China's stainless steel futures gave back ground sharply in the first trading week after the May Day holiday, as a sudden easing of Middle East tensions deflated the risk premium that had carried prices to recent highs. With the cost-side narrative unwinding and physical demand showing little follow-through, the market is searching for a new floor

SMM Nickel News, May 7: Macro and market news: (1) US ADP employment data for April recorded 109,000 new jobs, slightly above expectations of 99,000, while the previous reading was revised down from 62,000 to 61,000. (2) Iran's Permanent Mission to the United Nations proposed a feasible solution to the Strait of Hormuz issue: permanently ending the war, lifting the maritime blockade, and restoring normal passage. Spot market: On May 7, SMM #1 refined nickel prices fell 5,050 yuan/mt from the previous trading day. Spot premiums: Jinchuan #1 refined nickel averaged 1,150 yuan/mt, down 100 yuan/mt from the previous trading day; mainstream domestic electrodeposited nickel brands ranged from -800-200 yuan/mt. Futures market: The most-traded SHFE nickel 2606 contract plunged sharply during the night session and hovered at lows during the morning session, closing at 148,450 yuan/mt, down 3.33%. Trump explicitly stated on the evening of May 6 that a US-Iran deal was "very likely," that the negotiation framework had been largely finalised, that the resumption of passage through the Strait of Hormuz was in sight, and that the sulphur supply crisis was expected to be resolved, leading to a sharp pullback in nickel prices. In the short term, the most-traded SHFE nickel contract is expected to move sideways in the range of 145,000-150,000 yuan/mt, with the center likely shifting downward, as the key support below comes from the rigid cost support brought by Indonesia's new HPM policy.

SMM Morning Meeting Summary: Overnight, LME copper opened at $13,400.5/mt, touched a high of $13,462/mt early in the session before its center fluctuated downward, dipped to $13,328/mt before the center rose, and ultimately moved sideways to close at $13,391.5/mt, up 2.22%, with trading volume at 27,000 lots and open interest at 268,000 lots, an increase of 1,485 lots from the previous trading day, indicating bulls adding positions. Overnight, the most-traded SHFE copper 2606 contract opened at 103,350 yuan/mt, touched a high of 103,370 yuan/mt right at the open, then its center dipped to 102,850 yuan/mt before staying high and moving sideways, ultimately closing at 103,160 yuan/mt, up 0.49%, with trading volume at 36,000 lots and open interest at 199,000 lots, a decrease of 185 lots from the previous trading day, mainly indicating bears reducing positions.

Gold has been pulled in two directions in recent weeks. On one side, rising oil prices and escalating geopolitical tensions have strengthened the metal’s safe-haven appeal.

Starting from the new all-time high of USD 5,602 on January 29, the gold price has now been in a correction phase for over three months, characterized so far by two sharp downward waves, two recovery waves, and most recently by another downward wave since mid-April.

Gold demand in China surged 67 percent year-on-year to a record 207t, considerably higher than the previous quarterly record of 155t in Q2 2013

[SMM Morning Meeting Minutes: Macro and Industry Support Intertwined with Geopolitical Risks, Tin Prices Expected to See Short-Term Volatile Recovery]

Copper prices have remained range-bound for two weeks as stalled US-Iran talks cap upside, while stronger Chinese demand and a weaker US dollar provide support.

