SMM Evening Comments (Jun 22): Shanghai nonferrous metals rose across the board, nickel advanced 3.58%

SHANGHAI, Jun 22 (SMM) – SHFE nonferrous metals broadly closed higher across the board on Tuesday June 22, triggered by the Fed's updated inflation projections and a shortening of its interest rate hike schedule.

Nickel was the best performer with a rise of 3.58%. Copper rose 0.85%, lead advanced 1.2%, aluminium climbed 1.58%, tin increased 1.89% and zinc went up 0.56%.

The ferrous complex fell across the board. Hot-rolled coil went down 2.44%, iron ore shed 2.69%, and rebar fell 2.12%.

Copper: The most-traded SHFE 2108 copper contract finished the day 0.84% higher at 67,470 yuan/mt. Open interest rose 3,411 lots to 113,600 lots. Federal Reserve Chairman Powell reiterated that inflation would fall back to the Fed's long-term goal and continued to be optimistic about employment prospects. On Monday, the demand for overnight reverse repurchase by the Federal Reserve hit a record high, reaching $765.1 billion. Barclays predicted that it might approach $750 billion to $800 billion every day, and the market sentiment picked up in Powell's soothing speech, which led to the overall rebound of nonferrous metals. However, Dalio, founder of Qiaoshui, said that there are risks of overheating and inflation in the United States, which may threaten recovery, and the market is creating bubbles, which shows that the overall market sentiment is still cautious. The annualized total pending home sales in the US in May and whether Powell's speech could give the market some confidence again will continue to be monitored tonight.

Aluminium: The most-liquid SHFE 2107 aluminium contract finished the day 1.58% higher at 18,625 yuan/mt. Open interest fell 12,276 lots to 111,524 lots. The Fed's hawkish expectations are being gradually digested by the market. 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 18,400-18,800 yuan/mt.

Zinc: The most-active SHFE 2107 zinc contract closed up 0.56% at 21,650 yuan/mt. Open interest fell 7,706 lots to 65,436 lots. Federal Reserve Chairman Powell said that inflation has risen obviously, but with the solution of supply imbalance, it is expected to fall back to the Fed's policy target of 2%. Its dovish remarks cooled down the Fed's interest rate hike expectations, which was the main reason supporting the rebound of overnight trading. On fundamentals, according to the latest data, import zinc stood at 57,000 mt, which was obviously higher than expected and brought bad news to zinc prices. The increase in supply will lead to the improvement of the bargaining power of smelters, and it is expected that there will be room for further increase in TCs. Domestic downstream restocked at low prices, and the rising zinc prices today led to a slight decline in trading volume, but stocks were still in the state of decling. It is expected that stocks will continue to fall in June, which is an important reason supporting the current narrow fluctuation of zinc prices.

Nickel: The most-traded SHFE 2107 nickel contract ended the day 3.58% higher at 132,750 yuan/mt today. Open interest rose 7,554 lots to 96,073 lots.

Lead: The most-traded SHFE 2107 lead contract ended the day 1.17% higher at 15,600 yuan/mt. Open interest rose 1,834 lots to 40,724 lots. The import situation of lead concentrate was still not optimistic in May, the tight supply trend of smelting raw materials did not change, and the confidence of lead price bulls increased slightly. The spot market kept purchasing for rigid demand, while the peak season of consumption has not yet arrived, and there is a wait-and-see sentiment in the downstream. The contract will test support from 15,500 yuan/mt tonight.

Tin: The most-liquid SHFE 2108 tin contract fell to a session low of 198,220 yuan/mt and finished the day 1.89% higher at 202,350 yuan/mt today. Open interest rose 1,789 lots to 36,866 lots.