SMM Evening Comments (Jun 30): Shanghai Nonferrous Metals Closed Mixed with Cheering PMI in China but Hawkish Stance of US Fed

SHANGHAI, Jun 30 (SMM) – Shanghai nonferrous metals closed mixed today as the market sentiment was boosted to some extent after China official PMI for June returned to the expansion zone with a reading of 50.2. However, hawkish speeches of the US Fed still aroused bearish sentiment.

Shanghai copper fell 0.16%, aluminium shed 1.42%, lead gained 0.43%, zinc lost 1.16%, tin slid 2.04%, and nickel rose 2.55%.

Copper: The most-traded SHFE 2208 copper closed down 0.16% or 100 yuan/mt at 63,850 yuan/mt, with open interest down 2,221 lots to 139,765 lots.

On the macro front, the Federal Reserve Chairman Powell said when attending the European Central Bank Forum, that the biggest risk to the U.S. economy is sustained high inflation, rather than fears that raising interest rates will cause a significant slowdown in economic growth; tightening monetary policy while avoiding a U.S. recession is also possible, though it can not be fully guaranteed. Powell's hawkish speech pulled up the US dollar index with a close up of 0.59% overnight, pressuring copper prices.

The spot market was quiet on the last trading day in June as market participants were busy with the settlement. The SHFE front-month and next-month backwardation stood at around 150 yuan/mt, and spot premiums are likely to return to the 100 yuan/mt level after market activities pick up tomorrow, but are unlikely to rise significantly amid sluggish downstream demand and constant inflows of imports.

Aluminium: The most-traded SHFE 2208 aluminium closed down 1.42% or 275 yuan/mt to 19,060 yuan/mt, with open interest down 6,858 lots to 181,861 lots.

According to SMM research, both aluminium ingot and billet inventories are slowing down its de-stocking process, and the billet inventory even recorded an increase this week. In terms of spots, discounts of aluminium ingot expanded across the country, but the actual transaction situation differed. The trading market was quiet amid poor demand and seasonal low in the downstream.

Lead: The most-traded SHFE 2208 lead closed up 0.43% or 65 yuan/mt at 15,280 yuan/mt, with open interest up 10,654 lots to 59,671 lots.

The growth of spot lead prices lagged behind that of SHFE lead, and the actual transactions were muted despite high selling willingness of smelters and widening discounts to 150 yuan/mt once. In addition, the import window may open for lead concentrate with complicated international dynamics and relatively stable domestic environment.

Zinc: The most-traded SHFE 2208 zinc closed down 1.16% or 280 yuan/mt at 23,765 yuan/mt, with open interest up 1,739 lots to 116,191 lots.

On the macro front, the market sentiment was boosted to some extent after China official PMI for June returned to the expansion zone with a reading of 50.2. However, hawkish speeches of the US Fed still aroused bearish sentiment, and rising US dollar index also suppressed base metals prices. In addition, backwardation of LME cash-to-three-month contract narrowed, indicating lower short squeeze risks.

Tin: The most-traded SHFE 2208 tin closed down 2.04% or 4,220 yuan/mt at 202,600 yuan/mt, with open interest down 8,189 lots to 48,082 lots.

In the spot market, smelters lowered their offers slightly in morning trade and were less firm to their prices, while premiums offered by traders were largely unchanged from a day ago. SHFE warrants inventory fell 335 mt to 3,851 mt, and LME tin inventory rose 20 mt to 3,530 mt on June 29.

Nickel: The most-traded SHFE 2208 nickel closed up 2.55% or 4,380 yuan/mt at 176,090 yuan/mt, with open interest down 3,605 lots to 68,126 lots.

It is heard last night that the British government announced a new round of sanctions against Russia, which involved the president of Norilsk Nickel. The news triggered market panics for pure nickel supply in foreign markets, but the sanctions have less material impact on the nickel market.

The fundamentals of pure nickel changed little with steadily rising supply. On the demand side, the market shares of nickel briquette continued to be squeezed by MHP and high-grade nickel matte with greater cost efficiency, and the demand from the alloy sector was still weak.

[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.]