SMM Evening Comments (Jul 1): Shanghai Nonferrous Metals Closed with Losses amid Weakening Market Confidence

SHANGHAI, Jul 1 (SMM) – Shanghai nonferrous metals closed with losses after the U.S. Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2 percent in May, below economists' expectations of 0.4 percent.

Shanghai copper fell 4%, aluminium shed 1.61%, lead dropped 1.34%, zinc lost 4.96%, tin slid 6.46%, and nickel declined 6.74%.

Copper: The most-traded SHFE 2208 copper closed down 4% or 2,570 yuan/mt at 61,630 yuan/mt, with open interest up 11,737 lots to 151,502 lots.

On the macro front, the U.S. Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2 percent in May, below economists' expectations of 0.4 percent. U.S. inflation slowed, but overall inflation remained at a high level. Tight monetary policy continued to pressure copper prices, which fell rapidly.

In the spot market, standard-quality copper was in premiums of 120 yuan/mt in morning trade on the first trading day of July, but the buyers were mostly wait-and-see, hence the premiums fell quickly to below 100 yuan/mt. The premiums rose in afternoon trading with the expanding of SHFE front-month and next-month spread. The spread between good-quality and standard-quality copper stood at 10-20 yuan/mt, suppressing the buying interest of players. Hydro-copper was offered in premiums of 30-60 yuan/mt amid constant inflows of imports.

Aluminium: The most-traded SHFE 2208 aluminium closed down 1.61% or 310 yuan/mt to 18,900 yuan/mt, with open interest up 259 lots to 182,120 lots.

The transactions in the spot market were still poor with little improvement. Pessimism in the market suppressed metals prices, but SHEF aluminium dropped less significantly with cost support and low aluminium ingot inventory. Meanwhile, demand from downstream aluminium plate/sheet manufacturers was less satisfying in seasonal low in July and August, with most purchases made on rigid demand.

Lead: The most-traded SHFE 2208 lead closed down 1.34% or 205 yuan/mt at 15,085 yuan/mt, with open interest down 8,683 lots to 50,988 lots.

Goods holders were less interest in selling after SHFE lead prices slumped, and the spot discounts narrowed from a day ago. The discounts offered by smelters also narrowed. The downstream purchased on demand, and transactions with small orders were moderate.

Zinc: The most-traded SHFE 2208 zinc closed down 4.96% or 1,195 yuan/mt at 22,910 yuan/mt, with open interest down 2,898 lots to 113,293 lots.

On the supply side, a number of smelters suspended the production due to ore supply shortage, underpinning SHFE zinc. Meanwhile, SMM zinc ingot social inventory across seven major markets in China dropped from a week ago to 182,600 mt as of July 1. On the other hand, the bearish sentiment fermented amid aggressive interest rate hike by the US Fed. On the other hand, terminal orders were unsatisfying, and the fall in social inventory was the result of contracting supply rather than rising demand.

Tin: The most-traded SHFE 2208 tin closed down 6.46% or 13,260 yuan/mt at 192,000 yuan/mt, with open interest up 2,797 lots to 50,879 lots.

Less smelters quoted in morning trade today, while the offers in the market continued to fall. According to market feedback, quotes in morning trade today were flat from a day ago, while premiums of different brands still maintained a wide spread. The transactions picked up slightly from yesterday, while the downstream purchased on rigid demand.

In terms of inventory, SHFE warrants inventory rose 700 mt to 3,851 mt, but the spot market failed to see an improvement in transactions. LME inventory changed little this week, with a weekly increase of merely 65 mt to 3,500 mt as of June 30.

Nickel: The most-traded SHFE 2208 nickel closed down 6.74% or 11,930 yuan/mt at 164,990 yuan/mt, with open interest up 10,728 lots to 78,854 lots.

The market was still under the influence of UK’s sanction on NORNICKEL. On the fundamentals, the demand has not yet been fully released after the market sentiment improves, hence nickel prices are likely to fall further.

[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.]