SMM Morning Comments (May 30): Base Metals Show Mixed Performance, With Copper Outperforming, Growing Risk Appetite Softens Safe-Haven Appeal Of US Dollar

SHANGHAI, May 30 (SMM) – LME and SHFE base metals showed mixed performance overnight. On the macro front, the U.S. debt ceiling agreement boosted risk appetite in global markets and weakened the safe-haven appeal of the dollar, which fell on Monday. However, the core inflation in the United States is at a high level, and the market expects the Fed to raise interest rates in June.

Copper: The LME market was closed yesterday. The most active SHFE 2307 copper contract finished at 65,080 yuan/mt overnight, up 0.23%. Trading volume was 32,000 lots and open interest stood at 198,000 lots. On the macro front, the U.S. debt ceiling agreement boosted risk appetite in global markets and weakened the safe-haven appeal of the dollar, which fell on Monday. However, the core inflation in the United States is at a high level, and the market expects the Fed to raise interest rates in June. As of Monday May 29, SMM copper inventory across major Chinese markets stood at 118,300 mt, down 100 mt from last Friday but up 11,000 mt from the same period last year. Although there are imported copper in east China, the domestic supply of goods is still tight, resulting in inventory declines. The arrivals of both imported copper and domestic copper in south China increased, and consumption has declined after the copper price rebounded. In terms of consumption, demand decreased towards the end of the month, and the rebound in copper prices also caused consumption to fall. Market sentiment was positive after the US debt crisis has been lifted, but copper prices will lack ability to rebound further in the short term.

Aluminium: The most-traded SHFE 2307 aluminium contract opened at 18,055 yuan/mt overnight, with its low and high at 17,885 yuan/mt and 18,065 yuan/mt before closing at 18,070 yuan/mt, down 140 yuan/mt or 0.77%. 

On the macro front, a preliminary agreement was reached on the US federal government’s debt ceiling and budget. In addition, the US first-quarter GDP and employment data showed that the US economy was relatively resilient. Aluminium ingot social inventories continued to fall, mainly driven by low share of ingot output at smelters. Aluminium prices will hardly rebound, unless fundamentals show signs of improvement.

Lead: The London Metal Exchange (LME) was closed on May 29 for bank holiday in the UK.

Overnight, the most-traded SHFE 2307 lead contract opened at 15,250 yuan/mt and closed at 15220 yuan/mt after hitting the highest point at 15,255 yuan/mt and the lowest point at 15,205 yuan/mt, down 0.13%. The open interest increased 2,558 lots to 57,163 lots and the trading volume decreased 19,545 lots to 15,833 lots

Zinc: The LME was closed for the Spring Bank Holiday.

Overnight, the most-traded SHFE 2307 zinc contract hovered sideways after opening at 19,460 yuan/mt, and closed at 19,400 yuan/mt, down 30 yuan/mt or 0.15%. Trading volume fell to 55,935 lots, and open interest decreased by 1,437 lots to 134,000 lots. SHFE zinc found support at the 5-day moving average. Rumours of domestic smelters cutting output boosted market sentiment. Overseas macro headwinds also eased. However, uncertainty over US interest rate hike will still put pressure on zinc prices.   
 

Tin: Yesterday night, SHFE 2307 tin contract prices went up and fluctuated in a wide range, but then moved narrowly and closed at 209,000 yuan/mt, up 2.96%.

Nickel: Spot pure nickel premiums fell yesterday amid month-end. There were almost no NPI traders who intended to ship at lows with the improvement of macro front. Stocks held by some traders keep growing due to the arrivals of imported spots. On the demand side, according to SMM research, spot stainless steel trades were slack in day trading, which may drag down the spot prices. Nickel prices will gain weaker support because of the month-end and the abundant supply.

[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.]