SMM Morning Comments (Jun 15): Base Metals Closed With Gains Given That The Fed Kept Interest Rates Unchanged

SHANGHAI, Jun 15 (SMM) – LME and SHFE base metals closed with gains overnight

Copper: LME copper closed with a gain of 1.01% at $8,528/mt overnight. Trading volume stood at 22,000 lots. Open interest stood at 254,000 lots. The most active SHFE 2307 copper contract finished at 68,160 yuan/mt overnight, up 0.44%. Trading volume was 29,000 lots and open interest stood at 188,000 lots. On the macro front, the Federal Reserve kept interest rates unchanged as expected, but hinted that borrowing costs would rise another 50 basis points by the end of December. The US dollar index rebounded after falling. In terms of fundamentals, since the Federal Reserve announced the CPI data, copper prices have jumped higher. Yesterday, copper prices remained at around 68,000 yuan/mt, depressing downstream buying interest. Spot quotes fell. Sellers refrained from selling with prices lower than the delivery price. The overall transaction was poor. In terms of consumption, copper prices surged to high levels amid the traditional off-season. It is expected that processing companies will purchase as required. Copper prices are expected to remain strong as the Fed suspended interest rate hike in June.

Aluminium: Overnight, the most-traded SHFE 2307 aluminium contract opened at 18,530 yuan/mt, and rose to 18,610 yuan/mt, and finally closed at 18,505 yuan/mt, with its low of 18,490 yuan/mt, down 32 yuan/mt or 0.17%.

LME aluminium opened at $2,230/mt on Wednesday, with its low and high at $2,230.5/mt and $2,262.5/mt respectively before closing at $2,254/mt, a rise of $22/mt or 0.99%.

Market is expecting economic stimulus policies. Fundamentals: The operating aluminium capacity in China will continue to grow in June, sparking fears of oversupply in the third quarter. Some aluminium capacity in Yunnan may be resumed in late June as hydropower supply has picked up, but the nearly 2 million mt of idled capacity in the province is unlikely to be fully restarted in the short term.

Lead: Overnight, LME lead opened at $2,081/mt, and finally closed at $2,118/mt, up $36/mt or 1.73%.

The most-traded SHFE 2307 lead contract opened at 15,380 yuan/mt, and dipped to 15,320 yuan/mt, and finally closed at 15,375 yuan/mt, up 50 yuan/mt, or 0.33%.

On the macro front, LME non-ferrous metals hiked, boosted by the falling US dollar index amid stable interest rate.

Zinc: LME zinc prices closed with gains on Wednesday. LME zinc stocks fell 1,775 mt to 83,100 mt yesterday. Macro sentiment improved, and a softer US dollar lifted LME zinc prices.

SHFE zinc also rose overnight, with support from the 5-day moving average. The US Fed pausing interest rate hike boosted sentiment. Yet, the Fed may still raise rate in the future. There may be downward pressure on zinc prices after positive macro sentiment fades and due to poor fundamentals.

Tin: Yesterday night, affected by the sharp decline in US May PPI annual rate, the market believed that the Fed will suspend interest rate hikes and thus SHFE 2307 tin contract prices gradually rose and closed at 217,690 yuan/mt, up 2.96%.

Nickel: Nickel prices rose yesterday. The unadjusted CPI rate announced by the US on June 13 was 4.0%, slightly lower than the predicted value. It shows that inflation has eased and the expectation of hiking interest rates in June has weakened. On the supply side, the new pure nickel production lines were put into operation as scheduled. And output is ramping up during the year. According to SMM data, affected by the rise in the SHFE nickel prices, the spot premiums fell. But the absolute price was still high yesterday, arousing fears among downstream companies. The spot market saw scarce transactions as a result. To sum up, the rise in nickel prices was mainly affected by the macro aspect. If the fundamentals fail to support the bullish sentiment, nickel price may still decline in the near term.

[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.]