SMM Morning Comments (Jul 7): Shanghai base metals fell across the board with investors keeping a close eye on oil markets

SHANGHAI, Jul 7 (SMM) — Shanghai base metals declined across the board on Wednesday morning with investors keeping a close eye on oil markets after talks between members of the OPEC+ oil-producing alliance were abandoned. Meanwhile, their counterparts on the LME traded mixed.

Shanghai base metals fell across the board in overnight trading. Copper fell 2.8%, aluminium declined 1.73%, zinc shed 1.14%, tin weakened 3.33%, lead slid 0.76% and nickel dropped 3.33%.

The LME complex ended mostly lower on Tuesday. Nickel plunged 2.22% to lead the losses, zinc fell 0.8%, aluminium weakened 2.01%, copper decreased 2.13% and tin went up 0.3%, while lead added 0.35%.

Copper: Three-month LME copper fell 2.13% to end at $9,310/mt on Tuesday, and is likely to trade between $9,280-9,350/mt today.

The most-active SHFE 2108 copper contract went down 2.25% to close at 68,140 yuan/mt in overnight trading, and it is expected to move between 67,800-68,400 yuan/mt today, while spot premiums will be seen at 120–200 yuan/mt.

The expansion rate of service industry in the US in June was lower than expected, and the employment index of service industry fell to the lowest level in the year. US dollar rose sharply last night, causing widespread selling in the commodity market, and copper prices dropped. In addition, oil prices fell sharply overnight, WTI crude oil hit the biggest drop since the end of May, and copper futures were also dragged down by this. At present, copper prices have fallen back to the low point before the periodic rise, and the market is waiting for the latest minutes of the Federal Reserve's monetary policy meeting. It is expected that copper prices will have rebound and repair momentum at the low level, and will temporarily fluctuate.

Aluminium: Three-month LME aluminium fell 2.03% to close at $2,506/mt on Tuesday. The contract is expected to trade between $2,450-2,560/mt today.

The most-liquid SHFE 2108 aluminium contract fell 1.88% to settle at 18,800 yuan/mt on Tuesday night, and is likely to trade between 18,600-18,900 yuan/mt today.

The expansion rate of the US service industry in June was lower than expected, and the employment index fell to the weakest in the year. Goldman Sachs predicts that the probability of overheating is extremely small, and the Federal Reserve will not announce the reduction of the size to purchase bonds before December. Recently, the General Office of the CPC Central Committee and the General Office of the State Council issued the Opinions on Strictly Cracking down on Securities Illegal Activities in accordance with the Law, and issued a notice requesting all departments in various regions to conscientiously implement them in light of the actual situation.

Zinc: Three-month LME zinc fell 0.8% to close at $2,928/mt on Tuesday. Zinc stocks at LME-listed warehouses fell 175 mt to 252,125 mt. Overnight, the US dollar strengthened, and the expansion rate of service industry in the US was lower than expected in June. The employment index fell to the weakest in the year, and LME zinc declined under pressure. The contract is likely to trade between $2,910-2,960/mt today.

The most-liquid SHFE 2108 zinc contract fell 0.72% to end at 22,040 yuan/mt in overnight trading. The SHFE zinc contract is expected to move between 21,600-22,100 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be 240-250 yuan/mt.

Lead: Three-month LME lead settled 0.35% higher at $2,293/mt on Tuesday. The demand for overseas lead battery replacement has been hot, and the LME lead inventories have dropped by about 40%. Whether the contract could move above $2,300/mt will be monitored today.

The most-active SHFE 2108 lead contract went down 0.76% to close at 15,710 yuan/mt on Tuesday night. Domestic lead consumption is still flat amid relatively tepid spot trading, and stocks continue to pile up.

Tin: Three-month LME tin closed down 0.3% at $31,570/mt on Tuesday.

The most-liquid SHFE 2108 tin contract fell 1.64% to close at 215,630 yuan/mt on Tuesday night. Pressure above will be seen from 214,000 yuan/mt today. Support below will be seen from 218,600 yuan/mt today.