SMM Morning Comments (Jun 1): Shanghai base metals went down generally amid lower US dollar index

SHANGHAI, Jun 1 (SMM) — Shanghai base metals mostly declined in the overnight trading amid the lower US index. LME market was closed for holiday on Monday.

In the SHFE market, copper dropped 0.09%, aluminium fell 0.72%, lead dipped 0.35%, zinc lost 1.03%, tin shed 1.69%, while nickel inched up 0.39%.

Copper: The most-active SHFE 2107 copper contract dropped 0.09% to settle at 73,880 yuan/mt in overnight trading, and is likely to move between 73,800-74,400 yuan/mt today while spots will be offered between premiums at 50 yuan/mt and discounts at 60 yuan/mt. People’s Bank of China raised the foreign exchange deposit for the first time in 14 years, which may alleviate the pressure of yuan appreciation. The Organization of the Petroleum Exporting Countries (OPEC) and its allies tightened their outlook on the global oil market, and Brent Crude Futures moved close to $70. The overall spot trading was cautious. Domestic regulators were still paying close attention to the speculation in the futures market in June, and quotations may stay stable in the short term.

Aluminium: The most-liquid SHFE 2107 aluminium contract fell 0.72% to settle at 18,685 yuan/mt in the overnight trading, and is expected to trade between 18,500-19,800 yuan/mt today. The social inventory of aluminium ingots rose unexpectedly on Monday, up 14,000 mt to 962,000 mt from May 27, and the increase was significant in south China. The consumption in Guangdong is expected to further decline amid the power rationing and pandemic. Spots are likley to be offered between discounts at 30 yuan/mt and premiums at 20 yuan/mt.

As the US new infrastructure plan will increase the supply shortage, overseas market is optimistic about the aluminium prices. Malaysia will be blocked during June 1-14, and the warehouses are congested, which impeded the transportation of aluminium ingots in Southeast Asia. LME aluminium is expected to move between $2,450-2,520/mt.

Lead: The most-liquid SHFE 2107 lead contract dipped 0.35% to settle at 15,540 yuan/mt. Domestic social inventory of lead ingots kept rising on Monday, and holders were more willing to deliver amid wider price gap between spots and futures. Bulls lightened positions to avoid risks in the overnight trade, and SHFE lead will test the support of 15,500 yuan/mt today.

Zinc: LME zinc is expected to fluctuate high levels in the short term, likely to move between $3,050-3,100/mt today. US dollar index went down, and inflation rose, but OECD raised the expected growth rate of global economy, which boosted the market.

The most traded SHFE 2107 zinc contract dropped 1.03% to close at 22,675 yuan/mt in the overnight trade. Domestic supply and demand remained weak amid the inflation expectation under Biden’s infrastructure plan and Chinese government’s curb on commodity prices. The July contract is likely to move between 22,400-22,900 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen at 120-130 yuan/mt over 2106 contract.

Tin: LME tin is expected to trade high between $29,800-31,000/mt today, amid the short supply in overseas market and the lower US dollar index. The most-active SHFE 2107 tin contract shed 1.69% to end at 205,470 yuan/mt last night, with open interest decreasing 2,995 lots to 35,001 lots, and is likely to fluctuate between 197,000-210,000 yuan/mt today amid the power rationing in Yunnan.

Nickel: The most liquid SHFE 2107 nickel contract inched up 0.39% to close at 132,700 yuan/mt in the overnight trading, with open interest up 574 lots to 125,000 lots amid the mixed long and short sentiments. SHFE nickel contract is likely to fluctuate and test the upper level at 133,000 yuan/mt.