SMM Morning Comment For SHFE Base Metals On June 24

SHANGHAI, June 24 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,715.5/mt, initially reaching a high of $9,726.5/mt before declining to a low of $9,651/mt during the session. It then consolidated at the end of the trading session and finally closed at $9,680/mt, with a decline of 2.06%. Trading volume reached 18,000 lots, and open interest was 321,000 lots. Last Friday evening, the most-traded SHFE copper 2407 contract opened at ¥78,640/mt, initially declining to a low of ¥78,480/mt. It then slightly rebounded during the session, reaching a high of ¥78,970/mt near the end of the trading session, and finally closed at ¥78,700/mt, with a decline of 1.27%. Trading volume reached 21,000 lots, and open interest was 129,000 lots.

On the macroeconomic front, the US June Markit PMI data released last Friday was better than expected across the board, with service sector activity reaching its fastest pace in over two years, indicating that overall business activity remains resilient. The US dollar index rose, negatively impacting copper prices.

On the fundamentals side, due to the rebound in copper prices, downstream demand weakened again, forcing sellers to sell at low prices, but downstream buyers mainly restocked based on immediate needs. Additionally, a concentration of imported copper is expected to arrive at the port by the end of the month, which is anticipated to have some impact on the spot market. Overall, the weak demand is unlikely to change in the short term, and spot supply remains ample. In terms of prices, US Fed officials are expected to speak throughout the week, which is likely to put some pressure on copper prices.

Aluminum

Last Friday night, the most-traded SHFE 2408 aluminum contract opened at 20,430 yuan/mt, reaching a high of 20,470 yuan/mt and a low of 20,385 yuan/mt, and closed at 20,435 yuan/mt, down 120 yuan/mt, a decrease of 0.58%. The previous trading day, LME aluminum opened at $2,522.5/mt, hit a high of $2,537.5/mt and a low of $2,501/mt, and closed at $2,513/mt, down $8/mt, a decrease of 0.32%.

Summary: On the macro front, the US Fed's June comprehensive S&P Global PMI index was better than expected, and the US dollar index continued to rise, putting pressure on non-ferrous metals. Domestically, rural homestead policies were introduced, further stimulating urban housing demand. On the fundamentals, domestic aluminum capacity remained at a high level. Boosted by a rebound in aluminium billet conversion margins, aluminum liquid alloying ratio increased, and ingots production decreased. Meanwhile, due to recent pullback in aluminum prices, downstream restocking sentiment improved, driving destocking in the social inventory of aluminum ingots. However, new orders in industries such as photovoltaics and automobiles were not ideal, and the operating rate of aluminum processing enterprises will remain sluggish. Amid weak macro front, together with a weakening trend in downstream consumption expectations, market sentiment remains cautious. SMM expects aluminum prices to show wide fluctuations.

Lead

Last Friday, LME lead opened at $2,215/mt, briefly touching a high of $2,223/mt during the Asian session before declining. During the European session, LME lead continued to weaken, reaching a low of $2,181/mt, and finally closed at $2,186/mt, with a decline of 1.33%.

Last Friday evening, the most-traded SHFE lead 2408 contract opened at ¥18,735/mt, briefly touching a low of ¥18,635/mt at the beginning of the session. Later, influenced by factors such as a decline in LME lead inventories, bullish funds pushed lead prices up to a high of ¥18,950/mt, and finally closed at ¥18,895/mt, with an increase of 0.59%.

Zinc

Last Friday, LME zinc opened at $2,870/mt. At the beginning of the session, LME zinc fluctuated around the average daily line, reaching a high of $2,876/mt. Subsequently, bulls exited the market, causing LME zinc to consolidate around $2,860/mt. Approaching the night session, LME zinc accelerated its decline to a low of $2,831.5/mt before rebounding to consolidate near the average daily line, eventually closing lower at $2,858/mt, down $10.5/mt, a decrease of 0.37%. Trading volume increased to 5,763 lots, and open interest decreased by 242 lots to 231,000 lots. LME zinc inventory decreased by 1,850 tons to 242,525 tons, a drop of 0.76%, continuing its decline. The stronger-than-expected US PMI data boosted the dollar, leading to weak performance in LME zinc.

Last Friday, the most-traded SHFE zinc 2408 contract opened lower at RMB 23,705/mt. At the beginning of the session, it quickly dipped to RMB 23,625/mt before bulls entered the market, pushing SHFE zinc to rise, with the focus shifting above the average daily line. Approaching the end of the trading session, SHFE zinc quickly surged to a high of RMB 23,955/mt, eventually closing lower at RMB 23,875/mt, down RMB 20/mt, a decrease of 0.08%. Trading volume decreased to 81,430 lots, and open interest increased by 3,365 lots to 96,479 lots. Fundamentally, both supply and demand were weak, and SHFE zinc maintained range-bound consolidation, with short-term attention on the pressure level at the RMB 24,000/mt mark.

Tin

Last Friday night, the most-traded SHFE tin futures contract closed at 272,990 yuan/mt, down 1,690 yuan/mt, a decrease of 0.62%.

Last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 0-100 yuan/mt over SHFE 2407 tin contract, versus premiums of 0-500 yuan/mt for delivery brands and premiums of 600-800 yuan/mt for Yunxi brand. Last Friday morning, SHFE tin prices fell, and downstream procurement strategies were relatively conservative. Overall, last Friday's spot market transactions were relatively moderate.

Nickel

Last week, SHFE nickel prices continued to decline, reaching a low of 132,810 yuan/mt. By the close on Friday, it slightly rebounded to 133,510 yuan/mt. The price drop was caused by the weakening macro support for non-ferrous metals, with all varieties gradually returning to fundamentals. Market expectations of a supply surplus led to weak prices. On the macro front, data released on the evening of June 20 showed that the US initial jobless claims for the week ending June 15 decreased by 5,000 to 238,000, higher than the expected 235,000. Meanwhile, the US continuing jobless claims were 1.828 million, exceeding the expected 1.81 million. Additionally, the US June Philadelphia Fed manufacturing index was 1.3, far below the expected 5 and the previous value of 4.5, reflecting the current instability in the US market. Fundamentally, the price logic of SHFE nickel has shifted from being macro-driven to fundamentals-driven. The most worthy of attention is the change in refined nickel inventory both domestically and overseas. SHFE nickel experienced stock reduction for four consecutive weeks, dropping from 37,903 mt at the beginning of June to 29,804 mt last week, a total decrease of 8,099 mt, down 3,314 mt WoW, marking the largest weekly destocking since 2023. In contrast, LME nickel inventory increased from 83,724 mt at the beginning of June to 90,450 mt, an increase of over 7,000 mt, reaching the highest level since February 2022. According to an SMM survey, driven by previous macro factors and the Indonesian RKAB approval, as well as the continuous rise in the exchange rate of the US dollar against the RMB, overseas nickel prices have consistently been higher than domestic nickel prices, leading to exports of numerous domestic nickel plates. At the same time, overseas nickel could not enter the domestic market, ultimately bringing a continuous decrease in domestic circulating supply of nickel plates. Demand side, although end-users did not see a significant increase in orders, downstream purchasing sentiment was relatively optimistic during the downward trend in nickel prices, given the insufficient raw material inventory caused by the high nickel prices in the previous period. Therefore, the demand for nickel plates increased significantly in June. In summary, despite the unchanged long-term expectation of oversupply, SHFE nickel prices have limited downward room amid improving SHFE/LME nickel price ratio and the lack of a significant macro shift. It is expected that the most-traded SHFE nickel contract will operate between 130,000-140,000 yuan/mt this week.