The substantial strengthening of the US Fed's hawkish stance and severe warnings from former senior officials are completely shattering the market's dovish fantasies, triggering a drastic repricing of interest rate derivatives and the spot market.

This week, ferrous metals edged higher before extending their pullback, with coking coal posting the largest decline. At the beginning of the week, the National Development and Reform Commission (NDRC) and other departments issued a notice on launching a three-year campaign for energy conservation and carbon reduction in key industries, and news that the U.S. and Iran were to sign a memorandum of understanding on the 19th improved market sentiment, lifting all ferrous metals. In the latter half of the week, expectations for an eighth round of coke price hikes materialized in the futures market. However, as steel mill profits narrowed further and spot coke had largely priced in the eighth increase, further upside room was limited. Combined with emerging expectations of peak hot metal output, futures began to correct and cost support weakened. Meanwhile, May macro data came in below expectations, dragging the entire ferrous metals complex lower...

[Silicon metal futures fluctuate narrowly, spot market largely stable]: Downstream and trader procurement sentiment is cautious, with some users digesting previous low-price inventories. Clients outside China have purchase price expectations lower than current prices, and sentiment for new orders in the market is sluggish. Some users expect to purchase via futures point pricing at around 8,400-8,500 yuan/mt. On the supply side, the increase in operating rates of silicon enterprises in Sichuan and Yunnan during the rainy season is already within expectations, with few new variables in the market. As variables on both supply and demand sides are highly deterministic in the short term, market sentiment in the buyer-seller tug-of-war appears rational. The silicon metal price center is expected to remain near the low end of the range in the near term.

June 18: North China ports: South African high-iron manganese ore: 31.4-32.1 yuan/mtu, flat WoW; South African semi-carbonate: 37.5-38 yuan/mtu, down WoW; Gabonese ore: 40.6-41 yuan/mtu, down WoW; 46% Australian lumps: 43.3-43.8 yuan/mtu, down WoW; South African medium-iron ore: 37.5-38 yuan/mtu, flat WoW. South China ports: South African high-iron manganese ore: 34.1-34.6 yuan/mtu, flat WoW; South African semi-carbonate: 36.5-37 yuan/mtu, flat WoW; Gabonese ore: 41-41.5 yuan/mtu, down WoW; 46% Australian lumps: 43.5-44 yuan/mtu, flat WoW; South African medium-iron ore: 37-37.5 yuan/mtu, flat WoW. The manganese ore market remains stable but stagnant, with sluggish end-use demand and a dominant wait-and-see sentiment in trading.

In the spot market this week (6.15-6.18), SMM #1 lead prices first rose then fell, continuing to climb during the week before a slight correction ahead of the holiday. With mid-year settlement and the approaching Dragon Boat Festival, downstream stocking willingness was sluggish, purchases at high prices were cautious, and spot order trading was sluggish. By region, smelters in Henan had low inventory and tight spot order supply, while traders’ supply was stably at discounts of 100-150 yuan/mt against the SHFE lead 2607 contract, with sluggish trading; smelters in Hunan quoted premiums of 0-20 yuan on the 15th, turned to discounts of 30-0 yuan on the 17th and 18th, with some cargoes negotiated to a discount of 50 yuan; smelters in Jiangxi and Anhui were unwilling to make significant concessions throughout, only slightly lowering their quotes, with premiums narrowing from 100-150 yuan to 80-100 yuan. Overall, downstream mostly relied on long-term contract purchases, and spot transactions were generally weak this week.

This week, macro factors were intertwined around two main threads: the acceleration of US-Iran peace talks and higher-than-expected inflation. Peace talks heated up significantly — Trump said a peace agreement would be signed as early as this weekend in Europe, and Iran allowed 10 oil tankers to pass through the Strait of Hormuz as a goodwill gesture. Brent crude oil fell to a near two-month low of around $89/bbl, and the geopolitical risk premium rapidly faded. However, mid-week, May CPI rose 4.2% YoY, the first time it has exceeded 4% in three years, while the US Fed kept its core interest rate unchanged this week. By the end of the week, US-Iran optimism eased growth concerns. Overall, as geopolitical tensions cooled and sticky inflation persisted, copper prices retreated from highs and fluctuated more amid macro disturbances. Fundamentals side, China's spot market strengthened notably. On the inventory front, SMM social inventory continued to decline, and suppliers held prices firm with strong willingness. Spot premiums quickly shifted from discounts to premiums, and the backwardation structure near delivery supported SHFE copper premiums. Demand side, when copper prices pulled back, bargain hunting was active and transactions recovered, but when prices rebounded, downstream buying interest was suppressed and the market cooled, with overall demand mainly based on rigid needs. The SHFE/LME price ratio recovered slightly, and buyers' purchase willingness increased. Overall, the market pattern featured support from low inventory, strengthening spot premiums, and demand switching with price levels, forming support for copper prices on the downside. Looking ahead to next week, macro focus will be on whether the US-Iran agreement can be finalized and progress on resuming navigation in the Strait of Hormuz. The approaching June 30 ruling on US copper cathode tariffs also adds uncertainty. If peace talks materialize and geopolitical risks further recede, risk appetite will rebound, but oil prices and inflation expectations will fall in tandem. If sticky inflation leads the Fed to turn hawkish, it will weigh on risk assets. Fundamentals side, low inventory and strengthening spot premiums will provide downside support, while high copper prices will curb buying on rallies. LME copper is expected to trade at $13,300–13,800/mt, and SHFE copper is expected to trade at 104,200–105,800 yuan/mt, mainly moving sideways at high levels with a slightly weaker center. Spot premiums are expected to continue, and attention should be paid to the sustainability of suppliers holding prices firm after delivery and the downstream restocking intensity.