SMM Morning Comments (Jun 17): Base metals basically increased after Fed bringing forward interest rate hikes

SHANGHAI, Jun 17 (SMM) – LME and SHFE base metals mostly went up in the overnight trading on Wednesday after Fed brought forward the interest rate hikes into 2023.

In LME market, copper went up 0.73%, aluminium closed 0.98% higher, lead increased 0.85%, zinc edged up 0.25%, and tin dipped 0.05%.

In SHFE market, copper inched up 0.8%, aluminium won 1.08%, lead rose 1.42%, zinc gained 0.91%, and tin advanced 0.84%

Copper: Three-month LME copper went up 0.73% to close at $9,630/mt in the overnight trading yesterday, and is expected to trade between $9,400-9,500/mt today.

The most liquid SHFE 2107 copper contract inched up 0.8% to end at 69,570 yuan/mt on Wednesday night, and is expected to trade between 68,000-68,600 yuan/mt.

At the macro level, the dollar broke through 91 after the Federal Reserve brought forward its projections for the first post-pandemic interest rate hikes into 2023 and raised interest rate on excess reserves by 0.05 percentage point. Fed’s decision intensified the market concerns of the shrinking stimulus policies. Oil and gold prices fell back under the impact. Copper futures are expected to pare Wednesday night’s gains today. Spots are likely to trade at premiums between 40-100 yuan/mt.

Aluminium: Three-month SHFE aluminium closed 0.98% higher at $2,474/mt in the overnight trading yesterday, with open interest decreasing 19,280 lots to 699,000 lots, and is expected to trade between $2,450-2,500/mt.

The most active SHFE 2107 aluminium contract won 1.08% to settle at 18,790 yuan/mt last night, with open interest losing 257 lots to167,000 lots. The contract is expected to trade between 18,500-19,000 yuan/mt today, and the aluminium ingots in east China are likely to be offered at narrow discounts or flat level to the July contract amid improved liquidity.

Lead: Three-month LME lead increased 0.85% to close at $2,197/mt in the overnight trading yesterday. The interest rate hikes may weight on LME base metals. Today’s focus will be the support line of the 20-day moving average.

The most traded SHFE 2107 lead contract rose 1.42% to end at 15,375 yuan/mt last night. SHFE lead stocks fell for the second consecutive day, and the news about the government’s control on bulk commodity prices fermented, leading to the strong wait-and-see sentiment and cautious trade in the market. SHFE lead tested the cost support yesterday. Whether the prices can maintain the gain and stand above 15,300 yuan/mt is worth attention today.

Zinc: Three-month LME zinc edged up 0.25% to settle at $3,022/mt in the overnight trading on Wednesday, with open interest losing 5,017 lots to 260,000 lots. LME zinc stocks decreased 2,050 mt or 0.77% to 265,375 mt last night. LME nonferrous metals dropped amid the Fed announcement, but rebounded after Fed raised the inflation forecast in 2021 and 2022. LME zinc is expected to trade between $2,960-3,010/mt today under the pressure of Hawkish statements.

The most active SHFE 2107 zinc contract gained 0.91% to close at 22,760 yuan/mt last night, with open interest up 7,584 to 88,448 lots, driven up by the overseas market. The State Council announced to release the national reserves of zinc, which weighed on the prices. The contract is expected to trade between 22,200-22,700 yuan/mt today, and the premiums of 0# domestic Shuangyan zinc is likely to be seen between 80-90 yuan/mt over July contract.

Tin: Three-month LME tin dipped 0.05% to close at $31,215/mt in Wednesday’s overnight trading, with open interest down 340 lots to 11,711 lots. Fed maintained the benchmark interest rate at 0-0.25%, and kept the debt purchase pace until the goals of employment and price stability are fully achieved. However, Fed expects that the multiple increases in interest rate may drive up the actual interest rate, which will boost US dollar in the short term. Tin prices were under pressure of jumping US dollar yesterday, while the low Fed interest rate will still support the prices. LME tin is expected to trade between $31,000-32,000/mt today.

The most traded SHFE 2107 tin contract advanced 0.84% to end at 206,720 yuan/mt last night, with open interest decreasing 1,532 lots to 19,684 lots. State Council’s deployment of ensuring supply and stabilizing prices of commodities limited the increase in tin prices. The amount of the national metal reserves to be released is yet to be announced, which cooled down the bearish sentiments in the market. In addition, the power curtailment has not been fully lifted, so the tight supply will still support the prices. SHFE tin is expected to trade between 203,500-210,000 yuan/mt.

Nickel: The most traded SHFE 2107 nickel contract closed at 128,730 yuan/mt in the overnight trading yesterday. The overall macro environment still weighed on the prices. Fed announcement of the interest rate hikes cooled down the market, and nickel prices are likely to bottom out with the fundamental support.