SMM Morning Comments (Jun 24): Shanghai base metals rose across the board as US Markit PMI hit a new high

SHANGHAI, Jun 24 (SMM) — Shanghai base metals all went up on Wednesday night as the US June Markit PMI for manufacturing industry registered 62.6. LME base metals all rose as well.

In LME market, copper rose 2.36%, aluminium increased 0.33%, lead gained 0.74%, zinc closed 1.28% higher, and tin edged up 0.18%.

In SHFE market, copper advanced 1.33%, aluminium went up 0.72%, lead rose 0.84%, zinc added 0.88%, tin won 0.81%, and nickel increased 1.47%.

Copper: Three-month LME copper rose 2.36% to end at $9,487.5/mt on Wednesday night, and is expected to trade between $9,410-9,500/mt today.

The most liquid SHFE 2108 copper contract advanced 1.33% to settle at 69,500 yuan/mt last night, and is likely to trade between 69,100-69,700 yuan/mt today, with spot trading between a discount at 80 yuan/mt and a premium at 20 yuan/mt.

US June Markit PMI for manufacturing industry registered 62.6 last night, boosting the market confidence. US dollar index fell last night amid Powell’s playing down inflation concerns, which drove up copper futures. Macro factors will continue to dominate the market sentiment. Downstream spot purchase was suppressed by the futures rebound and capital pressure. Spot prices plummeted yesterday, and the inquires were scarce, leading to the overall discounts of spots without obvious price support.

Aluminium: Three-month LME aluminium increased 0.33% to close at $2,433/mt in the overnight trading yesterday, with open interest down 1,541 lots to 694,000 lots, and is expected to trade between $2,400-2,460/mt today.

The most traded SHFE 2108 aluminium contract went up 0.72% to end at 18,850 yuan/mt last night, with open interest up 13,542 lots to 211,000 lots, and is expected to trade between 18,600-19,000 yuan/mt today.

Lead: Three-month LME lead gained 0.74% to close at $2,190/mt on Wednesday night. Bears reduced positions to avoid risks amid the boosted base metals by the edging up dollar. LME lead may test $2,200/mt in the bullish market.

The most active SHFE 2108 lead contract rose 0.84% to end at 15,590 yuan/mt last night. Bulls increased positions and drove up the prices. Domestic lead ingot social inventories started to fall, which weighed on SHFE lead. Today’s focus will be the upper price line at 15,600 yuan/mt.

Zinc: Three-month LME zinc closed 1.28% higher at $2,896/mt on Wednesday night, with open interest up 1,385 lots to 257,400 lots. LME zinc stocks dropped 1,375 mt to 258,600 mt. US preliminary June Markit PMI for manufacturing industry and Powell’s hawkish statement drove up LME zinc. However, US sales of new houses fell short of expectation, which limited the price increase. LME zinc is expected to trade between $2,850-2,900/mt today.

The most liquid SHFE 2108 zinc contract added 0.88% to end at 21,875/mt last night, with open interest up 4,475 lots to 81,700 lots. SHFE zinc rebounded slightly amid rising LME prices. SMM zinc output is expected to be 513,200 mt in June, up 18,500 mt on the month, after the smelters in Yunnan gradually resume production. The support from the supply side will weaken amid the stable production at mines and the increased work at smelters. The consumption of galvanising and die casting weakened in the off-peak season, of which the orders declined. In addition, the release amounts of national reserves have been announced, so the social inventory may increase. Zinc prices may remain downward in the mid to long term. The August contract is expected to trade between 21,500-22,000 yuan/mt today, and the premiums of 0# domestic Shuangyan zinc are likely to be seen between 140-150 yuan/mt over July contract.

Tin: Three-month LME tin edged up 0.18% to settle at $30,425/mt on Wednesday night with open interest up 53 lots to 11,946 lots. LME tin stocks increased to 2,240 mt, alleviating the overseas supply pressure. However, the spot premiums remained high, and the liquidity was still tight. LME tin is expected to trade between $30,000-30,800/mt today.

The most active SHFE 2108 tin contract won 0.81% to end at 209,520 yuan/mt last night, with open interest down 279 lots to 40,864 lots. The market concerns of short spot supply boosted the tin prices, and SHFE tin is expected to trade between 205,000-210,000 yuan/mt today.

Nickel: Three-month LME nickel rose 1.74% to close at $18,080/mt yesterday. Powell’s statement and the PMI index at a record high boosted the market, and the overall non ferrous metals prices went up. Today’s focus will be the pressure line at $18,200/mt.

The most traded SHFE 2107 nickel contract increased 1.47% to end at 134,990 yuan/mt on Wednesday, and is expected to stand high today. The investors may leave the market after the prices hitting high levels, which may cause a short term decline.