SMM Morning Comments (Jul 9): Shanghai base metals were mixed as investors looked ahead to China’s inflation data

Published: Jul 9, 2021 10:00
Shanghai base metals were mostly higher on Friday morning as investors looked ahead to the release of China's inflation data. Meanwhile, their counterparts on the LME advanced across the board.

SHANGHAI, Jul 9 (SMM) — Shanghai base metals were mostly higher on Friday morning as investors looked ahead to the release of China's inflation data. Meanwhile, their counterparts on the LME advanced across the board.

Shanghai base metals closed mixed in overnight trading. Copper slid 0.26%, tin declined 0.2% and aluminium weakened 0.03%, while nickel climbed 0.1%, zinc rose 0.36% and lead increased 0.35%.

The LME complex performed similarly on Thursday. Nickel climbed 0.3%, tin rose 0.3% and lead increased 0.31%, while copper slid 1.24%, zinc declined 0.52% and aluminium weakened 1.49%.

Copper: Three-month LME copper fell 1.24% to end at $9,328/mt on Thursday, and is likely to trade between $9,300-9,380/mt today.

The most-active SHFE 2108 copper contract went down 0.67% to close at 68,560 yuan/mt in overnight trading, and it is expected to move between 68,300-68,900 yuan/mt today, while spot premiums will be seen at 110-170 yuan/mt.

According to overnight US economic data, US jobless claims stood at 373,000 last week, slightly higher than the previous value, and the labor market still recovered. In the minutes of the meeting in June, the Federal Reserve sent a signal of turning to a more hawkish position. The expectation of tightening liquidity strengthened investors' cautious mood, the recent spread of COVID-19 mutant virus aggravated the worries about the economic prospects. At night, US stocks fell the most in the past three weeks. Negative sentiment affected the weakening of commodities and copper futures dropped.

Aluminium: Three-month LME aluminium fell 1.49% to close at $2,450.5/mt on Thursday. It is expected to trade between $2,410-2,480/mt today.

The most-liquid SHFE 2108 aluminium contract fell 0.35% to settle at 18,750 yuan/mt on Thursday night, and is expected to trade between 18,500-18,900 yuan/mt today.

According to overnight US economic data, the number of jobless claims came in at 373,000 last week, slightly higher than the previous value, and the recovery of the labor market was still slow. In the minutes of the meeting in June, the Federal Reserve sent a signal of turning to a more hawkish position. The expectation of tightening liquidity strengthened investors' cautious mood, and the recent spread of COVID-19 mutant virus aggravated the worries about the economic prospects. At night, US stocks fell the most in the past three weeks. The negative sentiment affected the weakening of bulk commodities, and the center of gravity of SHFE and LME aluminium contracts shifted downward. On fundamentals, social inventories of aluminium ingots continued to decrease, but the consumption of profiles in construction and other sectors weakened, and aluminium billet stocks continued to pile up. The overall domestic aluminium spot gave limited boost to aluminium contracts. Output of domestic aluminium rose slowly in July, and the support from overall fundamentals on aluminium price declined. The changes of domestic aluminium ingot social inventories and the impact of macro policies on aluminium will be monitored. It is expected that Shanghai Aluminum will remain weak, stable and volatile today.

Zinc: Three-month LME zinc fell 0.52% to close at $2940/mt on Thursday. Zinc stocks at LME-listed warehouses fell 275 mt to 251,300 mt. The minutes of the Federal Reserve meeting confirmed that it planned to tighten monetary policy earlier than expected, which was compounded by the rebound of multinational mutant viruses and the lower-than-expected number of initial jobless claims in the US. The contract is likely to trade between $2,910-2,960/mt today.

The most-liquid SHFE 2108 zinc contract rose 0.18% to end at 22,270 yuan/mt in overnight trading. Overnight bullish sentiment pushed SHFE zinc up, and the overall market was still volatile. Under high zinc prices, the spot market turnover was tepid, social inventories were likely to pile up, and the supply continued to increase with marginally weakened consumption. The SHFE zinc contract is expected to move between 21,700-22,200 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be seen higher at 230-240 yuan/mt.

Lead: Three-month LME lead settled 0.37% higher at $2298/mt on Thursday. Overnight, the US dollar index weakened all the way, and LME nonferrous metals generally closed up. In this atmosphere, LME Lead rebounded and once again broke through $2,300/mt. Whether the contract could continue to fluctuate at a high level, and stand firm at $2,300/mt will be monitored today.

The most-active SHFE 2108 lead contract went up 0.35% to close at 15,780 yuan/mt on Thursday night. Domestic consumption demand for lead batteries was limited amid tepid spot trading. Combined with this week's social inventory accumulation expectation, the contract is slightly under pressure. Whether the contract could continue to make up for the increase and break through the pressure level of 15,800 yuan/mt still should be monitored.

Tin: The most-liquid SHFE 2108 tin contract fell 0.2% to end at 216,410 yuan/mt on Thursday night. Prices kept fluctuating at a high level, the range continued to narrow, and transaction activity was flat. Pressure above will be seen from 218,500 yuan/mt today. Support below will be seen from 214,000-214,500 yuan/mt today.

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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