SMM Morning Comment For SHFE Base Metals On August 14

SHANGHAI, August 14 (SMM) –

Copper

SMM August 14: Overnight, LME copper opened at $8,957/mt, initially maintained slight fluctuations, then plunged to a session low of $8,895/mt, before climbing to a session high of $8,984/mt. It then fluctuated widely and finally closed at $8,978.5/mt, down 0.55%, with a trading volume of 18,000 lots and an open interest of 281,000 lots. Overnight, the most-traded SHFE copper 2409 contract opened at 72,200 yuan/mt, initially fell to a session low of 71,650 yuan/mt, then climbed to a session high of 72,410 yuan/mt, and finally closed at 72,310 yuan/mt, down 0.32%, with a trading volume of 47,000 lots and an open interest of 164,000 lots.

Macro side, the US July PPI dropped significantly from the previous value, increasing traders' bets on the US Fed relaxing policies, boosting confidence in a rate cut in September. LME inventories surged on Tuesday to the highest level in nearly five years, while concerns about domestic demand persisted, causing copper prices to fall again.

Fundamentals, supply side, approaching delivery, smelter shipments increased, and warrants continued to flow out. Demand side, copper prices rose again, leading to a slight cooling in consumption. Overall, the US Fed's rate cut expectations provided a boost, and copper prices are expected to remain strong and volatile before the release of the US July CPI. It is also worthy of attention that workers at BHP's Chilean copper mine began a strike on Tuesday morning after wage negotiations failed, which may impact the mine's production.

Aluminum

Overnight, the most-traded SHFE aluminum 2409 contract opened at 19,040 yuan/mt, reaching a high of 19,140 yuan/mt and a low of 18,965 yuan/mt, and closed at 19,085 yuan/mt, up 5 yuan/mt or 0.03%. On Tuesday, LME 3M aluminum opened at $2,306.5/mt, hitting a high of $2,340/mt and a low of $2,290/mt, and closed at $2,326/mt, up $17/mt or 0.74%.

Macro side, US July PPI was lower than expected, raising expectations for rate cuts and boosting the metals market, but attention is still needed on subsequent CPI data. Fundamentals, domestic aluminum operating capacity is gradually stabilizing, and supply side is peaking. Cost side, alumina market is fluctuating at high levels, providing strong support for aluminum costs. In August, downstream aluminum consumption shows signs of stabilizing and recovering, with social inventory showing slight destocking, releasing positive signals. SMM expects short-term aluminum prices to go up from lows.

Lead

Overnight, LME lead opened at $2,040/mt. The cooling of US inflation supported rate cut bets, but at the same time, market concerns about economic recession resurfaced. LME lead showed a downward trend throughout the day, giving back the gains of the previous two days, reaching a low of $1,984.5/mt and finally closing at $1,985/mt, down 2.34%. Overnight, SHFE lead warrant inventory increased, coupled with news of downstream production cuts. The main SHFE lead 2409 contract opened lower at 17,705 yuan/mt, and the decline expanded after the opening, once falling to 17,350 yuan/mt. In the latter part of the trading session, the tug-of-war between bulls and bears intensified, with SHFE lead consolidating around 17,400 yuan/mt and finally closing at 17,450 yuan/mt, down 3.24%. Its open interest was 76,017 lots, a decrease of 2,624 lots from the previous trading day.

Macro side, the US July PPI fell more than expected, with the YoY increase narrowing to 2.2%, and service costs declining for the first time this year. The cooling inflation supported rate cut bets, with market bets on a 50 basis point rate cut by the US Fed in September exceeding 50% again. In China, new social financing in July was 770 billion yuan, new RMB loans were 260 billion yuan, M1 decline expanded to 6.6%, and M2 growth improved compared to the previous month.

Fundamentals side, domestic and international lead ingot inventories diverged. With the SHFE lead delivery approaching, SHFE lead warrant inventory continued to rise, while some medium and large lead-acid battery companies took high-temperature holidays and reduced production, dragging down lead price again. We need to pay attention to the willingness of holders to ship and whether spot discounts will narrow, but before lead consumption materializes, lead prices are expected to show weak fluctuations.

Zinc

Overnight, the US July PPI cooled more than expected; it is reported that Iran may delay retaliation if a permanent ceasefire is achieved in Gaza; the IEA lowered its forecast for global oil demand growth next year; China's July loan rates remained at historical lows; Shenzhen responded that the housing market purchase restriction policy has not been adjusted. Overnight, LME zinc opened at $2,745.5/mt, hitting the intraday high at the opening. Subsequently, LME zinc fluctuated along the daily moving average. During European trading hours, bulls reduced positions, causing LME zinc to quickly decline, with the focus shifting to around $2,688/mt, hitting a low of $2,678.5/mt, and finally closing down at $2,687.5/mt, down $8.5/mt, a decrease of 2.24%. Trading volume increased to 12,191 lots, and open interest decreased by 3,489 lots to 218,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME inventory increasing by 23,625 mt to 263,150 mt, an increase of 9.86%. The significant increase in LME zinc inventory, coupled with the US PPI data cooling more than expected, caused the focus of LME zinc to shift downward. It is expected that LME zinc will run weakly today.

Overnight, the most-traded SHFE zinc contract 2410 opened at 22,780 yuan/mt. At the beginning of the session, SHFE zinc briefly moved upward, hitting a high of 22,820 yuan/mt. Subsequently, shorts increased positions, causing SHFE zinc to fluctuate along the daily moving average, hitting a low of 22,590 yuan/mt, and finally closing down at 22,685 yuan/mt, down 275 yuan/mt, a decrease of 1.2%. Trading volume decreased to 52,571 lots, and open interest increased by 2,796 lots to 82,980 lots. Overnight, SHFE zinc recorded a bearish candlestick, affected by the US PPI cooling more than expected and the still poor domestic demand. SHFE zinc adjusted downward, and it is expected that SHFE zinc will mainly fluctuate today.

Tin

SMM, August 14: In the night session yesterday, the most traded SHFE tin futures contract closed at 257,300 yuan/mt, up 180 yuan/mt or 0.07%, with a high of 259,430 yuan/mt and a low of 256,320 yuan/mt.

Spot market transaction situation: During the morning session yesterday, trading companies' quotations for various domestic tin ingot brands showed little change in premiums and discounts compared to recent days. Tin prices dropped slightly yesterday, and downstream producers' purchasing sentiment was low, with only a small amount of restocking as needed. Most trading companies had scattered transactions, with a few trading companies transacting 20-30 mt. Overall, spot market transactions were relatively thin yesterday.

Nickel

On August 13, Jinchuan spot premiums were quoted at 1,300-1,500 yuan/mt, with an average premium of 1,400 yuan/mt, down by 50 yuan/mt compared to the previous trading day. Russian nickel spot premiums were quoted at -200 to 200 yuan/mt, with an average premium of 0 yuan/mt, up by 50 yuan/mt compared to the previous trading day. Yesterday morning, the market fluctuated upwards, and spot market premiums showed little overall fluctuation compared to the previous working day. Yesterday, nickel briquette prices were 126,700-127,000 yuan/mt, an increase of 750 yuan/mt compared to the previous trading day's spot prices. The price spread between nickel briquette and nickel sulphate was about 600 yuan/mt (nickel sulphate prices were 600 yuan/mt lower than nickel briquette prices).