SMM Morning Comment For SHFE Base Metals On July 2

SHANGHAI, July 2 (SMM) –
Copper

Overnight, LME copper opened at $9,656/mt, with the initial session seeing a rise in the trading range, peaking at $9,690.5/mt. The price then dipped, hitting a session low of $9,618/mt at the end of trading, and finally closed at $9,636/mt, up 0.52%. Trading volume reached 15,000 lots, and open interest was 327,000 lots. The most-traded SHFE copper contract for August 2024 opened at 78,760 yuan/mt, initially rising to 78,960 yuan/mt, then dipping to a session low of 78,500 yuan/mt, and finally closed at 78,730 yuan/mt, up 0.46%. Trading volume reached 44,000 lots, and open interest was 192,000 lots.

Macro-wise, the final value of the US June S&P Global Manufacturing PMI was 51.6, lower than expected and the previous value. The US June ISM Manufacturing PMI was 48.5, also lower than expected and marking the third consecutive month of contraction, with the price index showing the largest decline in a year. Meanwhile, the June Caixin China Manufacturing PMI rose to 51.8, the highest since June 2021. Copper prices received some support.

Fundamentals, supply side, recent arrivals of imported copper in Guangdong have increased, and smelters in north China are about to resume supply. Demand side, downstream consumption remains sluggish amid stable copper prices and widening price spread between the current-month and next-month contracts. As of Monday, July 1, SMM copper stocks in major regions in China increased by 8,100 mt from last Thursday to 407,200 mt, ending the destocking trend and starting to restock, with total stocks 302,200 mt higher YoY. Overall, copper prices are expected to hover around the current level today.

Aluminum
The most-traded SHFE 2408 aluminum contract opened at 20,355 yuan/mt overnight, reaching a high of 20,400 yuan/mt and a low of 20,300 yuan/mt, and closed at 20,315 yuan/mt, down 5 yuan/mt, a decrease of 0.02%. LME aluminum opened at $2,510/mt in the previous trading day, with a high of $2,547.5/mt and a low of $2,510/mt, and closed at $2,517.5/mt, flat compared to the previous trading day's closing price.

Summary: On the macro front, the US dollar slightly declined overnight. The US manufacturing index for June fell to 48.5, lower than the expected 49.1, and the US construction spending for May also came in below expectations. This week's focus will be on Fed Chairman Powell's speech on Tuesday, the release of the Fed's June monetary policy meeting minutes on Wednesday, and the US non-farm payrolls data on Friday. On the fundamentals, domestic aluminum supply continues to grow, while the arrival of the off-season for consumption weakened the operating rate of downstream aluminum producers. In July, domestic aluminum ingot destocking has not proceeded smoothly. In the short term, aluminum prices are expected to be weak due to fundamental, but close attention should be paid to any macroeconomic events that could disrupt market sentiment.

Lead
Overnight, LME lead opened at $2,216/mt, showing a bullish trend throughout the day, peaking at $2,236/mt, a new high in a week and a half. However, high overseas LME lead stocks still exist, and in the latter part of the trading session, LME lead gradually gave back its gains, finally closing at $2,214/mt, down 0.34%.

Overnight, domestic lead prices continued to benefit from tight supply. The most-traded SHFE lead contract opened at 19,680 yuan/mt and rose strongly, peaking at 19,840 yuan/mt, a new high since July 5, 2018. In the latter part of the trading session, the battle between bulls and bears intensified, and SHFE lead slightly gave back its gains, finally closing at 19,770 yuan/mt, up 1%. Open interest was 112,000 lots, down 143 lots from the previous trading day.

Zinc

Overnight, LME zinc opened at $2,932.5/mt, initially fluctuating near the average daily line amid mixed long and short positions. During European trading hours, longs reduced positions, causing LME zinc to quickly dip to $2,905/mt. Subsequently, shorts took profits and exited, leading LME zinc to rebound and peak at $2,977/mt during the night session. However, lacking upward momentum, LME zinc fell back and finally closed lower at $2,917/mt, down $24/mt or 0.82%. Trading volume decreased to 10,890 lots, and open interest fell by 2,935 lots to 237,000 lots. Overnight, LME zinc stocks were down by 225 mt to 261,850 mt, a decrease of 0.09%. Despite the US ISM manufacturing data contracting for three consecutive months, concerns about oversupply due to high inventory levels still exist, and LME zinc is expected to fluctuate.
Overnight, the most-traded SHFE zinc contract opened at 24,590 yuan/mt, initially rising briefly to 24,600 yuan/mt. Subsequently, increased short positions dragged SHFE zinc down to a session low of 24,325 yuan/mt, finally closing lower at 24,360 yuan/mt, down 15 yuan/mt or 0.06%. Trading volume decreased to 79,523 lots, and open interest increased by 529 lots to 93,457 lots. According to an SMM survey, as of Monday (July 1), SMM zinc ingot stocks in seven regions totaled 197,900 mt, up 4,100 mt from June 24 and up 3,300 mt from June 27, with domestic stocks increasing. Fundamentals are bearish, with poor downstream consumption and continuous increases in domestic stocks. SHFE zinc is expected to fluctuate rangebound.

Tin
Yesterday, the night trading session saw the most-traded SHFE tin contract close at 273,690 yuan/mt, down by 610 yuan/mt, a decrease of 0.22%. The highest price was 276,790 yuan/mt, and the lowest was 273,240 yuan/mt.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0 yuan/mt over SHFE 2408 tin contract, versus discounts of 500 yuan/mt to premiums of 200 yuan/mt for delivery brands and premiums of 200 yuan/mt for Yunxi brand. Yesterday morning, SHFE tin prices hovered at high levels, with downstream producers mostly adopting a wait-and-see attitude and showing low willingness to purchase. Overall, the spot market was relatively quiet yesterday.

Nickel
On July 1, Jinchuan nickel was at a premium of 1,500-1,600 yuan/mt, with an average of 1,550 yuan/mt, down 300 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 0-200 yuan/mt, with an average of 100 yuan/mt, down 50 yuan/mt compared to the previous trading day. In the morning, as the market fluctuated slightly upwards, downstream purchasing willingness decreased. However, the shortage of electro-deposited nickel in the spot market continued, and the premiums and discounts of various brands remained firm. The price of nickel briquette was 134,500-135,000 yuan/mt, up 1,100 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 5,205 yuan/mt (nickel sulphate prices were 5,205 yuan/mt lower than nickel briquette prices).