SMM Morning Comment For SHFE Base Metals (September 23)

SHANGHAI, Sep 23 (SMM) –

Copper

Market Concerns Over US Economic Recession Persisted, Copper Prices Slightly Declined [SMM Copper Morning Comment]

Last Friday evening, LME copper opened at $9,552/mt. After a slight initial decline, it rose to a high of $9,574/mt, then fell all the way down to $9,468/mt near the close. It slightly rebounded at the end, finally closing at $9,486/mt, a drop of 0.56%. Trading volume reached 18,000 lots, and open interest was 275,000 lots. Last Friday evening, the most-traded SHFE copper contract 2410 opened and peaked at 75,790 yuan/mt, then fell all the way down to 75,190 yuan/mt near the close. It slightly rebounded at the end, finally closing at 75,480 yuan/mt, a drop of 0.38%. Trading volume reached 32,000 lots, and open interest was 124,000 lots. On the macro side, since the US Fed initiated monetary policy easing, the US dollar has fluctuated repeatedly. Coupled with the lower-than-expected hawkish stance of the Bank of Japan last Friday, the yen came under pressure, and the US dollar index rebounded. Additionally, in a speech last Friday, US Fed Governor Waller indicated that if the job market deteriorates, a further 50 basis points rate cut might be considered. The market then adopted a cautious attitude, and concerns over a US economic recession persisted. Under this sentiment, major European stock indices collectively closed lower, and copper prices followed suit. On the fundamentals side, last Friday, due to typhoon weather, some traders reported that the pickup of imported goods was hindered, leading to a tight supply of spot copper cathode. Holders of the goods maintained firm spot premiums. On the consumption side, with the rise in copper prices last week, downstream buyers were highly cautious, and procurement demand was very strong. This week, coupled with pre-National Day stocking demand, inventory is expected to continue its downward trend. In terms of prices, supported by downstream consumption demand, copper prices are expected to fluctuate upward today.

Aluminum

The US Fed's stance on a rate cut in November remains uncertain; short-term aluminum prices are expected to fluctuate upward [SMM Aluminum Morning Comment]

SMM, Sep 23: Last Friday night, the most-traded SHFE aluminum 2411 contract opened at 19,980 yuan/mt, reaching a high of 20,000 yuan/mt and a low of 19,805 yuan/mt, and closed at 19,845 yuan/mt, down 225 yuan/mt, a decrease of 1.12%. On the previous trading day, LME aluminum opened at $2,536.5/mt, hit a high of $2,551/mt and a low of $2,478/mt, and closed at $2,486/mt, down $53.5/mt, a decrease of 2.11%.

On the macro front, the US Fed's stance on a rate cut in November remains uncertain, with the probabilities of a 50BP and 25BP cut being nearly equal. The market is awaiting the release of the US Fed's employment and inflation data this week. Meanwhile, the domestic LPR rate remains unchanged, slightly dampening domestic macro sentiment. On the fundamentals side, domestic aluminum market supply saw a slight increase, alumina showed upward fluctuations due to tight supply, and domestic aluminum costs remained high. Under the influence of the September-October peak season, aluminum downstream weekly operating rates remained stable, and downstream consumption showed steady improvement. However, caution is needed regarding the negative impact of overseas tax policies on domestic aluminum processing enterprises. Aluminum social inventory is still in a destocking cycle, with good supply-demand performance in September and October. Overall, given the short-term favorable macro front and stable fundamentals, the aluminum market is expected to fluctuate upward in the short term.

Lead

Lead Ingot Inventory Accumulation Intensified, Future Lead Prices to Watch for National Day Stockpiling Expectations [SMM Lead Morning Comment]

Last Friday, LME lead opened at $2,081/mt. During the Asian session, LME lead fluctuated upward, reaching an intraday high of $2,097.5/mt, a new high in nearly one and a half months. However, entering the European session, the US dollar index rose, coupled with an increase in LME lead inventory, causing LME lead to reverse and fall. The decline expanded during the night session, with LME lead giving up all daytime gains and finally closing at $2,042/mt, down 1.94%.

Last Friday, the most-traded SHFE lead 2410 contract opened at 16,520 yuan/mt. After the Mid-Autumn Festival, lead ingot inventory increased daily. SHFE lead quickly fell after opening, hitting a low of 16,320 yuan/mt and finally closing at 16,340 yuan/mt, down 1.8%. Its open interest was 33,860 lots, a decrease of 2,445 lots from the previous trading day.

Macro-wise, China did not cut interest rates, with the 1-year and 5-year LPRs remaining unchanged in September. US Fed Governor Waller noted that inflation slowed faster than expected, leading him to join the 50 basis point rate cut camp. Governor Bowman explained her dissenting vote, citing concerns about inflation and that a 50 basis point cut might be seen as prematurely declaring victory over inflation. Goldman Sachs indicated that two key voting members suggested the US Fed might slow the pace of rate cuts, making November uncertain. Additionally, weekend clashes between Israel and Lebanese militants intensified.

Fundamentally, after the Mid-Autumn Festival holiday, lead ingot inventory accumulation intensified both domestically and internationally. Domestic downstream enterprises gradually resumed normal production. Moving forward, we need to focus on the customary stockpiling actions of downstream enterprises before the National Day holiday. If consumption meets expectations, lead prices could potentially reach 17,000 yuan/mt. Conversely, we need to monitor the supply of scrap and the cost support from secondary lead.

