SMM Morning Comments (Jul 14): Shanghai base metals were mixed as rising US inflation weighed on sentiment

SHANGHAI, Jul 14 (SMM) — Shanghai base metals were mostly lower on Wednesday morning as investors digested hotter-than-expected U.S. inflation data and corporate earnings. Meanwhile, their counterparts on the LME declined across the board.

Shanghai base metals closed mixed in overnight trading. Copper slid 0.22%, zinc declined 0.72% and lead weakened 0.76%, while nickel climbed 0.26%, tin rose 0.24% and aluminium increased 0.31%.

The LME complex performed similarly on Tuesday. Nickel climbed 0.27%, tin rose 1.36% and aluminium increased 1.76%, while copper slid 0.57%, zinc declined 0.39% and lead weakened 0.84%.

Copper: Three-month LME copper fell 0.57% to end at $9,401.5/mt on Tuesday, and is likely to trade between $9,320-9,400/mt today.

The most-active SHFE 2108 copper contract went down 0.33% to close at 68,970 yuan/mt in overnight trading, and it is expected to move between 68,600-69,200 yuan/mt today.

Overnight, the US CPI in June rose by 5.4% year on year, and the core CPI was the highest in 30 years. Higher-than-expected inflation data reinforced people's speculation that the reasons for the Fed's tightening policy are increasing. Yesterday, the US dollar and US bond yields climbed together, and copper futures were under pressure. Recently, the market is still running amid economic recovery and tightening expectations of the Federal Reserve, waiting for the inflation data of the US this week and the speech of the Federal Reserve Chairman in Congress.

Aluminium: Three-month LME aluminium rose 1.76% to close at $2,538/mt on Tuesday. The contract is expected to trade between $2,480-2,550/mt today.

The most-liquid SHFE 2108 aluminium contract rose 0.31% to settle at 19,240 yuan/mt on Tuesday night, and is likely to trade between 19,000-19,500 yuan/mt today.

The global liquidity situation has not changed. 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. Domestic aluminium output rose slowly in July, and the support from overall fundamentals on aluminium prices showed a decline. The inflection point of the increase of stocks and the change of long and short position sentiment will continue to be monitored in the later period.

Zinc: Three-month LME zinc fell 0.39% to close at $2,937/mt on Tuesday. Zinc stocks at LME-listed warehouses fell 1,500 mt to 249,575 mt. Overnight, the US dollar index and US bond yields climbed all the way, putting pressure on the trend of zinc. The CPI of the US in June hit the biggest increase in 13 years, the inflationary pressure continued to increase, and the market worried about reducing bond purchases warmed up. Fed speech will be monitored in the near term. The contract is likely to trade between $2,900-2,950/mt today.

The most-liquid SHFE 2108 zinc contract fell 0.72% to end at 21,940 yuan/mt in overnight trading. On fundamentals, the supply at the ore and smelting ends increased month on month in June, while in the off-season of consumption, the consumption for various sectors decreased slightly month on month, and social inventories continued to increase, indicating that the inventory inflection point may have appeared, and the fundamental support was weak. Macro guidelines will be monitored in the near term. 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 170-190 yuan/mt.

Nickel: The most-active SHFE 2108 nickel contract rose 0.26% to close at 140,310 yuan/mt on Tuesday. Nickel contracts fluctuated widely with strong fundamental support. However, if there is no obvious bullish news in the near term, the resistance of nickel prices to continue to rise is still relatively large. It will keep fluctuating around 140,000 yuan/mt today, and the capital operates frequently in the day with large amplitude. Three-month LME nickel climbed 0.27% to close at $18,725/mt on Tuesday.

Lead: Three-month LME lead settled 0.84% lower at $2,308.5/mt on Tuesday. LME lead stocks continued to decrease, and the fundamentals of overseas lead market were relatively optimistic. Whether the contract could make up the increase and stand firm above the five-day moving average and $2,300/mt will be monitored today.

The most-active SHFE 2108 lead contract went down 0.1% to close at 15,615 yuan/mt on Tuesday night. Under the background that domestic lead consumption tends to be tepid, the effect market is positive in warehouse delivery. It is expected that the goods delivered will arrive at the warehouse one after another, and the accumulated expectation continues. The contract will test support from 15,500 yuan/mt today.

Tin: Three-month LME tin closed up 1.36% at $32,385/mt on Tuesday.

The most-liquid SHFE 2108 tin contract rose 0.24% to close at 220,920 yuan/mt on Tuesday night. It is expected to trade between 219000-222000 yuan/mt.