Metals broadly fell; lithium carbonate, coking coal, and SHFE silver dropped over 2%, while LME and SHFE tin, stainless steel, and polysilicon led the declines [SMM Midday Commentary]

SMM July 28 News:

Metal Markets:

As of the midday close, base metals on the domestic market broadly fell. SHFE copper fell 0.12%, SHFE aluminum edged up 0.26%. SHFE lead rose 0.38%. SHFE zinc fell 0.44%. SHFE tin fell 1.37%. SHFE nickel fell 0.76%.

In addition, the most-traded cast aluminum futures contract rose 0.17%, and the most-traded alumina contract fell 1%. The most-traded lithium carbonate contract fell 2.11%. The most-traded silicon metal contract fell 0.66%. The most-traded polysilicon futures contract fell 1.25%.

Ferrous metals all fell. Iron ore fell 0.13%, rebar fell 0.62%, and HRC fell 0.46%. Stainless steel fell 1.26%. Coking coal and coke: the most-traded coking coal contract fell 2.36%, and the most-traded coke contract fell 1.65%.

On the overseas base metals market, as of 11:41, LME metals fell nearly across the board. LME copper fell 0.56%, and LME aluminum fell 0.39%. LME zinc fell 0.36%, and LME tin fell 1.57%. LME nickel fell 0.26%. LME lead rose 0.16%.

In precious metals, as of 11:41, COMEX gold fell 0.68%, and COMEX silver fell 1.96%. On the domestic precious metals market: SHFE gold fell 0.84%, and the most-traded SHFE silver contract fell 2.59%. Citi said its base case shows that although the third quarter is historically a seasonal peak for stockpiling, India's gold imports will remain sluggish in Q3. This is due to ample scrap supply, cautious consumer sentiment, and a discount on local prices, which are curbing fresh import demand. However, Citi still set its 0-3 month short-term gold target price at $4,500. The bank said this target assumes an easing of tensions in the Strait of Hormuz and a shift from the Fed to a less hawkish stance; numerous short-term risks could still lead to another move lower in gold prices, including a major re-escalation, AI-driven de-risking, and a persistently hawkish Fed stance. (Jin10 Data APP)

Additionally, as of the midday close, the most-traded platinum futures contract fell 1.12%, and the most-traded palladium futures contract edged up 0.08%.

As of the midday close, the most-traded European shipping container freight futures contract rose 0.35% to 2,760 points.

As of 11:41 on July 28, selected futures midday quotes:

Spot Market and Fundamentals

Silver: Expectations of a US-Iran ceasefire pressured oil prices, and rate hike concerns eased somewhat, but cautious sentiment ahead of the Fed decision pushed silver prices to retreat after a rapid rise. Spot supply and demand were both weak, and transactions remained on par...

Macro Front

China:

[Hangzhou: Plans to lay out computing power networks, new-type power grids, and next-generation communication networks with appropriate foresight] The Hangzhou AI Industry Development Promotion Regulation (Draft) has been released for public comment. It proposes that the municipal government shall make overall plans for the construction of AI infrastructure systems, lay out new facilities such as computing power networks, new-type power grids, next-generation communication networks, and trusted data spaces with appropriate foresight, establish sound market-oriented operational mechanisms, and ensure efficient use and safety and controllability of all facilities; the municipal government shall coordinate the layout of intelligent computing power facilities and the allocation of energy resources. It shall build a new-type energy system for a megacity, strengthen the synergy of power supply, power grid, load, and energy storage, promote urban power supply reliability to meet the standards for using intelligent computing facilities, and ensure the safety, stability, and sufficiency of electricity for computing power; support the construction and operation of an urban computing resource scheduling service platform through market-oriented mechanisms to provide convenient services to the public such as computing resource information release, supply-demand matching, and transaction settlement. Encourage various computing power resources to connect to the platform to achieve efficient resource allocation. Support computing power operators to participate in the construction of the national integrated computing power network.

The PBOC conducted 305.5 billion yuan in 7-day reverse repo operations on the open market at an interest rate of 1.40%, flat from last time. Today, 253 billion yuan in reverse repos mature.

