SMM Evening Comments (Jun 21): Shanghai nonferrous metals declined for the most part, lead climbed 1.95%

SHANGHAI, Jun 21 (SMM) – SHFE nonferrous metals broadly fell on Monday June 21, following jitters in global markets over the more hawkish tone from the US Federal Reserve last week.

Zinc shed 2.67% to lead the losses, copper decreased 2.18%, tin went down 1.69% and aluminium fell 1.03%, while nickel advanced 0.73% and lead climbed 1.95%.

The ferrous complex fell across the board. Hot-rolled coil went down 4.26%, iron ore shed 8.79%, and rebar fell 4.21%.

Copper: The most-traded SHFE 2108 copper contract finished the day 2.16% lower at 66,520 yuan/mt. Open interest rose 4,152 lots to 110,100 lots. Bullard, president of St. Louis Fed, said that since the inflation rate is expected to be higher than the Fed's target of 2%, it may be appropriate to start raising interest rates next year, but Bernstein, the White House economic adviser, said that he is still convinced that inflation is only temporary. Summers, the former Treasury Secretary, said that the Fed realized that the threat of inflation outbreak was greater than previously expected. The market is still digesting negative sentiment. The National Activity Index of Chicago Fed in May and whether the short position sentiment in the market could be eased will continue to be monitored tonight.

Aluminium: The most-liquid SHFE 2107 aluminium contract finished the day 1.03% lower at 18,280 yuan/mt. Open interest fell 15,820 lots to 123,705 lots. The market's worries about the Fed's interest rate hike in advance continued to push up the US dollar index which rebounded to above 92, which will continue to put pressure on the nonferrous metals. On fundamentals, the current consumption shows signs of transition to the off-season, but the reduction of aluminium production in Yunnan and Inner Mongolia makes the turning point of destocking move backward, and social aluminium ingot inventories are still in the decreasing cycle. The contract is expected to trade between 18,200-18,400 yuan/mt tonight.

Zinc: The most-active SHFE 2107 zinc contract closed down 2.67% at 21,515 yuan/mt. Open interest fell 3,222 lots to 73,133 lots. SMM data showed that social inventories of refined zinc ingots across Shanghai, Tianjin, Guangdong, Jiangsu, Zhejiang, Shandong and Hebei decreased 5,700 mt from last Friday June 18 to 122,900 mt as of Monday June 21. The stocks were down 9,200 mt from June 15.

Nickel: The most-traded SHFE 2107 nickel contract ended the day 0.73% higher at 128,900 yuan/mt today. Open interest fell 7,819 lots to 88,519 lots.

Lead: The most-traded SHFE 2107 lead contract ended the day 1.95% higher at 15,435 yuan/mt. Open interest fell 16,565 lots to 36,651 lots. Lead ingot inventories declined for the first time on Monday after six consecutive weeks of increase, which also gave certain support to lead prices. The spot market kept purchasing for rigid demand. Whether the contract could stand above 15,400 yuan/mt and move above 15,500 yuan/mt will be monitored tonight.

Tin: The most-liquid SHFE 2108 tin contract fell to a session low of 196,260 yuan/mt and finished the day 0.85% lower at 199,510 yuan/mt today. Open interest rose 120 lots to 35,077 lots. The impact of the Fed's expectation of raising interest rates ahead of schedule continued to ferment, and the US dollar index rebounded for several days in a row. Today, the slight decline of the US dollar during the Asian session gave a little adjustment time to the trend of tin in the future. The shortage of fundamental supply supported tin prices in the near term, and it is expected that tin prices will keep fluctuating under pressure in the near term. Pressure above will be seen from 203,000 yuan/mt today. Support below will be seen from 198,000 yuan/mt today.