SMM Morning Comments (Jun 16): LME metals all fell amid higher US dollar index

SHANGHAI, Jun 16 (SMM) – LME base metals all fell in the overnight trading yesterday, as US dollar index went up slightly, and the plummeting US May retail sales brought negative sentiments to the market. Meanwhile, SHFE metals closed mixed amid the policy control.

In LME market, copper dropped 3.99%, aluminium fell 1.55%, lead lost 1.2%, zinc edged down 1.36%, and tin reduced 1.56%

In SHFE market, copper decreased 1.69%, aluminium inched down 0.58%, lead dipped 0.65%, zinc increased 0.78%, tin gained 0.14%, and nickel went down.

Copper: Three-month LME copper dropped 3.99% to close at $9,560/mt in the overnight trading yesterday, and is expected to trade between $9,450-9,620/mt today.

The most traded SHFE 2107 copper contract decreased 1.69% to end at 69,040 yuan/mt last night, and is likely to trade between 68,000-69,400 yuan/mt today.

At the macro level, the US May retail sales data saw an unexpected fall last night, shaking the optimistic outlook of the economic recovery. The rising US dollar also weighed on copper futures. US May PPI rose 0.8% on the month, which made the market worried about Fed’s tightening monetary policy before the interest rate meeting. China was still curbing the price increase of bulk commodities, and market sentiments were suppressed. Copper prices will move under the pressure of macro environment in the short term. Spot discounts are expected to be seen between 100-40 yuan/mt.

Aluminium: Three-month LME aluminium fell 1.55% to end at $2,450/mt in the overnight trading yesterday, with open interest increasing 8,499 lots to 718,000 lots, and is expected to trade between $2,450-2,500/mt today.

The most active SHFE 2107 aluminium contract inched down 0.58% to close at 18,835 yuan/mt last night, with open interest increasing 312 lots to 188,000 lots, and is expected to trade between 18,800-19,000 yuan/mt today. The aluminium ingots in east China are offered flat to the July contract amid improved liquidity.

Lead: Three-month LME lead lost 1.2% to settle at $2,178.5/mt in the overnight trading yesterday. Bulls reduced stocks to avoid risks as US dollar fluctuated higher. Today’s focus will be the support line at the 10-day moving average.

The most liquid SHFE 2107 lead contract dipped 0.65% to close at 15,230 yuan/mt last night, with the support at 15,200 yuan/mt. The changes in social inventories and the downstream purchase at lower lead prices after the delivery are worth attention today.

Zinc: Three-month LME zinc edged down 1.36% to close at $3,014.5/mt in the overnight trading yesterday, with open interest decreasing 901 lots to 265,000 lots, and is expected to trade between $3,000-3,050/mt today. LME zinc stocks decreased 225 mt or 0.08% to 267,425 mt last night. The increased US dollar weighed on nonferrous metals, while the falling US retail sales and rapidly rising PPI limited the drop.

The most active SHFE 2107 zinc contract increased 0.78% to end at 22,675 yuan/mt last night, with open interest rising 4,741 lots to 84,556 lots. SMM social zinc stocks kept falling last night, and market trading sentiment was cautious despite the underselling news. The July contract is expected to trade between 22,200-22,700 yuan/mt today, with the premiums of 0# Shuangyan zinc at 80-90 yuan/mt over it.

Tin: Three-month LME tin reduced 1.56% to settle at $31,230/mt in the overnight trading yesterday, with the open interest losing 165 lots to 12,051 lots. The overseas tight supply continued to support tin prices. LME tin is expected to trade between $31,000-32,000/mt today amid the worries of Fed’s tighter monetary policy.

The most traded SHFE 2107 tin contract gained 0.14% to close at 206,220 yuan/mt yesterday, with open interest down 374 lots to 22,868 lots. China’s policy control and the power curtailment in Yunnan impeded the SHFE tin increase, but the supply shortage will support the prices to fluctuate at high levels in the short term. SHFE tin is expected to trade between 203,000-210,000 yuan/mt today.

Nickel: The most liquid SHFE 2107 nickel contract went down to 129,050 yuan/mt in the overnight trading yesterday, dragging down by the US market worries. As the nickel market has been basically bullish recently, the price decrease is expected to be limited below the 40-day moving average line. The nickel futures trade will still be affected by macro environment, and the Fed meeting of interest rate on Thursday will be a key factor of inflation.