SMM Morning Comment For SHFE Base Metals On July 18

SHANGHAI, July 18 (SMM) –

Copper

Overnight, LME copper opened at $9,710.5/mt, initially hitting a high of $9,737.5/mt before declining throughout the session to a low of $9,609.5/mt at the end of trading. It then consolidated and finally closed at $9,616/mt, down 0.50%. Trading volume reached 20,000 lots, and open interest was 311,000 lots.

Overnight, the most-traded SHFE copper 2408 contract opened at 78,390 yuan/mt, initially hitting a high of 78,500 yuan/mt before fluctuating downward to a session low of 78,030 yuan/mt. At the end of the trading session, it rose slightly and then consolidated, finally closing at 78,180 yuan/mt, down 0.52%. Trading volume reached 30,000 lots, and open interest was 175,000 lots.

Macro side, the US Fed's Beige Book showed slight economic growth and slowing inflation in the US. However, due to uncertainties, economic growth expectations for the next six months have slowed. US Fed officials indicated that there might be a reason to cut interest rates in the coming months. The US dollar index fell to its lowest point since April, but copper prices remained under pressure due to demand concerns and inventory pressure.

Fundamentals, supply side, the volume sent to warehouses by smelters after delivery has significantly decreased, and arrivals have somewhat reduced. Demand side, although copper prices have fallen, sellers are holding firm on prices due to destocking expectations, and trading has not significantly improved. Overall, with mixed factors, copper prices are expected to lack upward momentum.

Aluminum

The most-traded SHFE aluminum 2409 contract opened at 19,785 yuan/mt overnight, reaching a high of 19,810 yuan/mt and a low of 19,700 yuan/mt, and closed at 19,720 yuan/mt, down 70 yuan/mt, a decrease of 0.35%. The previous trading day, LME aluminum opened at $2,415.5/mt, reached a high of $2,424/mt and a low of $2,397/mt, and closed at $2,405.5/mt, down $10.5/mt, a decrease of 0.43%.

Summary: On the macro front, signs of a weakening US economy last night have revived expectations of a rate cut by the US Fed, causing the US dollar index to fall to a four-month low. The upcoming 20th Third Plenary Session of the CPC Central Committee in China may bring new positive news. However, the assassination attempt on Trump over the weekend has increased his chances of winning, and the market expects his policies to be favorable to the dollar. Together with the uncertain situation of the Israel-Palestine conflict, this has added uncertainty to the market in the near term. On the fundamentals, domestic aluminium production is increasing, with some capacity still awaiting resumption. Downstream aluminium processing and end-user demand have entered the off-season, with some sectors experiencing demand shocks. The operating rate in the aluminium processing industry is declining, social inventory destocking is weak, and inventory levels are at a three-year high for the same period. Spot discounts may persist in the short term. The aluminium market currently lacks upward drivers, as the fundamentals remain bearish during the off-season. SMM expects aluminium prices to remain weak in the short term, with attention needed on macro changes and material-side events that may impact aluminium prices.

Lead

Overnight, LME lead opened at $2,189.5/mt. During the Asian session, it slightly fluctuated downward to a low of $2,197/mt. Entering the European session, the US dollar index fell to a four-month low. LME lead surged to a high of $2,224.5/mt. In the night session, it was dragged down by SHFE lead, pulling back from the high and closed at $2,184.5/mt, a decrease of 0.21%.

Overnight, the most-traded SHFE lead 2408 contract opened at 19,985 yuan/mt. It initially touched a high of 20,050 yuan/mt, but then fluctuated downward to a low of 19,805 yuan/mt due to profit-taking by longs. It closed at 19,860 yuan/mt, an increase of 0.28%.

Zinc

Overnight, LME zinc opened at $2,890/mt, quickly reaching a high of $2,904.5/mt, then hitting a low of $2,841/mt, and finally closed at $2,842/mt, down $54/mt, a decrease of 1.86%. Trading volume increased to 10,587 lots, and open interest decreased by 5,828 lots to 225,000 lots. Overnight, LME zinc recorded a bearish candlestick, with various moving averages above forming resistance and the daily K-line focus shifting down. Overnight, LME inventory held flat at 246,100 mt. With subdued global zinc consumption and supply surplus, bulls exited, leading LME zinc to lead the decline.

Overnight, the most-traded SHFE 2409 zinc contract opened at 23,800 yuan/mt, reaching a high of 23,855 yuan/mt, then dropping to 23,640 yuan/mt by the end of the trading session, and finally closed at 23,630 yuan/mt, down 385 yuan/mt, a decrease of 1.6%. Trading volume decreased to 84,614 lots, and open interest increased by 3,705 lots to 94,636 lots. Overnight, SHFE zinc recorded three consecutive bearish candlesticks, with the MACD bearish column expanding. Fundamentally, the market has clearly started to focus on the weakening consumption, which has surpassed the supply shortage contradiction, causing the zinc price focus to continuously shift downward.

Tin

The closing price of the most-traded SHFE tin contract in the night session yesterday was 267,670 yuan/mt, down 5,340 yuan/mt, a decrease of 1.96%. The highest price was 275,050 yuan/mt, and the lowest was 266,880 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 discounts of 200-700 yuan/mt over SHFE 2408 tin contract, versus discounts of 400 yuan/mt to premiums of 500 yuan/mt for delivery brands and premiums of 400-700 yuan/mt for Yunxi brand. During the morning session yesterday, SHFE tin prices remained high. Downstream companies mostly purchased as needed. Overall, the spot market remained sluggish yesterday.

Nickel

On July 17, Jinchuan nickel was at a premium of 1,400-1,700 yuan/mt, with an average of 1,550 yuan/mt, an increase of 100 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 100 yuan/mt to a premium of 200 yuan/mt, with an average premium of 50 yuan/mt, an increase of 100 yuan/mt compared to the previous trading day. In the morning, as the market ran weak, spot premiums saw a slight increase. Some traders reported the relatively dull trading atmosphere in the spot market. The price of nickel briquette was 131,000-131,200 yuan/mt, a decrease of 950 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 1,555 yuan/mt (nickel sulphate prices were 1,555 yuan/mt lower than nickel briquette prices).