SMM Evening Comments (Jul 13): Shanghai nonferrous metals ended mixed after the record high of inflation expectation

SHANGHAI, Jul 13 (SMM) – SHFE nonferrous metals finished the day mixed today as the US one-year inflation expectations hit a record high, while domestic market was less impacted.

Tin led the gains to rise 1.23%, aluminium increased 0.31%, nickel gained 0.59%, while copper fell 0.35%, lead dropped 1.61%, and zinc lost 1.9%.

The ferrous complex closed mixed. Iron ore gained 3.29%, rebar lost 0.13%, and HRC stood stable.

Copper: The most traded SHFE 2108 copper contract finished the day 0.35% lower at 69,200 yuan/mt today, with open interest down 4,605 lots to 10,300 lots.

New York Fed stated that the mid-value of the one-year inflation expectations rose to 4.8% in June from the 4.0% in May, hitting a record high since 2013, which indicated the more uncertainty in the inflation results. US dollar went up on the news and metals prices fell. The market is waiting for this week’s US inflation data and US chairman’s speech on the congress, in order to look for the clues of reducing debt purchase. China imported 428,400 mt of unwrought copper and copper semis in June, down 3.88% from the previous month and 34.74% from the same period 2020, according to the General Administration of Customs. The imports totaled 2.79 million mt from January to June, down 1.6% on the year. The import window was basically closed in Q2. Although the SHFE/LME prices recovered in mid- to late-June and the losses narrowed to around 400 yuan/mt, the demand for customs clearance was not stimulated. Domestic inventories declined mainly due to the lower storage inflow. Operating rates of copper semis weakened, and the fundamentals had weak support to copper prices. The focus tonight will be whether the US CPI would fall from the peak in June and cool down the expectations of US Fed’s interest hikes.

Aluminium: The most traded SHFE 2108 aluminium contract ended 0.31% higher at 19,235 yuan/mt today, with open interest up 4,540 lots to 214,284 lots.

The global macro liquidity remained loose. Fundamental aluminium consumption have weakened with the approaching of the off-peak season, but the lead ingot inventories have not fully entered the accumulation period, while aluminium billet inventories increased slightly, supporting the aluminium prices. SHFE aluminium is expected to remain volatile at high levels in the short term and trade between 19,000-19,400 yuan/mt today.

Lead: The most active SHFE lead contract closed 1.61% lower at 15,630 yuan/mt today, with open interest up 2,662 lots to 62,781 lots.

Bears increased positions significantly amid flat downstream consumption near the settlement of July contract. Spot buyers cautiously purchased on rigid demand today, and the smelters’ discounts narrowed slightly. Social inventories are expected to gradually increase with the approaching of the settlement day, and bulls remained wait and see. Tonight’s focus will be whether SHFE lead can stabilise at the 20-day moving average of 15,650 yuan/mt.

Zinc: The most traded SHFE 2108 zinc contract lost 1.9% to end at 21,995 yuan/mt today, with open interest down 8,633 lots to 88,428 lots.

James Bullard, chairman of St Louis Fed, supports to implement the interest hike in late 2022, as he believes it is the time to tighten the Fed stimulus policies. It drove up US dollars, and the market was dominated by sentiments. On the other hand, People’s Bank of China (PBOC) stated that the Fed policy shift had relatively little impact on Chinese financial market. PBOC will carry out international macro policy coordination centered around Chinese market to improve the international economic recovery. Although the short-term macro policy is uncertain, zinc prices will adjust in fluctuation following the fundamentals.

Nickel: The most liquid SHFE 2108 nickel contract increased 0.59% to end at 140,500 yuan/mt, with the open interest up 9,680 lots to 143,446 lots.

Tin: The most traded SHFE tin contract rose 1.23% to hit a new high and close at 221,070 yuan/mt today, with open interest up 3,001 lots.

SHFE tin is in a long-term upward trend affected by the fundamental supply and demand, and technically there’s no obvious upper pressure after it broke through 220,000 yuan/mt. The prices are expected to keep rising without significant fundamental change. The continuity of the upward momentum will be the focus.