SMM Evening Comments (Jun 20): Shanghai Nonferrous Metals Closed with Losses amid Diffusing Bearish Sentiment

SHANGHAI, Jun 20 (SMM) – Shanghai nonferrous metals closed all with losses today. US employment market performed well, which, however, aggravated market worries over more aggressive interest rate hikes in the future. Hence, the market was full of bearish sentiment though the US dollar index fell.

Shanghai copper shed 2.31%, aluminium lost 0.84%, lead declined 0.2%, zinc fell 1.54%, tin shed 4.01%, and nickel dropped 0.92%.

Copper: The most-traded SHFE 2207 copper closed down 2.31% or 1,610 yuan/mt at 68,000 yuan/mt, with open interest down 3,184 lots to 125,733 lots.

On the macro front, many governments have announced to raise the interest rate, heightening market worries of economic recession. On the fundamentals, the downstream refrained from purchasing after copper prices dropped below 70,000 yuan/mt as they feared that the prices may decline further. The terminal demand, based on orders in real estate and home appliances, remained muted. The cancelled warrants from LME Asian warehouses started to flow into China. Spot premiums stood around 280 yuan/mt despite falling copper prices.

Aluminium: The most-traded SHFE 2207 aluminium closed down 0.84% or 165 yuan/mt to 19,510 yuan/mt, with open interest down 13,670 lots to 136,384 lots.

On the fundamentals, domestic aluminium supply continued to rise, with operating aluminium capacity standing at a high of 40.7 million mt, pressuring aluminium prices. On the consumption side, aluminium processing companies ramped up their production slightly. And coupled with active downstream restocking amid diving aluminium prices, aluminium ingot social inventory kept dropping. In the near term, aluminium prices are unlikely to rebound significantly with supply pressure and gloomy terminal demand in sectors like real estate.

Lead: The most-traded SHFE 2207 lead closed down 0.2% or 30 yuan/mt at 14,960 yuan/mt, with open interest down 2,601 lots to 49,728 lots.

SHFE lead prices dropped, and goods holders quoted according to the market dynamics, and the discounts in some places narrowed. In addition, the supply in south and north China differed greatly amid production cuts across primary and secondary lead smelters. The downstream purchased on rigid demand, and the transactions with small orders were lacklustre.

Zinc: The most-traded SHFE 2207 zinc closed down 1.54% or 395 yuan/mt at 25,285 yuan/mt, with open interest down 6,442 lots to 87,062 lots.

US employment market performed well, which, however, aggravated market worries over more aggressive interest rate hikes in the future. Hence, the market was full of bearish sentiment though the US dollar index fell. In addition, the downstream in China recovered slowly, and the acceptance of high zinc prices was low. In addition, refined zinc exports in May rose palpable, which, coupled with sustained ore shortage in China, underpinned zinc prices. Zinc prices are likely to remain rangebound in the near term.

Tin: The most-traded SHFE 2207 tin closed down 4.01% or 9,940 yuan/mt at 238,160 yuan/mt, with open interest down 4,638 lots to 30,491 lots.

In the spot market, with the gradual implementation of smelters’ maintenance plans, less upstream players quoted in morning trade, and those who made quotes held firm to the prices. However, with the futures prices falling, downstream players stood wait-and-see, and market shipment was sluggish today. SHFE warrants fell 224 mt to 3,331 mt, and LME tin inventory added 235 mt to 3,260 mt as of June 17, and LME tin inventory added 70 mt to 3,330 mt today.

Nickel: The most-traded SHFE 2207 nickel closed down 0.92% or 1,820 yuan/mt at 195,290 yuan/mt, with open interest down 4,465 lots to 54,616 lots.

On the fundamentals, pre nickel supply tightness is expected to ease in the near term, but downstream sectors, including stainless steel and alloy, remained sluggish. SHFE nickel prices are expected to remain rangebound with downward risks this week.

[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.]