Global Aluminum Market Review – April: Divergent Domestic & Overseas Trends and Marked Spot Structure Disparities The global aluminum market in April featured a core pattern of strength overseas and weakness domestically with diverging trends. The main Shanghai aluminum contract retreated from highs amid fluctuations, while LME aluminum maintained firm momentum supported by low inventories and geopolitical factors, with both markets seeing mild corrections toward month-end. Market drivers this month centered on macro policies, geopolitical conflicts, supply-demand fundamentals and inventory structures, with movements of key indicators further highlighting supply-demand imbalances between domestic and overseas aluminum markets. I. April Aluminum Price Review: Linked Movements with Distinct Strength Differentials Shanghai aluminum and LME aluminum shared similar price rhythms in April, both fluctuating higher initially before retreating. However, notable gaps emerged in upward momentum and correction ranges, with overseas aluminum prices significantly outperforming domestic counterparts. The average Shanghai-LME aluminum ratio dropped from 7.36 in March to 7.03 in April, reflecting stronger overseas aluminum pricing relative to Shanghai aluminum. The main Shanghai aluminum contract trended upward early in the month before softening overall, declining from elevated levels through range-bound trading. It opened lower at RMB 24,715 per ton at the start of the month and consolidated. Driven by escalating Middle East geopolitical tensions and rising LME aluminum prices, it surged to a monthly peak of RMB 25,675 per ton in mid-April. In late April, amid continuous domestic inventory accumulation, weaker-than-expected downstream demand, and risk-averse capital outflows ahead of the May Day holiday, prices corrected steadily. Closing at RMB 24,430 per ton on April 30, the contract recorded a monthly trading range of nearly RMB 1,360 per ton. LME March aluminum traded firmly with mild late-month declines. Opening at USD 3,459 per ton, it climbed to a monthly high of USD 3,672 per ton in mid-April, underpinned by overseas supply disruptions from geopolitical frictions and sustained inventory destocking. Prices edged down later due to fluctuating US-Iran negotiations, hawkish macro sentiment and profit-taking at high levels, settling at USD 3,476 per ton at month-end with a slight monthly loss. Overall, LME aluminum vastly outperformed domestic Shanghai aluminum. In terms of price drivers, geopolitics served as a shared upward catalyst for global aluminum prices, with production cuts and supply disruptions in the Middle East continuously boosting market risk aversion. Price divergence stemmed from dual disparities in macro policies and fundamentals: elevated domestic inventories and sluggish demand consistently capped aluminum price rebounds, while tight overseas inventories and strained spot supplies provided robust support for LME aluminum. II. Key Inventory Indicators: Divergent Inventory Movements and Contrasting Supply-Demand Landscapes As a core gauge of aluminum market supply and demand, domestic and overseas inventory trends diverged sharply in April, directly shaping the relative strength of regional aluminum prices. Domestic aluminum inventories kept rising and stood at a multi-year seasonal high. Social inventories maintained an upward trend throughout April, hitting 1.465 million tons in mid-month, the highest seasonal level in five years. A clear imbalance emerged between rigid supply release and lackluster downstream demand during the traditional peak "Silver April" period, leading to persistent spot market loosening. SHFE warehouse stocks expanded from 420,000 tons at the start of the month to 450,000 tons at month-end. Elevated warehouse stock levels further confirmed ample domestic spot supply, weighing continuously on aluminum prices. Overseas LME aluminum inventories declined steadily to a 20-year low. Total LME aluminum inventories fell from 410,000 tons to 370,000 tons in April, extending months of destocking to historic lows. Noticeable structural divergence persisted in inventory composition: Russian aluminum accounted for approximately 92% of total LME stocks in March, resulting in low market-circulating inventories and increasingly tight physical spot supply, which acted as the fundamental pillar for strong LME aluminum prices. In summary, April’s global aluminum market was governed by contrasting core dynamics: low overseas inventories, geopolitical disruptions and hawkish Federal Reserve policies on the overseas front, versus high domestic inventories, weak real demand and stable growth expectations domestically. This drove pronounced market divergence. Affected by intertwined internal and external factors, the main Shanghai aluminum contract corrected downwards from highs, while LME aluminum remained in a firm trading range, backed by historically low inventories, a tight spot balance and geopolitical risk premiums.

Nickel prices continued to rise sharply this week, with the market narrative shifting from last week's "fluctuating at highs after policy materialization" to "full fermentation of substantive supply-side shocks." Indonesia's Weda Bay nickel mine announced a May production halt for maintenance due to exhausted RKAB quotas, Huayou Cobalt's subsidiary Huafei Nickel & Cobalt announced partial production line shutdowns from May 1 due to sulfur shortages, and the continued blockade of the Strait of Hormuz in the Middle East deepened the sulfur supply crisis. The three supply-side shocks combined to push nickel price centers sharply higher. The most-traded SHFE nickel contract broke through the 150,000 yuan/mt mark this week, while LME nickel briefly surpassed $19,500/mt intraday. Spot market, SMM #1 refined nickel averaged 150,000 yuan/mt this week, up 5,000 yuan/mt WoW. Spot premiums remained low as futures surged rapidly, with Jinchuan nickel premiums declining to 1,300 yuan/mt. Domestic mainstream electrodeposited nickel maintained significant discounts, further highlighting the structural feature of "strong futures, weak spot" in supply-demand fundamentals. On the macro front, US-Iran negotiations reached a complete impasse this week, with expectations of prolonged geopolitical risks rising. The two sides diverged sharply on the Strait of Hormuz issue: Trump claimed Iran was "on the verge of collapse and requesting the strait be opened," demanding Iran hand over all enriched uranium; Iran emphasized its "absolute control" over the strait and demanded transit fees from passing vessels. Fed Chairman nominee Warsh explicitly refused to commit to interest rate cuts at last week's hearing, and the market continued to digest this stance this week — CME Fed Watch showed a 99% probability of rates remaining unchanged in April and only about 3% probability of a cumulative 25bp cut by June, with monetary easing expectations virtually disappearing. Inventory, Shanghai Bonded Zone inventory was approximately 1,700 mt this week, flat WoW. China's social inventory was approximately 101,000 mt, with an inventory buildup of approximately 3,200 mt WoW. Looking ahead, although persistently high domestic inventory continued to pressure prices, Indonesia's Q2 triple shock of "ore tightening + sulfur supply disruption + MHP production cuts" is accelerating from expectations toward reality. After the Labour Day holiday, the most-traded SHFE nickel contract is expected to trade in the range of 145,000-155,000 yuan/mt.