Good morning,
Overnight China’s factory activity shrinks in surprise in May, the official manufacturing purchasing manager index fell to 49.5, unexpectedly contracted. The country’s export-oriented industries are expected to play the crucial role in hitting the 5% economic growth goal, with consumption at home still weighed down by a real estate slump.
Interesting this time that, so far, there have been no jump in the ferrous complex as we usually see with the immediate expectation of more stimulus against PMI misses, but you have to put that against the rising iron ore inventories and potential production cuts as a dampener.
Indonesia announced to delay ban on copper concentrate exports to year-end, taking away another potentially bullish driver for the industrial metal that surged to a record this month. Yet we are still in the consolidation period, and this week’s CTA flows have been very light. Copper still eyes on its key levels here, support into $10044 then $9967 and $10275 will be the topside resistance level.
Outside nickel, noticeably the onshore arb has been improved throughout the week which attracted far east bids coming into our space, especially copper. See how copper onshore arb now narrowed to its March level, suggesting buying LME against selling SHFE. On top of it, SHFE aggregate open interest seeing declines among the whole complex, suggesting liquidations. Light volume for LME throughout the session so far with a slim intraday range traded.
Later today we will have the personal Income/Spending and PCE deflator from US.
Price performance at cob 30th May 2024:
Ali
- Light turnover – running down 22% compared to 20d average and a $34 intraday range.
- LME ali continue to see fresh length and its net combined reading flipped to the positive territory.
- Shanghai aggregate open interest down 21.8k lots or 3.2% after 4th consec increase. Length get cut.
- According to SMM the operation rate of leading aluminum downstream processing enterprises in China this week has decreased by 0.4% to 64.2% compared with the previous week, and increased by 0.1% compared with the same period last year.
- See how both onshore alumina and electrolytic aluminum operating rate increased further in April.
- China imported bauxite inventory from Guinea declined for another week, from the peak on 29th March at 12.51 million ton to 9.4 million ton last week.
- Both SHFE daily on warrant and weekly deliverable stocks increased minimally. However, LME on warrant stocks continue to see decent stock draws..
- SHFE June July spread traded into 70 contango yday, easing from the recent high on 24th May at 45 contango.
- Weekly volume profile attached to illustrate that the big volume largely traded into the downside at $2700 area.
Copper
- Onshore arb bids came in overnight with a light turnover – running down 24% compared to 20d average with a $119 intraday range traded.
- See how copper onshore arb now narrowed to its March level, suggesting buying LME against selling SHFE.
- On wires, Indonesia announced to delay ban on copper concentrate exports to year-end, taking away another potentially bullish driver for the industrial metal that surged to a record this month.
- LME copper seeing long liquidation prog and its net combined reading now flipped to the negative territory with a minimal supply reading.
- Shanghai aggregate open interest down 13.6k lots or 2.3% for the 2nd consec sessions. Long liquidation related to the arb.
- Both Shanghai bonded inventory and China social inventory continue to see stocks build of late and no clear signs of draws yet.
- Our liquidity index seeing some improvement this week which should provide some support for copper prices.
- However, out currency index is lacking upward momentum this week which brought some downward pressure to copper prices.
- Weekly volume profile seeing the largest bar now traded into $10140 level shifting off from the peak at $10500 area.
- Only COMEX copper stocks seeing further stock draws whilst the rest exchanges continues to see inflows. Especially SHFE weekly deliverable stocks built to the highest level since April 2020.
- Both Yangshan premium and China 99.5% spot premium increased this week, especially China 9.5% spot premium improved to -120 from the low on 21st May at -340.
Nickel
- Light turnover with a slim intraday range at $290.
- LME nickel’s minimal long has been liquidating this week and the net combined reading flipped to negative territory.
- Shanghai aggregate open interest down 4.7k lots or 2.1%.
- On wires Indonesia seen a M5.0 earthquake in Kendari. It is right near morawali industrial park where a nickel mine area.
- Onshore stainless prices get sold off again overnight but managed to bounce back before closed. Shanghai nickel prices have ignored the first sell off and traded higher so far today.
- Feedstock prices, on the like of nickel sulfate and nickel pig iron prices remained supportive of late. Chart below to show you that nickel sulfate prices ranged from 32000-33000 yuan/ton.
- But onshore renewable energy equity index get sold off this morning which is not very supportive to the price.
- Both LME and SHFE on warrant stocks seeing minimal stock build whilst SHFE weekly deliverable stocks declined further to 25.4kt.
- Weekly volume chart seeing the largest bar traded into the down side at $20050 area.
Zinc
- Underperformer of today. After a few weeks’ stock draws, China zinc ingot inventory at port finally picked up to 39kt. But the current level is still lower than its previous years.
- Long adding prog has stalled into yday’s close and its net combined reading flipped to the negative territory with the heaviest supply reading since 8th April.
- Shanghai aggregate open interest down 1.9k lots or 0.8% for the 2nd consec session but small.
- Ferrous and steel prices have been range bound this morning while LME zinc prices initially follow this movement but get sold off after London kicked off.
- SHFE and LME on warrant seeing some decent stock build whilst SHFE weekly deliverable stocks also build up but slower.
- Weekly volume profile seeing the biggest volume bar traded into $3100 but the downside turnover picked up as well.
- Shanghai June July spread settled into 80 contango, easing from the high on 29th May at 40 contango.
Lead
- According to SMM, the weekly operating rate of recycled lead in four provinces this week (May 25th - May 31st) was 45.2%, an increase of 0.25 % from the previous week.
- Light turnover – running down 28% compared to its 20d average with a $26 intraday range traded.
- LME lead seeing long liquidation prog and the net combined reading remained in the negative territory with the heaviest supply reading since 22nd March.
- Shanghai June July spread settled at 45 contango, easing from the recent peak at level on 24th May.
- Shanghai daily on warrant and weekly deliverable stocks seeing some inflows. In contrast, LME on warrant stocks seeing further stock draws.
Macro
- 13:30hrs Personal Income
- 13:30hrs Personal Spending
- 13:30hrs PCE Deflator
LME Stocks
Shanghai On Warrant Stocks
Shanghai Weekly Deliverable Stocks
* For indicative purposes only, as at 09:45 UK time. Please contact the desk for live pricing
