📌 Base Metals Fundamental Update
Source: Advisory Bazaar Info Services
🔶 Copper
Market Activity:
The most-traded SHFE copper 2507 contract opened at 78,640 yuan/mt. It touched a session high of 78,700 yuan/mt early on, then fluctuated downward to a low of 78,500 yuan/mt, and finally closed at 78,610 yuan/mt, down just 0.01%. Trading volume stood at 19,000 lots, and open interest was 181,000 lots.
Macro Factors:
The US Fed kept interest rates unchanged, as expected. While the projection of two rate cuts this year remained, the number of policymakers expecting no cuts increased, and next year’s rate cut forecast was trimmed to one. Fed Chair Powell reiterated inflation risks, predicting that “high inflation” may persist in the coming months. The US dollar index rose, which put downward pressure on copper prices.
Fundamentals:
Copper cathode spot premiums fluctuated significantly due to differences among brands. Suppliers rushed to offload inventory fearing upcoming warrant outflows. Russian copper was sold at lower prices, affecting the market sentiment. Premiums are likely to continue declining with expected warrant outflows today.
⏬ Outlook:
With prevailing bearish macro and fundamental factors, copper prices are expected to struggle to maintain upward momentum today.
🔷 Aluminum
Macro Factors:
The Fed held interest rates steady. Chairman Powell mentioned that price pressures from tariffs will become more visible in the coming months and emphasized the need for clear signs of declining inflation before rate cuts.
Fundamentals:
China’s domestic operating capacity of electrolytic aluminum remained stable. A reduction in aluminum ingot casting volumes supported continued destocking of domestic inventories. However, expected weakness in alumina and auxiliary material prices is reducing cost support.
Demand Side:
Domestic seasonal slowdown and trade-related uncertainties are putting pressure on aluminum processing enterprises, likely lowering operating rates in the short term.
📈 Outlook:
Low inventories and higher ratios of liquid aluminum provide strong price support. However, limited downstream demand due to off-season effects will likely restrict further upside. Prices may remain high but rangebound in the short term.
🔘 Lead
Inventory (as of June 18):
• LME Lead: Rose by 2,025 mt to 289,475 mt.
• SHFE Lead: Fell by 1,116 mt to 44,387 mt.
Fundamentals:
Global lead supply has moved into surplus again, with LME stocks nearing 290,000 mt. Although domestic fundamentals saw some improvement due to production cuts and suspensions, weak demand in the traditional off-season continues to drag prices.
Other Developments:
SHFE recently allowed foreign investors to trade lead futures and options, which may temporarily increase market activity and offer short-term support.
🔍 Outlook:
Despite a possible short-term boost from higher participation, lead price trends will ultimately be determined by how fundamentals evolve.
🔹 Zinc
Market Performance:
LME zinc posted a bullish candle with a long upper shadow, facing resistance at the 20/60-day moving averages. The US dollar index fluctuated overnight before rebounding post Fed announcement. Geopolitical tensions in the Middle East supported safe-haven demand initially, but prices later fell.
SHFE Zinc:
Formed a small bullish candle with resistance from 20/60-DMA above and support from the 5-DMA below. SHFE zinc opened with a gap lower, tracking LME performance.
Macro Factors:
The Lujiazui Forum opened yesterday with China’s central bank announcing eight new financial liberalization measures, providing slight positive macro signals.
Fundamentals:
End-use demand remains weak while supply is expected to be ample.
📉 Outlook:
Zinc prices are likely to remain under pressure in the short term, with limited momentum due to weak demand despite some supportive macro news.