SMM Morning Comment For SHFE Base Metals August 14

SHANGHAI, Aug 14 (SMM) –

Copper

LME copper closed at $8,295/mt last Friday evening, a drop of 0.64%. Trading volume was 18,000 lots and open interest stood at 270,000 lots. The most active SHFE 2309 copper contract prices finished at 68,080 yuan/mt last Friday evening, down 0.56%. Trading volume was 38,000 lots, and open interest stood at 164,000 lots. On the macro front, it was announced last Friday that new RMB loans and social financing increments hit a seven-year low. In addition, with the possible debt restructuring of China's largest private real estate developer, Country Garden, the market's concerns about domestic real estate have also increased. As of Friday August 11, SMM data showed that copper inventory across major Chinese markets stood at 92,500 mt, down 800 mt from last Monday but up 3,200 mt from two Fridays ago. Inventories have fallen for four consecutive weeks. Due to the gradual inflow of imported copper in east China, the inventory has increased; in south China, due to the improvement of consumption and the large price difference between Shanghai and Guangdong, some sources of goods have been shipped to the east China market, and the inventory has declined. Downstream purchases will decline to a certain extent as the delivery nears. In terms of prices, after the market digests domestic financial data, copper prices may rebound slightly.

Aluminum

Last Friday night, the most-traded SHFE 2309 aluminium contract opened at 18,400 yuan/mt, with the lowest and highest prices at 18,255 yuan/mt and 18,405 yuan/mt before closing at 18,345 yuan/mt, down 150 yuan/mt or 0.81% from the previous trading day. LME aluminium opened at $2,197/mt last Friday with its high and low at $2,206/mt and $2,166/mt respectively before closing at $2,178.5/mt, a decrease of $25.5/mt or 1.16% from the previous trading day.

On the macro side, the positive signs emerge this week. The Federal Reserve is expected to raise interest rates, while China is focusing on expanding domestic consumption, and economic stimulus policies continue to be implemented. In terms of fundamentals, domestic aluminum ingots social inventory declined to nearly 500,000 mt, but with the resumption of production in Yunnan, the aluminum ingots inventory pressure is expected to increase. Entering the middle of August, the downstream operating rate, especially the aluminum extrusion, plate and strip plants, has improved, but whether the consumer side can support the further decline in aluminum stocks is unpredictable. In the short term, low inventories will still support aluminum prices, while positive macro sentiment and signs of recovery in consumption will provide confidence to the market. But expectations of increased supply still put upward pressure on aluminum prices. SMM predicted that the short-term aluminum prices will remain volatile, and follow-up attention should be paid to consumption and inventory.

Zinc

LME zinc prices closed at $2,398/mt last Friday evening, a decrease of $52/mt or 2.12%. The trading volume rose to 9132 lots, and open interest was up by 2,761 lots to 208,000 lots. LME zinc inventory increased by 225 mt to 91,800 mt, an increase of 0.25%. The recent domestic economic data has fallen short of expectations, and the dollar has strengthened. LME zinc prices thus weakened.

The most active SHFE 2309 zinc contract prices closed at 20,480 yuan/mt last Friday evening, down 240 yuan/mt or 1.16%. The trading volume was down to 75,088 lots, and open interest grew 1,433 lots to 93,578 lots. In recent days, the market has once again paid attention to trust products and real estate events, and the macro sentiment has weakened. However, zinc social inventory decreased 8,700 mt to 117,200 mt, still having support to zinc prices.

Tin

On last Friday’s night session, SHFE 2309 tin contract price fell sharply at the opening. Then it recovered slightly and finally closed at 218,740 yuan/mt, down 1.98%.

Spot premiums and discounts changed little on August 11 morning. Small brand tin ingots were offered at discounts of 400-600 yuan/mt, versus discounts of 0-100 yuan/mt and premiums of 0-400 yuan/mt for delivery brand, premiums of 700-1,200 yuan/mt for Yunxi brand, and discounts of 600-1,000 yuan/mt for imported brand. Due to the sharp drop in SHFE tin prices last Friday, smelting companies were willing to support the price rather than accept shipment at a lower price. However, there was no obvious purchasing sentiment in the downstream market, and some traders said that the spot market faced no transactions or sporadic transactions on Friday.

Nickel

SHFE nickel experienced a volatile movement last week, declining by 2.76% WoW. On the macro front, the focus last week was on the U.S. July non-seasonally adjusted CPI annual rate. According to data released on last Thursday evening (August 10), the actual value stood at 3.20%, slightly lower than the market expectation of 3.30%. This indicates an easing of inflation in the current U.S. market, which in turn strengthens market expectations for a rate cut in September. This positive sentiment has extended to the commodities market, boosting non-ferrous metals prices on last Friday. In terms of fundamentals, the increased production and gradual ramp-up of overseas pure nickel and intermediate product projects in mid-August will likely lead to a more relaxed supply outlook for pure nickel in the coming period. Furthermore, pure nickel imports in the first half of this year dropped by 46.48% compared to last year's same period. According to SMM research, it has been found that some traders have entered long-term deals with foreign suppliers for pure nickel in 2023. This suggests potential for more pure nickel imports in the second half of 2023. The alloy industry wasn't very hopeful about civilian orders last week because consumers were feeling less positive overall. But because of production scheduling and procurement pace, alloy enterprises still anticipate some demand in August. The stainless steel industry continued its increased production trend from July, providing some support to the demand for pure nickel. In the electroplating industry, there's a general impact from the off-season, with downstream demand orders remaining sluggish, resulting in limited demand for pure nickel. Production of 300 series stainless steel may drop in August due to poor demand. To sum up, nickel prices are mainly subject to macro factors, with limited support from fundamentals, and may move in a wide range this week.