SMM Morning Comments (Jul 5): Base Metals Showed Mixed trends Overnight

SHANGHAI, Jul 5 (SMM) –Zinc, lead and tin prices showed mixed trends overnight

Copper: LME copper prices closed with a drop of 0.25% at $8,359/mt last evening. Trading volume stood at 6,000 lots. Open interest stood at 256,000 lots. The most active SHFE 2308 copper contract finished at 68,010 yuan/mt overnight, down 0.26%. Trading volume was 16,000 lots and open interest stood at 191,000 lots. On the macro front, no important economic data was released yesterday, and the market bet that the weak US economic data may prompt the Federal Reserve to reconsider its rate hike trajectory. In terms of fundamentals, spot quotes in east China plunged due to the inflow of imported copper and sluggish consumption. Spot quotes are unlikely to rally in the near term due to traders selling off cargoes. Inventory in south China has dropped for 3 consecutive days, mainly due to less arrivals. The overall transaction was not active. End-user consumption will continue to shrink if copper prices remain high. The market remained cautious, and copper prices fell slightly.

Aluminum: The most-traded SHFE 2308 aluminum contract opened at 17,975 yuan/mt overnight, and closed at 17,995 yuan/mt, down 45 yuan/mt or 0.25%.  LME aluminum 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 0.58%.

Macroeconomic news were mixed. Overseas markets are paying close attention to the upcoming earnings season and US non-farm employment data on Friday. On the domestic front, the market expects that domestic policy stimulus will be strengthened. In terms of fundamentals, domestic operating aluminum production capacity increased slightly in June, and it will take some time for Yunnan's output to be released. Supply pressure may appear in late July. At present, the domestic social inventory of aluminum is still at a low level. However, the aluminum social inventory may show a slight accumulation. Power rationing in Leshan, Sichuan has not included the aluminium industry. In the short term, aluminium supply will increase while demand will weaken. SHFE aluminium may fluctuate rangebound.

Zinc: Overnight, LME zinc price made gains. With some bearish macro data against current high overseas expectations for the recovery of domestic consumption, and LME Zinc basically swung within the range.

Overnight, SHFE zinc market closed with a gain. The SHFE/LME zinc price ratio remained high at 8.5-8.7. Imported zinc flowing into China exerted negative pressure on domestic spot zinc, like Shanghai and Ningbo. In spite of moderate arrivals of smelters, the supply of zinc ingots still remained snug.

Lead: LME lead opened at $2,090.5/mt overnight, and inched higher to $2,100/mt from a low of $2,081/mt, but finally closed down $5/mt, or 0.24%, at $2,090/mt.

The most-traded SHFE 2308 lead contract was closed at 15,505 yuan/mt overnight, and rebounded after dipping to 15,455 yuan/mt, and finally closed down 0.35%, at 15,490 yuan/mt.

On the macro front, the upward momentum of lead was slightly insufficient amid waning impact of positive news.     

Tin: Overnight SHFE 2308 tin contract opened with a slight drop, seeing a low of 222,560 yuan/mt, but rebunded before staying range-bound, and closed at 224,750 yuan/mt, down 0.23%.

[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.]