SMM Morning Comments (Jul 7): Base Metals Closed With Mixed Trends Overnight

SHANGHAI, Jul 7 (SMM) –Base metals closed with mixed trends overnight

Aluminium: The most-traded SHFE 2308 aluminium contract opened at 17,865 yuan/mt overnight, with its low and high at 17,805 yuan/mt and 17,920 yuan/mt before closing at 17,830 yuan/mt. It fell by 25 yuan/mt or 0.14%. LME aluminium opened at $2,139/mt on Thursday, with its low and high at $2,127/mt and $2,153/mt respectively before closing at $2,130/mt, a drop of $7/mt or 0.33%.

Uncertainty factors have increased in the macro aspect. Market is anticipating stimulus policies from China. The market is paying close attention to data such as the US non-farm payrolls data that will be released today. In terms of fundamentals, Yunnan's output has been gradually released. The latest data show that the downstream operating rate continued to decline, and the downstream consumption weakened. Aluminium ingot social inventory rose, but remained at a low level. In the short term, it is expected that SHFE aluminium may move rangebound. There are rumours of power rationing in Leshan, Sichuan. Market should also pay attention to the opportunities for the inflow of imported aluminium ingots brought about by the narrowing of the domestic and overseas price difference.

Zinc: LME zinc price made gains overnight. There were more discussions on export restrictions and the Fed's interest rate hike, and market sentiments tended to be positive. However, short-selling strategies on rallies will deserve to be monitored.

Overnight, SHFE zinc market closed with a rise. The monthly output of zinc ingots was 555,500 mt in June, and is expected to be 544,800 mt in July. In addition, more than 30,000 mt of imported zinc may flow into China. Therefore, zinc supply still remained ample. However, current fundamentals exerted little impact on zinc market. Players still need to pay attention to changes in macro market sentiment.

Lead: LME lead opened at $2,066.5/mt overnight, and dipped to $2,046/mt on bulls’ position reduction after a slight rise, and finally closed down 0.68% at $2,051.5/mt, marking a drop for two consecutive trading days.

The most-traded SHFE 2308 lead contract was opened at 15,510 yuan/mt overnight, and trended lower to 15,475 yuan/mt after hitting a high of 15,545 yuan/mt, but finally closed down 0.35%, at 15,485 yuan/mt.

On the macro level, after suspension of hawkish signals in June, an expectation of the Fed’s interest rate hikes in July was strengthened. Therefore, the US dollar index swung on a strong note, exerting a slight impact on non-ferrous metals.

[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.]