SMM Morning Comments (May 13): Shanghai base metals fell across the board as Wall Street dove on rate hike fears

SHANGHAI, May 13 (SMM) — Nonferrous metals on both SHFE and LME declined across the board on Thursday morning as Wall Street fell sharply with inflation data triggering fears of a rate hike.

Shanghai base metals fell across the board in overnight trading. Copper fell 0.54%, aluminium declined 1.13%, zinc shed 1.23%, tin weakened 1.44%, lead slid 1.18% and nickel dropped 0.89%.

The LME complex fell across the board on Wednesday. Lead plunged 1.58% to lead the losses, zinc fell 1.23%, aluminium weakened 1.44%, copper decreased 1.38%, nickel went down 1.28% and tin dropped 0.92%.

Copper: Three-month LME copper rose 1.38% to end at $10,410/mt on Wednesday, and is likely to trade between $10,340-10,420/mt today.

The most-active SHFE 2106 copper contract went down 1.47% to close at 75,960 yuan/mt in overnight trading, and it is expected to move between 75,600-76,200 yuan/mt today, while spot discounts will be seen at 100–10 yuan/mt.

The overall CPI of the US in April announced yesterday increased 4.2% year on year, and the growth rate reached a new high since September 2008. The resurgence of inflation in the market caused investors to worry about tightening monetary policy. The three major US stock indexes fell across the board at night, and the US bond yields and the US dollar index rebounded sharply, which weakened the rise of copper prices to a certain extent. On the spot side, the contract kept fluctuating at a high level, further curbing domestic copper consumption, while downstream buying maintained a wait-and-see attitude, mainly focusing on purchases for rigid demand.

Aluminium: Three-month LME aluminium fell 1.46% to close at $2,496/mt on Wednesday. It is expected that the contract will trade between $2,450-2,520/mt today. 

The most-liquid SHFE 2106 aluminium contract fell 1.13% to settle at 19,710 yuan/mt on Wednesday night. Support below will be seen from 195,000 yuan/mt today.

Zinc: Three-month LME zinc fell 1.36% to close at $2,974/mt on Wednesday. Zinc stocks at LME-listed warehouses fell 575 mt to 288,125 mt. Overnight, CPI in April was significantly higher than market expectation. US dollar strengthened, suppressing the nonferrous metals, and LME zinc took advantage of the trend. Considering that Federal Reserve Chairman Powell promised to keep the interest rate stable, it is expected that LME zinc will keep fluctuating in the near term. The contract is likely to trade between $2,950-3,000/mt today.

The most-liquid SHFE 2106 zinc contract fell 1.23% to end at 22,165 yuan/mt in overnight trading. The fundamentals of zinc haven't changed much for the time being. The State Council stated that it should effectively curb the excessive growth of commodity prices. The market worries about inflation risk suppressed market optimism, and SHFE zinc fluctuated downward. Market sentiment changes should be monitored in the near term. The SHFE zinc contract is expected to move between 22,100-22,600 yuan/mt today, while spot premiums for domestic 0# Shuangyan will be flat.

Lead: Three-month LME lead settled 1.58% lower at $2,183.5/mt on Wednesday. The contract will test support from 10-day moving average today.

The most-active SHFE 2106 lead contract went down 1.18% to close at 15,430 yuan/mt on Wednesday night. Secondary lead was shipped at a large discount yesterday, smelter discount maintained, and the bulk order transaction was tepid. The expectation of social inventory accumulation will be monitored today. The contract will test support from 15,400 yuan/mt today.

Tin: Three-month LME tin closed down 0.72% at $29,785/mt on Wednesday. The US dollar went higher as the CPI in April was significantly higher than the market expectation, hitting the fastest growth rate in more than 12 years, and inflation jumped. However, the trend of the US dollar was relatively mild, as Federal Reserve Chairman Powell promised to keep interest rates stable and at the same time allow inflation to rise for a period of time. At the same time, the Federal Reserve also said that inflation may be temporary and will fall again by the end of this year. The rebound of the US dollar put pressure on the trend of LME tin. It is expected that LME tin will mainly fluctuate at a high level in the near term. Pressure above will be seen from $30,500/mt today. Support below will be seen from $29,000/mt today.

The most-liquid SHFE 2107 tin contract fell 1.67% at 193,430 yuan/mt on Wednesday night. It is expected that the contract will keep fluctuating weakly in the near term. Pressure above will be seen from 196,000 yuan/mt today. Support below will be seen from 191,000 yuan/mt today.