SMM Morning Comments (Jul 3): Base Metals Closed Mostly With Gains

SHANGHAI, Jul 3 (SMM) –Base metals closed mostly with gains

Copper: LME copper prices closed at $8,319.5/mt last Friday evening, a rise of 1.79%. Trading volumes were 17,000 lots and open interest stood at 261,000 lots. SHFE 2308 copper contract finished at 67,850 yuan/mt last Friday evening, up 1.1%. Trading volume was 35,000 lots, and open interest stood at 185,000 lots. On the macro front, economic data released last week showed that the core PCE price index in the United States in May was lower than market expectations, and consumer spending cooled. SMM data shows that as as of Friday June 30, SMM copper inventory across major Chinese markets stood at 99,100 mt, up 11,400 mt from Monday and up 15,900 mt from June 21. The total inventories decreased 27,100 mt from 126,200 mt in the same period last year. There were shipments arrivals of both imported copper and domestic copper in east China, which led to an increase in inventory; in South China, due to the approaching mid-year settlement, smelters liquidated stocks, while downstream buying interest was weak, growing inventories. In terms of consumption, as the mid-year settlement will end, demand is expected to increase. Due to the impact of recent US economic data, copper prices have fluctuated greatly. It is expected that copper prices will still be guided by macro sentiment in the short term and will strengthen.

Aluminum: The most-traded SHFE 2308 aluminium contract opened at 17,970 yuan/mt at last Friday’s night session, with its low and high at 17,965 yuan/mt and 18,045 yuan/mt before closing at 18,030 yuan/mt. It rose 40 yuan/mt or 0.22%. LME aluminium opened at $2,161/mt last Friday, with its low and high at $2,134/mt and $2,179/mt respectively before closing at $2,156/mt, a drop of $5/mt or 0.23%.

On the macro front, the U.S. Department of Labour showed that the number of initial jobless claims in the U.S. fell unexpectedly, and the final U.S. first-quarter GDP data released on the same day indicated that the economy was still resilient. China’s manufacturing PMI rebounded slightly, but remained in the contraction territory, which strengthened market expectations for policy stimulus. In terms of fundamentals, aluminium production in Yunnan Province has resumed, but production in Shandong was reduced, leading to limited growth in operating capacity in June. Supply pressure will grow in late July. Given sluggish downstream consumption, aluminium ingot social inventories may build up slightly. It is expected that SHFE aluminium may fluctuate around 18,000 yuan/mt in the near future.

Zinc: LME zinc price hiked at last Friday’s session amid falling US dollar index.

SHFE zinc market closed with a gain at last Friday’s session. During last week, replenishing demand from downstream buyers before the Dragon Boat Festival slightly reduced inventory, but the spot premium was weak. At the same time, a good deal of imported zinc ingots, such as SMC, YP, Peru, and Kazakhstan Zinc and possibility of wide-opened import window exerted great pressure on domestic supply.

Lead: LME lead opened at $2,055/mt at last Friday’s session, and trended higher to $2,102/mt on cool-down of US consumer spending and falling US dollar index, and finally closed up 1.61% at $2,088/mt, with a high of $2,102/mt.

The most-traded SHFE 2308 lead contract was closed at 15,485 yuan/mt at last Friday’s session, and surged to 15,650 yuan/mt, boosted by a spike in LME lead price before moving down, seeing its low of 15,470 yuan/mt, and finally closed up 1.00% at 15,585 yuan/mt.

On the macro front, China, the US and European countries will announce June PMI data, the number of ADP employment in the US in June and weekly initial unemployment claims, the unemployment rate in June and the seasonally adjusted non-agricultural employment population. The Fed's release of its monetary policy meeting minutes and FOMC regular meeting will deserve to be monitored.

Tin: At last Friday’s night session, SHFE tin moved sideways after the opening, and closed at 219,400 yuan/mt, up 1.12%.

Nickel: On the macro front, the U.S. announced last Thursday night that the number of initial jobless claims for the week ended June 24 was 239,000, lower than the previous value and expectations, reflecting that the current U.S. job market is still strong. In the first quarter, the final annualized quarterly rate of the core PCE price index in the US was 4.9%, which was lower than the previous value and the predicted value of 5%. Expectations for the Fed to raise interest rates have grown. From a fundamentals point of view, on the supply side, the social inventory of pure nickel last week decreased by 1,168 mt from the previous week, while the inventory in the bonded area increased by 300 mt. SHFE nickel warrants continued to decrease last week. From the demand side, according to SMM research, the market trading atmosphere has warmed up this morning, and downstream demand has increased. Global macro headwinds may keep nickel prices in check.

[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.]