SMM Price Outlook for Base Metals on SHFE (May 16, 2017)

Rio Tinto’s Oyu Tolgoi gold-copper mine in Mongolia announced on social media the resumption of copper concentrate shipments. The mine had announced the previous day that from 9 a.m. local time on June 17, civil groups blocked a concentrate transport route at the mine, causing a halt to planned concentrate shipments. Oyu Tolgoi is one of the world’s most important copper mine projects and is critical to Rio Tinto’s copper sales growth strategy. The mine is still ramping up to operate at full capacity and is expected to become the world’s fourth-largest operating copper mine. Meanwhile, the project is also vital to Mongolia’s economy, with its exports accounting for a significant portion of the country’s GDP.

US Fed June FOMC "Warsh Debut" — rates held steady at 3.50%-3.75% (fourth consecutive hold), but the dot plot was unexpectedly hawkish: nine officials projected at least one rate hike this year, and the median was raised from 3.4% to 3.8%. Warsh himself "did not submit a projection" in the dot plot, which was interpreted as a complete overhaul of the forward guidance framework. In the short term, this weighs on copper prices, but the fundamental tight balance remains unchanged.

US CPI YoY 4.2% in May hit a nearly three-year high — energy prices, up 23.5% YoY, were the main driver, while core CPI was relatively mild (2.9%). BNP Paribas expected an interest rate hike as early as December; Goldman Sachs pushed back the timing of its rate cut to mid-2027.