SMM Morning Comment For SHFE Base Metals (June 29)

SHANGHAI, Jun 29 (SMM) –

Copper

LME copper prices closed at $8,239.5/mt last evening, down 1.32%. Trading volume was 20,000 lots and open interest stood at 262,000 lots. SHFE 2308 copper contract finished at 67,310 yuan/mt last evening, down 0.68%. Trading volume was 40,000 lots, and open interest stood at 187,000 lots. At the group meeting of the four central banks in Europe, Britain, the United States and Japan, Powell said that he did not rule out the possibility of the Fed raising interest rates again at its next meeting in July, and reiterated that it is necessary to raise interest rates twice this year. European Central Bank President Christine Lagarde said that there is still work to be done on inflation, and that there is not enough substantive evidence that underlying inflation is falling. A pause in interest rate hikes is not currently considered. In terms of fundamentals, the supply of available cargoes in the spot market in east China is tight, and the sellers held back their cargoes. Market transactions were relatively quiet at the end of the month and in the middle of the year. Inventories in south China continued to increase due to the relatively weak downstream consumption near the end of the month, and smelters liquidating inventories, lowering spot quotes. Trading will be still quiet in the near term. In terms of consumption, the market will gradually enter the off-season. Weak fundamentals and the hawkish stance of ECB and Federal Reserve lowered copper prices.

Aluminum

The most-traded SHFE 2308 aluminum contract opened at 18,065 yuan/mt overnight, with its low and high at 17,920 yuan/mt and 18,065 yuan/mt before closing at 17,975 yuan/mt. It fell by 100 yuan/mt, or 0.55%. LME aluminum opened at $2,192/mt on Wednesday, with its low and high at $2,163/mt and $2,212/mt respectively before closing at $2,176.5/mt, a drop of $16/mt or 0.73%.

There are growing expectations for interest rate hikes in the United States and Europe. Production resumption in Yunnan will also grow supply pressure. Aluminum ingot and billet stocks both rose after the Dragon Boat Festival due to poor demand. SHFE aluminum is expected to hover around 18,000 yuan/mt.

Lead

LME lead opened at $2,097/mt on Wednesday. During the Asian trading session, LME lead traded basically fluctuated between $2,080-2,095/mt. After entering the European session, the US dollar rose strongly, thus non-ferrous metals generally fell under pressure. LME lead fell to $2,068/mt, and finally closed at $2,078/mt, a decrease of 0.91%.
The most-traded SHFE 2308 lead contract opened at 15,470 yuan/mt overnight, and moved between 15,460-15,480 yuan/mt before closing at 15,460 yuan/mt, down 0.03%. Open interest rose 481 lots to 108,000 lots.

The central banks in the US, Europe and the UK all sent hawkish signals. The profits of industrial enterprises above designated size in China fell by 12.6% year-on-year in May, and the decline has narrowed for three consecutive months.
In terms of fundamentals, the SHFE/LME lead price ratio has recently expanded, thus the export window for lead ingots has been closed. Rising SHFE lead warrants will weigh on lead prices. Battery scrap costs remain high. Lead consumption is poor.

Zinc

Overnight, LME zinc closed at $2,374/mt, up $4/mt or 0.17%. Trading volume decreased to 5,413 lots, and open interest fell 323 lots to 181,000 lots. LME zinc inventory decreased by 425 mt to 77,825 mt, a drop of 0.54%. Overnight, the Fed's hawkish remarks put pressure on LME zinc prices.

The most active SHFE 2308 zinc contract lost 95 yuan/mt or 0.47% to settle at 19,930 yuan/mt in overnight trading. Trading volumes decreased to 39,887 lots and open interest fell 425 lots to 105,000 lots. The fundamentals of SHFE zinc have not changed much recently. Zinc prices fluctuated at high levels. The overall spot premiums moved at lows. Downstream buying interest was weak.

Tin

Overnight, SHFE 2307 tin contract fell rapidly to 210,000 yuan/mt, but then bounced back before moving sideways, closing down 0.65% at 212,240 yuan/mt.

Nickel

SHFE 2308 nickel contract opened at 159,150 yuan/mt overnight, and closed at 157,000 yuan/mt, down 1,540 yuan/mt. Trading volume increased by 9,680 lots, and open interest decreased by 5,173 lots. Expected supply increase, weak downstream demand and macro headwinds will leave nickel prices vulnerable to further decline.