SMM Morning Comments (Jun 1): Base Metals Closed Mostly with Losses, US Fed Sends Hawkish Signals

SHANGHAI, Jun 1 (SMM) – LME and SHFE base metals closed mostly with losses overnight.

Copper: LME copper closed at $8,110/mt in overnight trading, a drop of 0.06%. Trading volume was 15,000 lots and open interest stood at 257,000 lots. The most active SHFE 2307 copper contract finished at 64,850 yuan/mt overnight, down 0.06%. Trading volume was 41,000 lots and open interest stood at 193,000 lots. On the macro front, an official of the Federal Reserve recently warned that any decision made by the Federal Reserve to maintain the overnight benchmark interest rate unchanged at the upcoming meeting does not mean that the tightening of monetary policy has been completed. This narrowed the gains in the dollar. In addition, a procedural vote on a bill to suspend the US debt ceiling has received enough votes in the House of Representatives to pass. In terms of fundamentals, the spot quotes fell yesterday due to the inflows of imported copper and aggressive stock liquidation. However, downstream companies were more cautious in purchasing, and some companies worked through inventory due to high premiums. The overall transaction in the spot market has weakened. In terms of consumption, market demand weakened at the end of the month, and it is expected that market activity will recover in June. In terms of price, the guidance from the recent macro and fundamental is not strong, and copper prices are expected to remain rangebound.

Aluminium: The most-traded SHFE 2307 aluminium contract opened at 18,000 yuan/mt overnight, with its low and high at 17,945 yuan/mt and 18,160 yuan/mt before closing at 18,115 yuan/mt, up 180 yuan/mt or 1%. LME aluminium opened at $2,227.5/mt on Wednesday, with its low and high at $2,201/mt and $2,249/mt respectively before closing at $2,247/mt, up $19/mt or 0.85%.

On the macro level, although Biden and McCarthy have reached an agreement on the debt ceiling issue, the plan still needs to be passed by Congress. At present, many Republican lawmakers have raised objections, and the x-date is gradually approaching. The market is still worried about the debt ceiling issue. PCE data shows that US prices are still firm. The Fed is expected to raise interest rates in June. Auminum ingot social inventories continued to fall. Auminum prices have returned to above 18,000 yuan/mt, but further rise depends on whether fundamentals can improve.

Lead: Overnight, LME lead prices opened at $2,067.5/mt and closed at $2,011/mt after hitting the highest point at $2,069.5/mt and the lowest point at $2,007.5/mt, down 2.78%. The open interest decreased 1,349 lots to 115,000 lots compared with the previous session, while the trading volume increased 2,776 lots to 6,220 lots.

Overnight, the most-traded SHFE 2307 tin contract opened at 15,170 yuan/mt and closed at 15,110 yuan/mt after hitting the highest point at 15,180 yuan/mt and the lowest point at 15,100 yuan/mt, down 0.62%. The open interest increased 3,784 lots to 60,828 lots compared with the previous trading day, and the trading volume increased 1,310 lots to 37,495 lots.

Zinc: LME zinc stocks increased 13,175 mt to 87,500 mt, which exerted great pressure on LME zinc prices. Overnight, SHFE zinc prices declined amid the poor overseas market and weak market sentiment. In the spot market, given the increasing imports of zinc ingots and weak downstream demand, the momentum of zinc prices was limited.

Tin: Yesterday night, SHFE 2307 tin contract prices rebounded rapidly after plunging to 203,600 yuan/mt, and finally closed at 206,700 yuan/mt, down 0.38%.

Nickel: Spot premiums of Norilsk nickel fell sharply yesterday due to large arrivals and sell-off. The market share of domestic NPI may be eroded as Indonesia plans to defer export tariffs on nickel products. Stainless steel futures fell, while spot prices were stable. Nickel prices will face downside risks due to ample supply.  

[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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