SHANGHAI, Jul 5 (SMM) – SHFE and LME base metals closed mixed amid expected more interest rate hikes across the globe. The President of the German Central Bank opposed the ECB's anti-fragmentation move, saying more rate rises than expected will be needed.

LME copper shed 1.06%, aluminium fell 0.22%, lead gained 0.78%, and zinc rose 1.35%.

SHFE copper shed 0.62%, lead lost 0.13%, and zinc rose 1.61%.

Copper: LME copper opened at $8,038.5/mt yesterday and fell to $7,957/mt after rising to $8,060/mt. At last, the prices closed at $7,970/mt, down by $85/mt, or 1.06%. The trading volume was 10,900 lots, and open interest stood at 233,000 lots. SHFE copper opened at 61,090 yuan/mt in overnight trading and rose rapidly to 61,360 yuan/mt after falling to 60,470 yuan/mt. At last, the prices closed at 60,860 yuan/mt, down by 380 yuan/mt, or 0.62%. Trading volume decreased by 88,200 lots to 64,200 lots, and open interest stood at 154,000 lots.
The PMI of ISM manufacturing in the US recorded 53 in June, the lowest since June 2020, while it is expected to be 54.9, and the previous reading was 56.1. The new order index dropped below 50, which is consistent with the trend of other indicators. Besides, employment also declined. (Bearish ☆) Standard Chartered believed that the Reserve Bank of Australia will raise the interest rate by 50 basis points to 1.35%, and the Bank of Israel announced that it will raise the benchmark interest rate by 0.5 percentage point to 1.25% to cope with the rising inflation rate in the country. (Bearish ☆) On July 4, spot premiums of copper cathode in the Shanghai market stood at 90-140 yuan/mt over the 2207 contract. The average premium was 115 yuan/mt, 5 yuan/mt higher than the previous trading day. On the second trading day of July, the falling futures prices to around 61,500 yuan/mt failed to attract downstream buyers, and traders still purchased on rigid demand. However, due to the lack of supply, some cargo holders were reluctant to sell, resulting in great differences between buyers and sellers and limited market transactions. The market shall keep an eye on the guidance of the spread between the front-month and next-month contracts on the premiums and the inflow of imported copper when the import window opens.

LME copper will trade between $7,990-8,090/mt today; SHFE copper prices are expected to move between 60,900-61,500 yuan/mt. Spot premiums are likely to fluctuate between 80-150 yuan/mt.

Aluminium: The most-traded SHFE 2208 aluminium contract opened at 19,000 yuan/mt overnight and touched a low of 18,875 yuan/mt before closing at 19,040 yuan/mt. The contract has climbed to the 5-day moving average, but still faced upward pressure.

LME aluminium opened at $2,475/mt on Monday and closed at $2,463/mt, down 0.22%.

Aluminium supply is still on the rise. Aluminium ingot social inventory has stopped falling, while aluminium billet inventory rose 2,300 mt from last Thursday. Consumption is gradually weakening in the off-season. The most-traded SHFE 2208 aluminium contract is expected to remain weak and move between 18,700-19,300 yuan/mt today. 

Lead: LME lead opened at $1,937/mt and closed at $1,945/mt overnight, up 0.78%, after hitting the lowest point of $1,909.5/mt and the highest point of $1,960/mt. 

The most-traded SHFE 2208 lead contract opened at 15,045 yuan/mt and fell to 14,955 yuan/mt in the early stage, but then rebounded and closed at 15,025 yuan/mt amid the increase of LME lead, a decrease of 0.13%.

Zinc: LME zinc closed at $3,086/mt on Monday, up $41/mt or 1.35%. The open interest fell 105 lots 201,000 lots. LME zinc is expected to move between $3,080-3,130/mt today. Overnight LME inventory added 525 mt to 83,325 mt.

The most traded SHFE 2208 zinc contract closed at 23,085 yuan/mt overnight, up 365 yuan/mt or 1.61%. The open interest rose 2,845 lots to 115,000 lots. SHFE zinc is expected to move between 22,800-23,300 yuan/mt, and domestic Shuangyan zinc in premiums of 80 yuan/mt over SHFE 2208 contract. The SHFE/LME price ratio rose to 7.22, and the import profits were as high as 1,137.1 yuan/mt, indicating the opening of import window for overseas ore. However, after taking into account the shipping cycle, the supply tightness of domestic ore could hardly ease.

Overnight: Eurozone monthly PPI stood at 0.7% in May, narrowing again from previous 1.20%. The President of the German Central Bank opposed the ECB's anti-fragmentation move, saying more rate rises than expected will be needed. Oil prices rose as supply concerns over Organization of the Petroleum Exporting Countries (OPEC) production reductions, Libyan unrest and sanctions against Russia outweighed fears of a global demand recession.

Tin: Domestic tin inventory under SHFE warrants increased slightly due to poor demand in the spot market. LME tin inventory also rose slightly. The import profit window showed signs of opening, and there were limited quotations for imported tin in the spot market. SHFE tin hovered narrowly at below 200,000 yuan/mt overnight. A large amount of capital flowed out of SHFE tin market. Given the strong caution in the market, SHFE tin will probably move sideways in the short term.

Nickel: On the supply side, affected by the fluctuations in nickel prices, traders generally held a wait-and-see attitude, and the delivery of Jinchuan nickel was less than expected, so the Jinchuan nickel supply in Shanghai was scarce. In terms of NPI, the transaction prices kept declining due to traders' and the NPI plants’ dumping of goods. As for the costs, according to the current transaction price, the NPI plants suffered losses, and the supply remained surplus. In terms of nickel sulphate, the inquiry of downstream precursor factories was active, but the supply of nickel sulphate small orders was insufficient, and the sources of small orders in the market were less. On the demand side, the pandemic situation in Wuxi over the weekend seriously affected the normal trading of the market. Typhoon Chaba cast a limited impact on the Foshan market, and the traffic basically returned to normal. In terms of alloys, downstream manufacturers generally held a bearish attitude towards nickel prices. Besides, except for the military industry, the order volume of the alloy was small this year, and the overall demand was weak. To sum up, the current demand for pure nickel remains poor even though the downstream purchases on rigid demand, while the supply of primary nickel is expected to be sufficient. Therefore, nickel prices will remain rangebound at low 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.]