SMM Evening Comments (Jun 23): Shanghai Nonferrous Metals All Closed with Losses amid Rising Worries over Economic Recession

SHANGHAI, Jun 23 (SMM) – Shanghai nonferrous metals closed all with losses as market players were increasingly worried about a potential economic recession after Federal Reserve Chairman Jerome Powell delivered a more hawkish speech yesterday.

Shanghai copper slid 2.33%, aluminium fell 1.22%, lead dropped 0.43%, zinc declined 1.59%, tin shed 2.83%, and nickel lost 5.08%.

Copper: The most-traded SHFE 2208 copper closed down 2.33% or 1,580 yuan/mt at 66,190 yuan/mt, with open interest up 4,754 lots to 126,060 lots.

On the macro front, at yesterday's congressional hearing, Federal Reserve Chairman Jerome Powell delivered a more hawkish sound, and market fears of a U.S. recession are also creeping up. Powell said the U.S. economy would be "extremely challenging" to achieve a "soft landing" and that a recession could occur as interest rates are raised to combat inflation. As fears of an economic slowdown will hurt energy consumption, oil prices plunged 3% on Wednesday.

In the spot market, after the futures prices recorded a single-day loss of more than 1,500 yuan/mt for two straight days, the purchasing interest subsided greatly. And the demand was even weaker as some downstream players have completed their restocking last week. In addition, some enterprises actively sold off to gain cash with financial pressure and invoice issues in the second half of the year, and spot premiums dropped quickly.

The market shall watch when copper prices will stop falling and the restocking demand by then.

Aluminium: The most-traded SHFE 2207 aluminium closed down 1.22% or 240 yuan/mt to 19,485 yuan/mt, with open interest down 12,623 lots to 94,277 lots.

The supply has been rising steadily, while the demand side was weaker than the same period last year despite some recovery. In addition, the downstream operating rates were further influenced by the recent high temperature. It is expected that aluminium prices will still carry downward potential in the near term with tightening macro environment and rising supply.

Lead: The most-traded SHFE 2207 lead closed down 0.43% or 65 yuan/mt at 15,080 yuan/mt, with open interest down 4,532 lots to 25,192 lots.

Lead futures prices dropped today, and the goods holds made shipments according to the market dynamics. The discounts narrowed slightly, and production of secondary lead in Anhui kept contracting. And lead ingot supply posted regional differences. The downstream in Zhejiang and Jiangsu purchased on demand from nearby, and transactions with small orders picked up slightly from yesterday.

Zinc: The most-traded SHFE 2208 zinc closed down 1.59% or 405 yuan/mt at 25,095 yuan/mt, with open interest up 8,229 lots to 89,890 lots.

On the macro front, multiple rate hike resolutions have suppressed the non-ferrous metals market. On the fundamentals, low LME zinc inventory in the Europe rattled the nerves of market players, and the supply shortage extended. The demand side stood weak, with operating rates in downstream sectors likely galvanising, die-casting and zinc oxide falling down. And market transactions stood weak though raw material prices dropped recently.

Tin: The most-traded SHFE 2207 tin closed down 2.83% or 6,660 yuan/mt at 229,000 yuan/mt, with open interest down 1,672 lots to 30,899 lots.

In the spot market, fewer upstream sellers made offers in morning trade when futures prices dropped, and smelters still held firm to the prices, with scarce transactions. SHFE warrants added 97 mt today to 3,180 mt. Import losses narrowed significantly as of closing in the afternoon, and imports based on SHFE 2207 were profitable.

Nickel: The most-traded SHFE 2207 nickel closed down 5.08% or 10,020 yuan/mt at 187,140 yuan/mt, with open interest up 2,788 lots to 57,632 lots.

On the fundamentals, pure nickel imports remained profitable, which even expanded to some extent, but sluggish downstream demand dragged on the customs clearance volume. On the demand side, due to problems like procurement cycle, the transactions in the alloy sector were low. To sum up, pure nickel market remained low in both supply and demand, and the prices are likely to fall further, coupled with a muted macro front.

[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.]