SMM Morning Comment for SHFE Base Metals on August 4

SHANGHAI, August 4 (SMM)-

Copper

LME copper prices closed at $8,640/mt overnight, a rise of 1.56%. Trading volumes were 17,000 lots and open interest stood at 285,000 lots. The most active SHFE 2309 copper contract finished at 69,350 yuan/mt overnight, up 0.52%. Trading volume was 37,000 lots, and open interest stood at 184,000 lots. The US factory orders spiked 2.3% in June, the largest increase since January 2021. The market remained cautious ahead of the release of the US non-farm payrolls data in July, and the US dollar index retreated. In terms of fundamentals, spot premiums rose in east China on tight available cargoes. Inventories in south China declined. The overall trading picked up. Purchases will pick up after copper prices rise. Copper prices are expected to remain rangebound at high levels as the market is awaiting US job data.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,415 yuan/mt, with the lowest and highest prices at 18,390 yuan/mt and 18,495 yuan/mt before closing at 18,480 yuan/mt, up 30 yuan/mt or 0.16%. LME aluminium opened at $2,213/mt on Thursday, with its high and low at $2,233/mt and $2,197/mt respectively before closing at $2,232.5/mt, an increase of $22/mt or 1.02%.

On the macro level, the US non-farm productivity rebounded sharply in the second quarter, reining in growth in labor costs and improving the US inflation situation. In terms of fundamentals, the resumption of aluminium production in Yunnan is speeding up. At present, the amount of resumed production is mainly liquid aluminum, and there is no large aluminum ingot oversupply pressure.

During the week, the actual arrival of aluminum ingots was lower than expected, so the destocking of aluminum ingots continued and the low inventory will support aluminum prices. On the demand side, favorable policies have promoted real estate, automobile, and other related consumption to gradually pick up, but the impact of follow-up policies still needs further observation. In addition, some end-users have asked employees to take a break recently against slack demand in summer, so the downstream demand may be weakened. In the short term, SHFE aluminium will remain volatile, and consumption and inventory still need attention.Lead

Zinc

Overnight, LME zinc prices closed at $2,505/mt, up $14/mt or 0.56%. Trading volume decreased to 7,877 lots, and open interest increased by 1,173 lots to 200,000 lots. LME zinc inventory decreased by 1,300 mt to 97,925 mt, down 1.31%. Demand improved, supporting LME zinc prices.

The most active SHFE 2309 zinc contract prices settled at 21,025 yuan/mt, up 130 yuan/mt or 0.62%. Trading volume decreased to 62,833 lots, and open interest fell by 167 lots to 106,000 lots. Supply was ample and demand was weak. Recently, affected by the weather, downstream construction has once again decreased, and the fundamental support is weak.

Tin

Overnight, SHFE 2309 tin contract price shook up rapidly after the opening. After reaching a high price of around 230,340 yuan/mt, it quickly fell back to the lowest price of 228,740 yuan /mt and finally closed at 230,230 yuan/mt, up 0.26%.

Lead

LME lead prices ended 0.14% higher at $2,150/mt in the overnight trading. Open interest decreased by 1,581 lots to 118,000 lots. Trading volumes fell 472 lots to 3,929 lots. The most active SHFE 2309 lead contract prices ended at 15,985 yuan/mt, up 0.35%. Open interest increased by 2,732 lots from the previous trading day to 109,000 lots, and trading volumes fell 14,872 lots to 24,710 lots.

Nickel

SHFE 2309 nickel contract opened at 170,360 yuan/mt at the night session on August 3, and closed at 167,580 yuan/mt, down 4,440 yuan/mt. Trading volume increased 35,781 lots, and open interest increased 9,2342 lots. This indicates that short funds have flowed into the market to open a large number of positions, and prices may continue to decline in the short term. The support for the high prices of SHFE nickel is limited due to the current macroeconomic sentiment gradually dissipating. Nickel prices fluctuated downwards yesterday. In fundamentals, on the demand side, the purchasing intentions of some downstream buyers have increased due to the decline in nickel prices. According to SMM research, the downstream transaction has recovered yesterday. However, the actual downstream demand has not recovered. Downstream buyers restocked only as needed. In summary, it is expected that nickel prices may fluctuate downwards in the future.