US dollar:

As of 11:41, the US dollar index fell 0.07 to 101.46. US President Trump said on Monday while discussing the Fed that Fed Chairman Warsh is outstanding, but he has to deal with the board. He believes Warsh will do the right thing, and he knows what Warsh wants. Regarding interest rates, Trump said rates should be lower, and the US should have the lowest rates in the world. He also mentioned that costs are falling rapidly. (Jin10 Data APP)

"Fed mouthpiece" Nick Timiraos: Fed Chairman Warsh had to convince the most rate-cut-enthusiastic president in modern history to appoint him as Fed Chairman. Now he faces a new challenge: convincing 18 colleagues to abandon the professional mindset he believes led them astray. The first test will come on Wednesday.

Citadel Securities expects the Fed to raise interest rates this week—a surprise move that would reinforce Chairman Kevin Warsh's credibility in the fight against inflation. Frank Flett, the institution's head of macro strategy, wrote in a report that a 25-basis-point rate hike on Wednesday would cement Warsh's repeated commitment to restoring price stability, while demonstrating that policymakers are no longer relying on pre-signaling every policy move. "Markets may again underestimate the extent of the Fed's hawkish pivot." A rate hike this week would "decisively end the era of forward guidance" while highlighting the Fed's independence. (Jin10 Data APP)

Paul Mackel, an economist at HSBC Economics, said in a report that the Fed's decision this week may not provide a new catalyst for a rise in the US dollar, unless the Fed surprises with a rate hike. Fed Chairman Warsh has acknowledged inflation is above target and expressed a commitment to price stability. He said that if this week's meeting merely aligns with those views, a significant rally in the US dollar is unlikely, as the market is already positioned for rate hikes later this year. "Nevertheless, we also recognize that some are contemplating the idea of a surprise Fed rate hike, just as it did suddenly in February 1994," he said. If the market welcomes it as a prudent move, this would boost the US dollar. (Jin10 Data APP)

Citigroup traders are betting the Fed will leave interest rates unchanged this week. According to Akshay Singal, the bank's global head of short-term interest rate trading, the position they hold will profit if the Fed holds rates steady. Singal said, "We remain firm in our expectation that rates will stay on hold." He added that Fed Chairman Warsh has made clear he wants the market to focus on the data, and the data indicates the Fed has no need to raise rates at the moment. (Jin10 Data APP)

Lloyd Chan, a senior FX analyst at MUFG Bank, pointed out in a research note that the US dollar could find short-term support due to elevated US Treasury yields and ongoing tensions in the Middle East. He added that this week's Fed decision is likely to be a key catalyst for markets. Chan noted, "While no policy change is expected, the market's focus will be squarely on the Fed's guidance—specifically, whether policymakers are still inclined to tighten policy." Furthermore, the analyst added, "US tariff issues are coming back into the market's spotlight as the Trump administration seeks to rebuild its tariff policy after the US Supreme Court struck down Trump's proposed global reciprocal tariff measures earlier this year." (Jin10 Data APP)

Other Currencies:

RBA Chair Bullock: Uncertain whether the magnitude of the RBA's rate hikes is sufficient to return CPI to the target range. The RBA board will raise the cash rate further if needed. The full effects of previous rate hikes are still yet to manifest. The RBA is committed to preventing cost pressures from becoming entrenched inflation. Underlying CPI is broadly on track with expectations, but still too high. Indicators suggest mild consumption growth in Q2. Demand growth may still need to slow further. (From Wall Street See APP)

Data:

Data including the US ADP employment change for the week ending July 11, the US FHFA House Price Index monthly change for May, the US S&P/CS 20-City Composite Home Price NSA Index yearly change for May, the US Conference Board Consumer Confidence Index for July, and the US Richmond Fed Manufacturing Index for July will be released today. Additionally, watch for: a speech from RBA Chair Bullock, and a meeting between Israeli Prime Minister Netanyahu and US President Trump.

Crude Oil:

As of 11:41, oil prices on both exchanges fell, with WTI crude down 1.46% and Brent crude down 1.37%. Geopolitically, the situation showed signs of phased easing. Trump said on Monday that the US is engaged in diplomatic negotiations with Iran to end their conflict, while warning that fighting will resume if talks fail. According to sources cited by Bloomberg, Iran and Oman are trying to reach an agreement to restart shipping through the Strait of Hormuz. Oil prices extended their decline in response to this news. (From Wall Street See APP)

Spot Market Wrap-up:

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