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SMM Morning Comments (Jun 13): Base Metals Closed Mostly with Losses on US Inflation Data That is Still High
Jun 13, 2022 10:00CST
Source:SMM
Shanghai and LME base metals closed mostly with losses amid rising US dollar index as US CPI in May announced last Friday rose rapidly, recording the highest annual increase in nearly 40 and a half years.

SHANGHAI, Jun 13 (SMM) - Shanghai and LME base metals closed mostly with losses amid rising US dollar index as US CPI in May announced last Friday rose rapidly, recording the highest annual increase in nearly 40 and a half years.

LME copper slid 1.81%, aluminium lost 2.81%, lead fell 2.5%, and zinc shed 2.01%.

SHFE copper fell 0.68%, aluminium slid 1%, lead lost 0.13%, and zinc shed 0.5%.

Copper: Last Friday, LME copper opened at $9,566/mt and stopped falling and stabilised after dropping to $9,415/mt. At last, the prices closed at $9,435/mt, down 1.81%. Trading volume was 13,000 lots, and open interest stood at 235,000 lots.

SHFE 2207 copper contract opened at 72,300 yuan/mt last Friday and stopped falling and stabilised after dropping to 71,970 yuan/mt. At last, the prices closed at 72,040 yuan/mt, down 0.68%. Trading volume was 36,000 lots, and open interest stood at 148,000 lots.

On the macro front, the US CPI in May announced last Friday rose rapidly, recording the highest annual increase in nearly 40 and a half years. Under the background of high inflation in the US, the market's expectation of the Fed to increase the interest rate rises again. Last Friday, the US dollar index rebounded sharply, and copper futures fell under pressure.

In the spot market, approaching the delivery of the 2206 contract, the spread between the front-month and next-month contracts hovered around 100 yuan/mt in the backwardation structure, which suppressed the trading of the market to some extent. Last week, the futures prices stood above 72,500 yuan/mt, restraining the downstream purchasing. The spot premiums stabilised as the overall market trading was limited. The market should pay attention to the flowing of cancelled warrants of LME Asian warehouses into China, and shall keep an eye on the trading opportunities that are given by the change of spread between the front-month and next-month contracts.

LME copper will trade between $9,300-9,400/mt today; SHFE copper prices are expected to move between 71,500-72,100 yuan/mt. Spot premiums are likely to fluctuate between 50-180 yuan/mt.

Aluminium: The most-traded SHFE 2207 aluminium contract opened at 20,480 yuan/mt at last Friday’s night session and rose to 20,535 yuan/mt before closing at 20,370 yuan/mt, down 205 yuan/mt or 1%.

LME aluminium opened at $2,760/mt last Friday and closed at $2,682.5/mt, a drop of $77.5/mt or 2.81%.

On the supply side, aluminium smelters are sticking to their output increase plans. On the demand side, downstream consumption has improved, allowing social inventories to continue to fall. In the spot market, some sellers held their offers firmly last Friday. However, the 20-day moving average of spot buying index is still in a downward trend. It is expected that the short-term aluminium prices will remain rangebound.

Lead: LME lead ended 2.5% lower at $2,142/mt on June 10 after opening at $2,182.5/mt and trending lower to $2,136/mt due to the rising US dollar index. The open interest increased by 140 lots to 96,387 lots.

The most-liquid SHFE 2207 lead contract fell 0.13% at 15,010 yuan/mt, after dropping to the lowest level at 14,920 yuan/mt and briefly hitting the highest point at 15,040 yuan/mt. The open interest increased by 2.325 lots to 53,671 lots.

Zinc: LME zinc closed at $3,699.5/mt last Friday, down $76/mt or 2.01%. The open interest fell 896 lots to 213,000 lots. LME zinc is expected to move between $3,680-3,730/mt today. Overnight LME inventory lost 1,000 mt to 83,800 mt.

The most traded SHFE 2207 zinc contract closed at 26,030 yuan/mt last Friday night, down 130 yuan/mt or 0.5% overnight. The open interest added 1,138 lots to 108,000 lots. SHFE zinc is expected to move between 25,900-26,400 yuan/mt, and 0# Shuangyan zinc in discounts of 20 yuan/mt over SHFE 2207. On the supply side, zinc concentrate TCs kept falling amid ore supply tightness, and some smelters carried out routine maintenance. On the consumption side, the operating rates of the three major downstream sectors were significantly lower than the same period last year, indicating lasting consumption weakness. To sum up, zinc prices are unlikely to rise or fall steeply on the currently fundamentals.

Last Friday, the U.S. CPI rose 8.6% year-on-year, and high inflationary pressure reinforced the Fed's interest rate hike expectations. The People’s Bank of China: credit and social financing rebounded, and the financial support for the real economy increased; China May CPI dropped MoM, while PPI growth continued to slow down. General Administration of Market Regulation: to investigate and deal with price infractions such as price gouging.

Tin: Domestic tin ingot social inventory rose as expected due to poor demand in the spot market and upcoming delivery of futures contract. Overseas LME tin inventories were little changed. The import profit window is still closed, and the market quotations of imported tin have decreased significantly. The most-traded SHFE tin contract went down rapidly after opening lower at last Friday’s night session. Large amounts of capital flowed out of the most-traded SHFE tin contract as some investors began to roll their positions onto distant month contracts. In light of the cautious sentiment, SHFE tin is expected to move sideways before delivery of the front-month contract.

Nickel: Last Friday, the most-traded SHFE 2207 nickel contract opened at 216,000 yuan/mt, and fell to 211,000 yuan/mt, with the lowest traded price standing at 210,520 yuan/mt. At last, the prices closed at 210,940 yuan/mt, a decrease of 2.69% from the previous trading day. Trading volume was around 50,000 lots, and open interest decreased by 5,156 lots to 56,887 lots. On the fundamentals, the supply became sufficient as the pure nickel downstream demand was weak, and the costs of nickel sulphate dropped. Besides, the prices of NPI kept falling due to the weak downstream demand. On the demand side, the demand from new energy and stainless steel was poor, resulting in the falling raw material prices. In the long run, if the production resumption of the precursor is optimistic, the nickel salt supply will once again support the prices. In addition, the inventory of pure nickel warrants is low, and the sources of deliverable goods are still tight, so the nickel price will unlikely to drop. The nickel prices are expected to remain rangebound at high levels.

[Disclaimer: The above representation and data is based on market information SMM believes to be reliable at the time of acquiring as well as the comprehensive assessment by SMM research team, and any and all information provided in this article is for reference only. This article does not constitute a direct recommendation for investment or any decisions in any form and clients shall act on their own discreet and any decisions made by clients are not within the responsibility of SMM.]


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