259,000 lots. The most active SHFE 2307 copper contract finished at 63,660 yuan/mt overnight, up 0.63%. Trading volume was 74,000 lots and open interest stood at 213,000 lots. On the macro front, U.S. data released last night showed that the economy remains resilient even amid the Fed’s aggressive rate hike cycle, and the U.S. dollar index rose.

In addition, the optimism of the US debt ceiling negotiations began to emerge, and the risk appetite for assets has increased. Copper prices fell to a new low yesterday. Due to the impact of the expansion of the price spread bewteen the SHFE front-month and SHFE next-month contracts, spot quotes were suppressed. In addition, due to the continuous decline in copper prices, downstream processing companies were more cautious and purchased as required. With the cargoes under warrants being offered for sales and inflow of imported copper, spot supply tightness will ease. In terms of consumption, most market participants are pessimistic about the market outlook. Downstream companies will purchased as required. Copper prices rebounded slightly, but the gains are unlikely to sustain.

Aluminium: The most-traded SHFE 2307 aluminium contract opened at 17,750 yuan/mt overnight, with its low and high at 17,575 yuan/mt and 17,920 yuan/mt before closing at 17,765 yuan/mt, up 115 yuan/mt or 0.65%. LME aluminium opened at $2,209/mt on Thursday, with its low and high at $2,193/mt and $2,239/mt respectively before closing at $2,214/mt, up $8/mt or 0.36%.

On the macro level, the debt ceiling negotiations have failed to reach an agreement for now, adding to macro uncertainty. The US Fed swings on whether to raise interest rate or not. Consumption recovery is weaker than expected. Aluminium ingot inventories in some areas have begun to accumulate. Falling prebaked anode and coal prices weakened cost support to aluminium prices. It remains to be see whether SHFE aluminium will fall below 18,000 yuan/mt in the short term.

Zinc: LME zinc moved downwards after opening at $2,295/mt on Thursday, closing at $2,257.5/mt, down $37.5/mt or 1.63%. Trading volume added 4,896 lots to 14,242 lots, and open interest rose 3,476 lots to 191,000 lots. LME zinc inventory rose 18,050 mt to 63,450 mt. Concerns over US debt ceiling issue and growing inventories weighed down LME zinc prices. 

Overnight, the most-traded SHFE 2307 zinc contract opened at 18,870 yuan/mt. The contract fell at first and then rallied before closing at 18,940 yuan/mt, down 215 yuan/mt or 1.12%. Trading volume fell 464 lots to 222,000 lots, and open interest rose 2,894 lots to 150,000 lots. Strengthening US dollar and weaker-than-expected recovery of domestic economy will pose resistance to SHFE zinc prices.

Lead: Overnight, the LME lead prices opened at $2,047/mt and closed at $2,062.5/mt after hitting the lowest point at $2,027/mt and the highest point at $2,078/mt, up 0.88%.

The most-traded SHFE 2307 lead contract opened at 15,220 yuan/mt and closed at 15,250 yuan/mt after hitting the highest point at 15,270 yuan/mt, up 0.07%.

Tin: The most-traded SHFE 2306 tin contract prices dipped rapidly after opening and closed at 200,350 yuan/mt after hitting the highest point at 201,830 yuan/mt, up 1.71%.

Nickel: NORNICKEL nickel premiums rose further on shrinking market supply. SMM presumes that the supply tightness will not be eased until next week. Almost all NPI factories stopped quoting and took a wait-and-see approach. Stocks held by traders keep growing due to the arrivals of imported spots delivered for long-term orders. On the demand side, according to SMM research, some agents bought some spot stainless steel, but the end demand did not pick up significantly. Recently, as the futures prices continued to fall, prices of spots delivered for warrants stood lower than those of the market sources, which, coupled with the stainless steel mills’ reduction in shipments, drove down the social inventory. Nickel prices may bear some pressure from the inflow of imported goods.

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