SMM Morning Comment For SHFE Base Metals August 18

SHANGHAI, Aug 18 (SMM) –

Copper

LME copper prices closed at $8,234/mt overnight, a gain of 0.75%. Trading volume was 21,000 lots and open interest stood at 274,000 lots. The most active SHFE 2309 copper contract prices closed at 68,220 yuan/mt overnight, up 0.6%. Trading volumes stood at 26,000 lots and open interest stood at 152,000 lots. On the macro front, the number of people applying for unemployment benefits in the United States recorded 239,000 in the week ending August 12, lower than the expected 240,000, indicating that the labour market remained tight. In addition, China's monetary policy implementation report stated that it will resolutely prevent the risk of exchange rate overshoot, and the yuan rebounded. In terms of fundamentals, the spot quotes in east China rose sharply, mainly due to the relatively tight spot cargoes and the drop in copper prices. Driven by low inventories, spot quotes in south China also rose sharply. Copper prices moved downward, boosting downstream demand. Copper prices will have limited upside room in the near future.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,555 yuan/mt, with the lowest and highest prices at 18,470 yuan/mt and 18,580 yuan/mt before closing at 18,470 yuan/mt, down 10 yuan/mt or 0.05% from the previous trading day. LME aluminium opened at $2,132/mt on Thursday with its high and low at $2,186/mt and $2,132/mt respectively before closing at $2,146/mt, an increase of $3/mt or 0.14% from the previous trading day.

On the macro side, the Chinese government introduced relevant policies to stabilize the property market and boost consumption. As fears of a renewed interest rate hike resurfaced in the middle of the week, traders need to pay close attention to the multiple impacts of the Federal Reserve’s interest rate hike expectations and exchange rate fluctuations on the non-ferrous metal market. In terms of fundamentals, the output ratio of molten aluminum is still at a high level, and the amount of domestic ingots is still relatively small. It is difficult for the market to witness a large number of concentrated arrivals of ingots in the short term. Domestic aluminum ingots social inventory declined to nearly 500,000 mt, but with the resumption of production in Yunnan, aluminum ingots may arrive in some consumption areas. In mid-August, the downstream inventory restocking was active, which strengthened confidence over extended destocking of aluminum products and boosted spot premiums. In the short term, low inventories will still support aluminum prices. However, the uncertain macro sentiment and the expected supply increase will put pressure on the upward trend of aluminum prices. SMM predicted that the short-term aluminum prices will remain volatile, and follow-up attention should be paid to consumption and inventory.

Lead

LME lead prices closed at $2,137.5/mt last evening, up $20/mt or 0.94%.

The most active SHFE 2108 lead contract prices gained 95 yuan/mt or 0.59% to close at 16,110 yuan/mt today, with open interest down 2,209 lots to 86,088 lots.

Zinc

The most active SHFE zinc contract lost $5.5/mt or 0.24% to settle at 2,296.5 yuan/mt in overnight trading. Trading volumes decreased 10,739 lots, and open interest increased 3,851 lots to 204,000 lots. LME zinc inventory increased by 1,025 mt to 142,775 mt, an increase of 0.72%. Overnight, the number of Americans filing for unemployment benefits fell last week. The labour market continued to support the economy. Worries about high interest rates caused US stocks to fall. Inflationary pressures remained.

The most active SHFE 2310 zinc contract prices closed at 19,865 yuan/mt last evening, up 85 yuan/mt or 0.43%. Trading volume fell to 49,569 lots, and open interest gained by 2,412 lots to 92,071 lots. Overnight, the domestic real estate policy and the central bank’s exchange rate stabilization policy, the yuan rebounded. Non-ferrous metals prices rebounded accordingly.

Tin

Overnight, SHFE 2309 tin contract price rapidly rose to 213,320 yuan/mt after the opening. Then it maintained a sideways range of fluctuations and finally closed at 212,810 yuan/mt, up 0.83%.

Spot premiums and discounts changed little on August 17 morning. Small brand tin ingots were offered at discounts of 200 yuan/mt, and premiums of 100-500 yuan/mt for delivery brands, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt, premiums of 900-1,200 yuan/mt for Yunxi brand, and discounts of 500 yuan/mt for imported brand. While tin prices hovered at lows, trading cooled as many downstream buyers had stocked enough raw materials earlier. Many traders reported low stocks after previous shipments.

Nickel

SHFE 2309 nickel contract opened at 163,200 yuan/mt at the night session on August 17, and closed at 164,960 yuan/mt, down 2,660 yuan/mt. Trading volume rose by 2,047 lots, and open interest decreased by 8,097 lots.

On the fundamentals, daily spot market transactions were still weak. Since the upstream was eager to ship at lower premiums. Domestic brands represented by Jinchuan nickel saw an acceptable transaction situation, but the recent trading volume of Norilsk nickel continued to be depressed. Overall, it is expected that the subsequent nickel price will be volatile.