SMM Morning Comments (Jun 23): Shanghai base metals mostly rose after Fed chair’s hawkish statement

Published: Jun 23, 2021 10:00 (GMT+8)

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Shanghai base metals basically cruised higher in the overnight trading as Fed chair Jerome Powell made hawkish statement to appease the inflation concerns. Meanwhile, LME metals all went up.

SHANGHAI, Jun 23 (SMM) —Shanghai base metals basically cruised higher in the overnight trading as Fed chair Jerome Powell made hawkish statement to appease the inflation concerns. Meanwhile, LME metals all went up.

In LME market, copper advanced 0.97%, aluminium rose 1.00%, lead gained 0.51%, zinc edged up 0.69%, and tin went up 0.56%.

In SHFE market, copper rose 1.19%, aluminium increased 0.51%, lead dipped 0.29%, zinc added 0.325%, tin gained 0.68%, and nickel advanced 2%.

Copper: Three-month LME copper advanced 0.97% to close at $9,269/mt on Tuesday night, and is expected to trade between $9,240-9,320/mt today.

The most liquid SHFE 2108 copper contract increased 1.19% to end at 68,030 yuan/mt last night, and is expected to trade between 67,800-68,400 yuan/mt today, with spot premiums between 20-90 yuan/mt.

Fed chair Jerome Powell kept playing down the inflation concerns by reiterating that the inflationary pressures were temporary, and Feb would be patient on the interest rate increase. They would not implement sudden interest rate hike due to the high employment and inflation concerns. US dollar fell back overnight. China’s National Food and Strategic Reserves Administration announced to release only 20,000 mt of copper reserve, which boosted the market sentiments and drove up copper prices. The SHFE/LME price ratio and the import profits and losses will directly impact the shipments.

Aluminium: Three-month LME aluminium rose 1.00% to end at $2,426/mt last night, with open interest down 4,002 lots to 696,000 lots, and is expected to trade between $2,400-2,460/mt today.

The most active SHFE 2107 aluminium contract increased 0.51% to settle at 18,720 yuan/mt in yesterday’s overnight trading, with open interest losing 3,219 lots to 109,000 lots, and is expected to trade between 18,500-18,800 yuan/mt.

Lead: Three-month LME lead gained 0.51% to close at $2,174/mt on Tuesday night. Bulls added positions to enter the market overnight, leading to the increase in the third consecutive night in LME lead under the pressure of 5-day, 10-day, and 20-day moving averages. Whether LME lead can break through the pressure lines will be today’s focus.

The most traded SHEF 2108 lead contract dipped 0.29% to end at 15,555 yuan/mt in the overnight trading yesterday. SHFE lead remained fluctuating at high levels in the bullish market, before sliding late last night. Today’s focus will be the support line at 15,450 yuan/mt.

Zinc: Three-month LME zinc edged up 0.69% to close at $2,859.5/mt last night, with open interest down 732 lots to 256,000 lots. LME zinc stocks dropped 575 mt or 0.22% to 259,975 mt overnight. Powell’s hawkish statement boosted the market sentiment, and LME zinc is expected to trade between $2,830-2,880/mt today.

The most liquid SHFE 2108 zinc contract added 0.325% on Tuesday night to end at 21,660 yuan/mt, with open interest up 6,138 lots to 737,000 lots. Zinc fundamentals remained largely unchanged in the short term. China has announced to release 30,000 mt of national zinc reverse, but the implementation time is yet to be determined. Zinc prices may remain volatile at high levels driven by the overseas market. The August contract is expected to trade between 21,400-21,900 yuan/mt today, and the premiums of 0# domestic Shuangyan zinc are likely to move between 160-180 yuan/mt over July contract.

Tin: Three-month LME tin went up 0.56% to end at $30,370/mt on Tuesday night, with open interest up 1 lot to 11,893 lots. US dollar index fell back last night, as some investors left the market with profits from the continuous dollar increase last week. The drop of US dollar, coupled with Powell’s hawkish statement and tight overseas supply, are likely to support LME tin prices to fluctuate at high levels. LME tin is expected to trade between $30,000-30,700/mt today.

The most traded SHFE 2108 tin contract gained 0.68% to settle at 203,720 yuan/mt last night, with open interest up 1,470 lots to 38,336 lots. The tight spot liquidity is expected to support SHFE tin to trade between 199,000-205,000 yuan/mt today.

Nickel: Three-month LME nickel added 1.66% to close at $17,770/mt in the day trading on Tuesday. Today’s focus will be the pressure line around $17,800/mt.

The most active SHFE 2107 nickel contract advanced 2% to end at 132,800 yuan/mt last night.

Nickel led the gains of base metals as macro sentiments recovered after US dollar fell back. After the day trading was closed on Tuesday, the market sentiment was perturbed by the news calling on Indonesian government to limit the smelting plant construction and exports of the NPI and FeNi with low added value. However, Indonesian government has not carried out clear policy. The news is still worth attention as exporting nickel products with higher added value has been Indonesia’s policy orientation in recent years. Nickel prices may remain high amid bullish news. Today’s focus will be whether SHFE nickel can break through 133,000 yuan/mt.

Market commentary Copper Aluminium Lead Zinc Tin Nickel

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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