SMM Morning Comment For SHFE Base Metals July 28

SHANGHAI, Jul 28 (SMM) –

Copper

LME copper prices closed at $8,551/mt last evening, down 0.62%. Trading volume was 16,000 lots and open interest stood at 275,000 lots. The most active SHFE 2309 copper contract finished at 68,900 yuan/mt overnight, down 0.39%. Trading volume was 35,000 lots, and open interest stood at 184,000 lots. On the macro front, the US GDP growth unexpectedly accelerated in the second quarter, and the growth rate of durable goods orders in June also far exceeded expectations, increasing the expectation of a "soft landing". Better-than-expected US economic data dampened investor expectations for a relatively dovish monetary policy by the Federal Reserve. In terms of fundamentals, copper prices soared yesterday, the enthusiasm for trading in the spot market declined, while some traders restocked on the dip. Some downstream buyers in east China restocked for weekend production in advance. Sellers in south China sold goods at low prices, but the downstream purchasing enthusiasm was weak. End-user consumption was weak, and most of the trades were contributed by traders. On the macro front, the U.S. economy is still resilient. It is expected that copper prices will remain high in the near future.

Aluminum

The most-traded SHFE 2309 aluminium contract opened at 18,400 yuan/mt overnight, with the lowest and highest prices at 18,365 yuan/mt and 18,445 yuan/mt before closing at 18,395 yuan/mt, down 25 yuan/mt or 0.14%. LME aluminium opened at $2,215/mt on Thursday, with its high and low at $2,244.5/mt and $2,196.5/mt respectively before closing at $2,209/mt, an increase of $1/mt, or 0.05%.

On the macro level, the rate hikes in Europe and US have been implemented successively in July, in line with market expectations. Domestic stimulus policies may be more frequent in H2 2023. In terms of fundamentals, the resumption of aluminium production in Yunnan is speeding up, and it is expected that some large smelters in the region will be able to produce at full capacity by the end of August, potentially fueling the total domestic operating capacity to a record high. At present, the amount of resumed production is mainly liquid aluminum, and there is no large aluminum ingot oversupply pressure. In terms of consumption, domestic downstream demand is in the off-season. So far, the domestic aluminium ingot inventory accumulation is lower than expected. The low inventory in the off-season may give support to aluminium prices. SHFE aluminium may move range bound in the short term.

Lead

On Thursday, LME lead opened at $2147/mt, hit a session low of $2146.5/mt at the beginning and then shook up to $2175/mt, and finally closed at $2156.5/mt, up $11.5/mt, or 0.54%.

Overnight, the most-traded SHFE lead contract opened at 15,960 yuan/mt and hit a session low of 15,940 yuan/mt, and finally closed at 15,965 yuan/mt, up 40 yuan/mt, or 0.25%.

On the macro level, the strong US data release boosted the US dollar index and non-ferrous metals were under downward pressure, so the lead prices were also affected. Recently, the supply of goods circulating in the spot market is not sufficient, and SHFE lead warrants increased but remained at historically low levels. The market has positive expectations for refined lead consumption in the third quarter, but the recent downstream consumption is still in the off-peak period. The high price of lead has inhibited downstream procurement enthusiasm, and the inventory of refined lead at home and abroad is still expected to increase slightly this week. Under the interweaving of positive and negative factors, SHFE lead lacked upward momentum. Open interest of SHFE lead fell back to 167,000 lots.

Zinc

Overnight, the U.S. Department of Commerce announced that gross domestic product (GDP) grew at an annual rate of 2.4% in the second quarter, up from 2.0% in the first quarter. The European Central Bank raised interest rates for the ninth time in a row, but the chances of a pause in rate hikes at the next policy meeting have risen.

 Overnight, LME zinc prices closed down $16/mt or 0.65% at $2,454/mt. The trading volume was 10,394 lots, and open interest lost 1,920 lots to 198,000 lots. Last Friday, LME zinc continued to weaken, and the market's expectations for subsequent interest rate cuts have weakened.

Overnight, the most active SHFE 2309 zinc contract prices closed at 20,590 yuan/mt, down 145 yuan/mt or 0.7%. Trading volume stood at 66,000 lots, and open interest decreased by 3,600 lots to 122,000 lots.  Spot trading is getting weaker amid market pessimism. It is expected that there may be different degrees of stock accumulation in various places this week. The support from fundamentals for the zinc price is still weakening.

Tin

SHFE 2308 tin contract price hit a low of 232240 yuan/mt after the opening, and then rose slightly and maintained a sideways trend before closing down 1.79% at 233,150 yuan/mt.

Nickel

SHFE 2308 nickel contract opened at 171,600 yuan/mt overnight, and closed at 170,180 yuan/mt, down 2,810 yuan/mt. Trading volume fell by 31,573 lots, and open interest decreased by 14,543 lots.

On the macro level, the Federal Reserve announced on Thursday that it would raise interest rates by 25 basis points in July, reaching the highest level in 22 years, which will suppress commodity prices. From a fundamentals point of view, yesterday's spot premiums plunged sharply, and the sentiment for upstream shipments has intensified. According to SMM research, spot nickel prices were too high, even after spot premiums were lowered. The downstream trade sentiment was low and some downstream plants still have nickel plate inventory, so the spot market turnover was weak yesterday. To sum up, it is expected that the subsequent nickel price may fluctuate downward.