Zinc

Hints of More Basis Points Rate Cuts, LME Zinc to Fluctuate Downward [SMM Zinc Morning Comment]

SMM, Sep 23: Last Friday, US Fed Governor Waller hinted at additional 50 basis points rate cuts; British media reported that Israel plans to conduct ground operations in Lebanon; Trump rejected Harris's invitation for another TV debate; a large-scale port strike is imminent, posing a major threat to the US supply chain; the fifth meeting of the China-US Economic Working Group was held; the CSRC revised and issued regulations on risk control indicators for securities companies.

Last Friday, LME zinc opened at $2,933.5/mt. Initially, LME zinc fluctuated rangebound around the daily moving average, then moved above it and peaked at $2,955/mt. By the European trading session, LME zinc fell back to fluctuate rangebound around the daily moving average, then SHFE zinc fluctuated downward in a stepwise manner below the daily moving average and hit a low of $2,866.5/mt. By the end of the session, LME zinc slightly moved up to fluctuate rangebound around $2,875/mt. During this period, LME zinc broke above the daily moving average but quickly fell back, closing down at $2,867/mt, a drop of $72.5/mt or 2.47%. Trading volume increased to 116,000 lots, and open interest decreased by 3,211 lots to 240,000 lots. Last Friday, LME zinc recorded a bearish candlestick with no lower shadow, with the upper Bollinger Bands forming resistance and the 10/60-day moving averages providing support below. LME social inventory decreased by 650 mt to 256,150 mt, a drop of 0.25%. Currently, with the US Fed Governor hinting at more 50 basis points rate cuts and about 45,000 workers at 36 US ports planning to strike on October 1, LME zinc was expected to fluctuate downward.

Last Friday, the most-traded SHFE zinc 2411 contract opened at 23,905 yuan/mt. Initially, with shorts increasing positions, SHFE zinc briefly fluctuated rangebound around the daily moving average and peaked at 23,920 yuan/mt. It then fluctuated downward below the daily moving average and hit a low of 23,620 yuan/mt. Subsequently, with shorts reducing positions, SHFE zinc's center of gravity slightly moved up to fluctuate rangebound around 23,700 yuan/mt, closing down at 23,700 yuan/mt, a drop of 310 yuan/mt or 1.29%. Trading volume decreased to 69,340 lots, and open interest increased by 898 lots to 101,000 lots. Last Friday, SHFE zinc recorded a bearish candlestick, with the daily K-line center of gravity moving downward, the upper Bollinger Bands forming resistance, and the 10/60-day moving averages providing support below. Currently, the supply side output remains low, and the demand side is also in a weak state. With both supply and demand weak, SHFE zinc was expected to fluctuate downward.

Tin

SHFE tin prices fell during the night session, some downstream enterprises placed orders [SMM Tin Morning News]

SMM, September 23: Last Friday, the most-traded SHFE tin contract closed at 258,660 yuan/mt in the night session, down 1,370 yuan/mt, a decrease of 0.53%. During the early session last Friday, the premiums and discounts quoted by trading companies for various domestic tin ingot brands did not change much compared to recent days. Specifically, small brand tin ingots were quoted at premiums of 0-500 yuan/mt against the SHFE 2410 contract, delivery brand prices were quoted at premiums of 200-700 yuan/mt against the SHFE 2410 contract, Yunnan Tin brand was quoted at premiums of 200-800 yuan/mt against the SHFE 2410 contract, and imported tin brands were quoted at discounts of 200-700 yuan/mt against the SHFE 2410 contract. Last Friday morning, tin prices surged significantly, and most downstream and end-user enterprises adopted a wait-and-see attitude, with only a few downstream enterprises restocking as needed. Most trading companies saw scattered transactions. Overall, the spot market transactions were relatively quiet last Friday.

Nickel

Last week, nickel prices fluctuated upward, mainly due to macro boosts. Macro front, after the US Fed cut interest rates by 50 basis points, combined with Fed Chairman Powell's remarks about the risk reduction of a US economic recession, short-term market risk appetite increased, leading to a fluctuation upward in nickel prices. Fundamentally, the current main speculation point remains on nickel ore. The approval of Indonesia's RKAB is still pending, but with market expectations for increased nickel ore supply, the enthusiasm for purchasing Philippine ore has declined. This indirectly reflects that current market concerns about tight nickel ore supply from Indonesia have eased compared to before. From the overall supply and demand of primary nickel, the September-October peak season for NEVs and traditional stainless steel industries did not meet expectations, causing upstream raw material prices, including NPI and nickel salts, to continue to decline. In the upstream intermediate products sector, the continuous production and release of hydrometallurgical and pyrometallurgical intermediate products have exacerbated the oversupply. Given the unfavorable fundamentals, nickel prices may face upward pressure. In the short term, while nickel prices are boosted by macro factors to fluctuate upward, the weak fundamentals suggest caution against the risk of nickel prices declining. It is expected that SHFE nickel will operate in the range of 122,000-127,000 yuan/mt this week.