SMM Morning Comment For SHFE Base Metals August 23

SHANGHAI, Aug 23 (SMM) –

Copper

LME copper prices closed at $8361/mt last evening, up 0.88%. Trading volume was 18,000 lots and open interest stood at 278,000 lots. SHFE 2309 copper contract prices closed at 69030 yuan/mt last evening, a gain of 0.71%. Trading volume was 18,000 lots, and open interest stood at 138,000 lots. On the macro front, the minutes of the Fed's discount rate meeting showed that the boards of the New York Fed and the Atlanta Fed supported keeping the discount rate unchanged in July. In addition, the total number of existing home sales in the United States recorded an annualized 4.07 million in July, which was lower than the expected 4.15 million and was the lowest since January 2023. In terms of fundamentals, due to the inflow of imported copper into the spot market in east China yesterday, the spot quotes fell. There will be additional inflows of imported copper. In south China, warrants began to be offered for sale due to previous high spot quotes, lowering spot quotes. The overall trading was not active. In terms of consumption, as the downstream expects that the spot quotes will continue to decline, more market players stood on the sideline. It is expected that the performance of consumer demand will be poor.

Aluminum

Overnight, the most-traded SHFE 2309 aluminum contract opened at 18700 yuan/mt and closed at 18675 yuan/mt, flat from the previous trading day. LME aluminum prices closed at $2181/mt overnight, an increase of $35.5/mt or 1.65%.

On the macroeconomic side, it is clear from the recently released minutes of the Federal Reserve's July policy meeting that most Fed members believe that there is a relatively high upside risk to inflation and further tightening of policy may be required. But there were also members supporting keeping interest rates at current levels, the first sign in a long time that policymakers were significantly divided on the course of action. Fundamentally, the amount of domestic ingot casting is still relatively small, lowering the possibility of concentrated arrivals in the short term. Domestic social inventory of aluminum ingots will fall below the 500,000-mt mark soon. As the resumption of production in Yunnan comes to an end, products may gradually flow into the market. However, there are signs of improvement in consumption in mid-August, and the downstream inventory replenishment is active. The improvement in the consumption side supports the further destocking of aluminum product inventories and this will boost the market. SMM expects short-term aluminum prices to remain volatile. Attention will be paid to domestic aluminum inventory and downstream consumption.

Lead

Three-month LME lead prices ended 0.76% lower at $2151.5/mt in the overnight trading. Open interest increased by 2317 lots from the previous trading day to 124,000 lots, and trading volumes grew 160 lots to 6336 lots.

The most active SHFE 2309 lead contract prices opened at 16350 yuan/mt last night, and closed at 16270 yuan/mt, an increase of 0.31%. Open interest increased by 8899 lots from the previous trading day to 92492 lots, and trading volumes fell 34359 lots to 41445 lots.

Zinc

Overnight, LME zinc prices closed up $12/mt or 0.52% at $2335.5/mt. The trading volume was 6326 lots, and open interest added 56 lots to 205,000 lots. During the Asian trading hours, the U.S. dollar index fell, and the market’s concerns about capital liquidity weakened; then the U.S. index gradually rebounded, and SHFE zinc prices declined. Overnight, the most active SHFE 2310 zinc contract prices closed at 20130 yuan/mt, up 55 yuan/mt or 0.27%. Trading volume stood at 46,000 lots, and open interest gained by 246 lots to 105,000 lots. There were shipments arrivals from smelters under long-term contracts as well as imported zinc, cooling spot premiums. And the recent support to zinc prices weakened as lower zinc prices drove dip purchasing.

Tin

The price of the SHFE 2309 tin contract closed at 219430 yuan/mt last evening, up 0.68%. During the early trading yesterday, spot quotes of various domestic tin ingot brands did not change much. Among them, the quotations of small brand tin ingots stood at a maximum of 300 yuan/mt, and the premiums of delivery brands ranged from 100 yuan/mt to 600 yuan/mt. There were also some trading companies with low inventory selling at a premium of 700 yuan/mt. Yunxi brand was quoted with premiums of 800-1,300 yuan/mt, and imported tin brand were quoted with discounts of 700-500 yuan/mt. Trading companies in the market generally reported that the transaction situation was poor. Some traders purchased due to low inventories.

Nickel

On August 22, the SHFE 2309 nickel contract prices closed at 169,340 yuan/mt, an increase of 2,720 yuan/mt from the closing price of the previous trading day. The intraday trading was weaker than that of the previous trading day. The trading volume decreased by 6514 lots, and the open interest decreased by 4031 lots. It shows that long funds and short funds have flowed out of the market to varying degrees, and bears closed their positions. The price will rise in the short term and may fall back soon. From a macro point of view, the current strong trend of nickel prices is still greatly affected by the Indonesian nickel ore quotas. On Monday, the People's Bank of China lowered the 1-year LPR for the second time this year, down 10 basis points to 3.45%. The positive macro sentiment supports nickel prices to fluctuate upwards. From a fundamental point of view, spot market transactions were still weak as a whole, and the upstream was selling aggressively, lowering spot premiums. In summary, it is expected that the nickel price may fluctuate rangebound in the near term.