SMM Morning Comments (Jun 4): Base metals fell amid the strong US employment data

SHANGHAI, Jun 4 (SMM) – Shanghai base metals all fell last night, and LME metals closed down as well amid the strong US employment data and the concerns of Fed withdrawal of stimulus package.

SHFE copper dropped 2.68%, aluminium dipped 1.32%, lead lost 1.92%, zinc moved down 2.61%, tin fell 1.15%, and nickel dropped 2.34%.

In LME market, copper plummeted 2.92%, aluminium dropped 1.23%, lead fell 1.99%, zinc went down 3.02%, and tin lost 2.42%.

Copper: Three-month LME copper edged down 2.92% to close at $9,818.5/mt in the overnight trading, and is expected to trade between $9,840-9,920/mt today.

The most-traded SHFE 2107 copper contract went down 2.68% to close at 71,060 yuan/mt in overnight trading.

The US ISM service industry index hit a record high in May. US initial jobless claims dropped below 400,000, and US private payrolls increased by 978,000 jobs in May, the biggest increase since June 2020. Investors’ worries about inflation and the Fed’s withdrawal of easing plan have increased amid the strong US employment data and economic recovery. US stocks fell overnight, US bond yields rose along with the US dollar, and copper futures plummeted. The monthly basis narrowed yesterday, and the holders raised premiums, which suppressed the profit margins of traders and restricted their trading activity. The overall market was cautious, but as long as the monthly gap does not narrow significantly in the near future, the spot premiums will continue to pick up as the settlement day approaches. Spot copper is expected to be traded between premiums of 60-130 yuan/mt.

Aluminium: Three-month LME aluminium lost 1.23% to settle at $2,405/mt in the overnight trading, and is expected to trade between $2,380-2,460/mt today. The strong US employment data and the concerns of currency policies boosted the US dollar and weighed on non-ferrous metals.

The most-liquid SHFE 2107 aluminium contract fell 1.32% to settle at 18,275 yuan/mt in the overnight trading, and is expected to trade between 18,250-18,600 yuan/mt today. SHFE aluminium is expected to move at low levels amid weaker consumption in Guangdong and domestic macro control. Aluminium spots are likely to trade between discount of 30 yuan/mt and premium of 20 yuan/mt.

Lead: Three-month LME lead fell 1.99% last night to close at $2162.5/mt. The news that Fed plans to withdraw the stimulus package for pandemic have boosted the US dollars, and LME base metals mostly fell. LME lead will test the support line at $2,100/mt today.

The most active SHFE 2107 lead contract closed 1.92% lower at 15,070 yuan/mt in the overnight trading. Bears kept increasing positions for four consecutive days, and the focus today is still the support line at 15,000 yuan/mt.

Zinc: Three-month LME zinc fell 3.02% to settle at $2,974/mt last night, with open interest decreasing 4,082 lots to 267,000 lots. LME zinc stocks increased by 1,100 mt or 0.4% to 277,125 mt overnight. Many bulls left the market as LME non-ferrous metals declined amid strong US employment data and policy concerns. LME zinc is expected to fluctuate between $2,950-3,000/mt today.

The most-liquid SHFE 2107 zinc contract lost 2.61% to settle at 22,390 yuan/mt in overnight trading, with open interest decreasing 8,054 lots to 99,531 lots. SHFE zinc was dragged down by the LME market. According to SMM survey, refined zinc output decreased by 10,400 mt in May, and is expected to increase by 2,400 mt in June. Downstream users were resistant to the high prices, and zinc prices are likley to fluctuate at high levels. The July contract is likely to move between 22,000-22,500 yuan/mt today, and spot premiums for domestic 0# Shuangyan will be seen at 90-100 yuan/mt against the July contract.

Tin: Three-month LME lead fell 2.42% to settle at $30,200 yuan/mt, with open interest losing 49 lots to 11,732 lots. ISM released the US PMI of non-manufacturing industry for May at 64, setting a record high, which supported the rebound of US dollar index to 20.55. LME lead is expected to move between $31,000-30,000/mt.

The most liquid SHFE 2107 tin contract dropped 1.15% to close at 202,560 yuan/mt last night, with open interest 765 lots lower to 30,802 lots. The decline of LME tin weighed on the SHFE contract. Some tin plants in Yunnan resumed production, but the supply remained tight, which supported the tin prices. SHFE tin contract is expected to fluctuate between 200,000-210,000 yuan/mt.

Nickel: US economy is recovering from the COVID-19 pandemic. The most traded SHFE 2107 nickel contract moved down 2.34% in the overnight trading to close at 130,720 yuan/mt. LME nickel opened at $17,945/mt today and is trending lower. LME nickel is likley to test the support at $17,660/mt, and SHFE nickel will test the support line at 130,000 yuan/mt today.