SHANGHAI, Jun 17 (SMM) – SHFE and LME base metals closed mostly in the negative zone as the Swiss central bank raised its interest rate from -0.75% to -0.25%, the first rate adjustment in seven years.

LME copper fell 0.89%, aluminium lost 3.58%, lead rose 2.31%, and zinc shed 1.79%.

SHFE copper fell 1.78%, aluminium lost 1.97%, lead rose 0.54%, and zinc shed 1.75%.

Copper: LME copper opened at $9,116/mt yesterday and rose to $9,168.5/mt after dropping to $9,020/mt. At last, the prices closed at $9,126/mt, down 0.89%. Trading volume was 20,000 lots, and open interest stood at 231,000 lots.

SHFE 2207 copper contract opened at 69,820 yuan/mt in overnight trading and rebounded from a low of 96,150 yuan/mt. At last, the prices closed at 69,520 yuan/mt, down 1.78%. Trading volume was 14,000 lots, and open interest stood at 135,000 lots.

On the macro level, the data showed that the number of jobless claims in the US fell less than expected at the beginning of last week, but the labour market remained tense. The Fed's sharp interest rate hikes weakened the related economic data overseas, and the positive efforts made by the Fed to slow down demand and reduce the inflation rate to 2% may have begun to show results. At the same time, the market's worries about the economic recession have intensified, and non-ferrous metals were under huge pressure.

In the spot market, on the first day after the delivery of the 2206 contract, traders were still looking for opportunities to restock, intending to suppress the premiums. However, the goods-holders refused to reduce their prices.

LME copper will trade between $9,030-9,130/mt today; SHFE copper prices are expected to move between 69,100-69,700 yuan/mt. Spot premiums are likely to fluctuate between 200-300 yuan/mt.

Aluminium: The most-traded SHFE 2207 aluminium contract opened at 19,820 yuan/mt overnight and closed at 19,660 yuan/mt, down 395 yuan/mt or 1.97%.

LME aluminium opened at $2,619/mt on Thursday and closed at $2,521.5/mt, down $93.5/mt or 3.58%.

Driven by downstream consumption, the domestic social inventory of aluminium ingots continued to decline. However, due to the impact of the previous collateral scandal, and the invisible inventory may increase. The US interest rate hike is in line with market expectations, thus its impact on aluminium prices may be weakened. In the spot market, downstream buyers still purchased as needed, and spot premiums declined. SMM expects that the short-term aluminium prices will remain rangebound.

Lead: LME lead ended 2.31% higher at $2,125/mt in the overnight trading after hitting a low of $2,075.5/mt and then rose due to the weakening US dollar index. The open interest decreased by 2,037 lots to 90,800 lots.

The most-traded SHFE lead 2207 contract ended 0.54% higher at 14,960 yuan/mt in the overnight trading after moving between 14,820 yuan/mt and 15,010 yuan/mt. The open interest decreased by 2,396 lots to 56,901 lots.

Zinc: LME zinc closed at $3,600.5/mt Thursday, down $65.5/mt or 1.79%. The open interest fell 76 lots to 204,000 lots. LME zinc is expected to move between $3,580-3,630/mt today. Overnight LME inventory lost 550 mt to 79,575 mt, down below the 80,000 mt level.

The most traded SHFE 2207 zinc contract closed at 25,615yuan/mt last night, down 455 yuan/mt or 1.75% overnight. The open interest fell 3,430 lots to 94,000 lots. SHFE zinc is expected to move between 25,500-26,000 yuan/mt, and 0# domestic zinc fall 550 yuan/mt. On the consumption side, the die-casting sector generated poor demand for zinc ingot amid heavy rains in Guangdong, slow recovery of domestic consumption, few terminal orders and slow de-stocking of finished products inventory. The spot market turned quiet as well owing sufficient supplies and rebounding zinc prices.

Overnight, the Swiss central bank raised its interest rate from -0.75% to -0.25%, the first rate adjustment in seven years. Impacted by the Bank of England and the Swiss central bank both raising interest rates, the European bond market trembled sharply, with many government bonds plunging and yields setting new multi-year highs, with German government bond yields once setting new highs since 2014. European gas prices spiked for the third consecutive day after Russia said it would continue to cut gas supplies to Europe due to the machine shutdown caused by sanctions. One of the largest crypto hedge funds, Three Arrows Capital, failed to meet margin calls and some positions were forced to close.

Tin: Domestic tin inventory under warrants did not change much following delivery of SHFE 2206 tin contract. LME tin inventories remained stable and fluctuated around 3,000 mt recently. There were fewer quotations in the spot market. Sales of imported tin were poor amid closed import profit window. The most-traded SHFE tin contract went down overnight before finding support at around 245,000 yuan/mt. The open interest continued to decline. Transactions in the spot market weakened after tin prices rose. More deliverable brands will be available in the spot market following recent delivery of futures contract. The market's ability to digest the excess inventory will affect the direction of tin prices.

Nickel: The most-traded SHFE 2207 nickel contract opened at 198,820 yuan/mt in overnight trading, and hovered around 195,000 yuan/mt, with the lowest traded price of 194,830 yuan/mt. At last, the prices closed at 196,490 yuan/mt, a decrease of 4,160 yuan/mt, or 2.07%, from the previous trading day. Trading volume was 57,000 lots, and open interest decreased by 2,158 lots to 55,869 lots. Nickel prices fell as the Fed raised the interest rate as expected. On the fundamentals, the supply of nickel sulphate raw materials and NPI was sufficient, while the downstream and terminal demand did not improve. In the market, the pure nickel supply remained tight. As the pure nickel prices have fluctuated based on the US Fed's interest rate hikes, SMM expects the nickel prices to remain rangebound at low levels this week.

[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.]

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