SMM Morning Comment For SHFE Base Metals On August 6

SHANGHAI, August 6 (SMM) –

Copper

Overnight, LME copper opened at $8,888/mt, initially dropped to $8,714/mt, then rebounded during the session, approaching $8,960/mt near the end of the trading session, and finally closed at $8,854.5/mt, down 2.56%. Trading volume reached 46,000 lots, and open interest was 291,000 lots.
Overnight, the most-traded SHFE copper 2409 contract opened at 70,800 yuan/mt, initially dipped to 70,630 yuan/mt, then rose during the session, reaching 71,690 yuan/mt, and finally closed at 71,300 yuan/mt, down 2.41%. Trading volume reached 105,000 lots, and open interest was 175,000 lots.

Macro side, global assets faced a "Black Monday" yesterday, with multiple stock markets experiencing circuit breakers. The sell-off sentiment in the stock markets also led to a sharp drop in copper prices. Fundamentals side, copper prices fell yesterday, but downstream consumption showed signs of recovery, and market trading activity increased. As of Monday, August 5, SMM national mainstream copper stocks increased by 100 mt from last Thursday to 348,500 mt, up 255,200 mt YoY from 93,300 mt. Additionally, due to the impact of Document No. 783, the supply of copper rod made from copper scrap saw a sharp drop, increasing the demand for copper cathode. In terms of prices, under the panic market sentiment, copper prices are expected to continue to run weakly.

Aluminum

Market: The most-traded SHFE aluminum 2409 contract opened at 18,785 yuan/mt overnight, reaching a high of 18,920 yuan/mt and a low of 18,755 yuan/mt, and closed at 18,885 yuan/mt, down 10 yuan/mt, a decrease of 0.05%. The previous trading day, LME aluminum opened at $2,261/mt, reached a high of $2,283/mt, a low of $2,227/mt, and closed at $2,262/mt, down $1/mt, a decrease of 0.04%.

Summary: On the macro front, the Chinese government continues to boost the domestic economy, the expectation of a US Fed rate cut is growing, and regional conflict situations are escalating, providing upward momentum for aluminium prices. However, yesterday's "Black Monday" for global assets has introduced uncertainty to the macro front. On the fundamentals side, aluminium supply is increasing while demand remains sluggish. In July, aluminium production is expected to reach around 3.68 million mt, and social inventory is at a high level for the same period, putting pressure on aluminium prices. In the short term, both macro and fundamental factors are mixed, and aluminium prices are expected to fluctuate widely.

Lead

Overnight, LME lead opened at $2,027/mt, briefly touched a high of $2,038/mt during the Asian session, and then fluctuated downward. Entering the European session, shorts increased their positions and the dollar fluctuated upward, causing LME lead to dip to $1,926.5/mt, and it finally closed at $1,957.5/mt, down 3.81%.

Overnight, the most-traded SHFE 2409 lead contract opened at 17,300 yuan/mt, briefly touched a low of 17,075 yuan/mt at the beginning of the session, and then weakly consolidated as longs reduced their positions. During this period, it touched a high of 17,415 yuan/mt and finally closed at 17,235 yuan/mt, down 3.58%.

Zinc

Overnight, global assets experienced a "Black Monday"! Foreign media reported that Iran might attack Israel within 24 to 48 hours; US officials stated that the Asad Air Base in western Iraq was attacked; US Fed officials mentioned that the Fed's duty is not to react to one month's employment data, and its policy mandate is unrelated to the stock market; it was reported that Libya's largest oil field, the Sharara oil field, was completely shut down on Monday; China's Caixin Services PMI for July showed an accelerated expansion in the service sector; China's 10-year government bond yield once fell below 2.1%; the offshore yuan surged over 700 points against the dollar during the day; the central bank of China and five other departments announced support for eligible seed companies to list, raise funds, and refinance; the Shanghai headquarters of the central bank guided banks to reasonably adjust deposit rates; further expanded the cross-border use of the yuan; and strengthened monitoring and analysis of the real estate market and financial situation.

Overnight, LME zinc opened at $2,646.5/mt. At the beginning of the session, bulls had the upper hand in the tug-of-war, pushing LME zinc to a high of $2,692.5/mt. Subsequently, as bulls took profits and exited, LME zinc fluctuated downward, operating below the average daily line. Approaching the night session, it dipped to $2,563/mt. Entering the night session, LME zinc rebounded from the bottom, consolidating around $2,635/mt, and finally closed lower at $2,642/mt, down $20/mt, a decrease of 0.75%. Trading volume increased to 15,188 lots, and open interest decreased by 1,185 lots to 220,000 lots. LME zinc's various moving averages above form resistance. Overnight, LME zinc inventory decreased by 2,775 mt to 229,775 mt, a drop of 1.19%, continuing the trend of declining LME inventory. Due to recession concerns, global stock markets sold off, manifesting a "Black Monday," causing LME zinc price to shift downward. However, the US Fed's downplaying of recession concerns limited the decline in LME zinc.

Overnight, the most-traded SHFE zinc 2409 contract opened lower at 22,020 yuan/mt. At the beginning of the session, SHFE zinc quickly dipped to 21,975 yuan/mt, then as bears took profits and exited, SHFE zinc corrected upward, fluctuating upward throughout the session. By the end of the trading session, the focus shifted upward to 22,290 yuan/mt, and finally closed lower at 22,300 yuan/mt, down 230 yuan/mt, a decrease of 1.02%. Trading volume decreased to 115,000 lots, and open interest decreased by 339 lots to 89,074 lots. Overnight, SHFE zinc recorded a small bullish candlestick, but the daily K-line focus shifted downward. Overnight, driven by LME zinc, SHFE zinc corrected from a low level. Fundamentally, tight supply supported zinc prices, and SMM social inventory remained low, providing support for zinc prices. In the short term, attention should be paid to macro sentiment disturbances.

Tin

In the night session yesterday, the most-traded SHFE tin contract closed at 242,250 yuan/mt, down 5,650 yuan/mt, a decrease of 2.28%. The highest price was 243,200 yuan/mt, and the lowest was 239,610 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 500-1,500 yuan/mt over SHFE 2409 tin contract, versus premiums of 400-1,500 yuan/mt for delivery brands, and premiums of 700-1,100 yuan/mt for Yunxi brand. Tin prices surged and then fell back yesterday, with some downstream producers making small restocks in the afternoon after prices fell, but most downstream producers remained on the sidelines. Overall, the spot market transactions were relatively moderate yesterday.

Nickel

On August 5, Jinchuan nickel was quoted at a premium of 1,500-1,700 yuan/mt, with an average of 1,600 yuan/mt, flat compared to the previous trading day. Norilsk nickel was quoted at a discount of 200 yuan/mt to a premium of 200 yuan/mt, with an average of 0 yuan/mt, up 50 yuan/mt from the previous trading day. In the morning, the market fluctuated, and spot premiums showed little change compared to the previous working day. Nickel briquette prices were 127,900-128,200 yuan/mt, down 350 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 1,913 yuan/mt (nickel sulphate prices were 1,913 yuan/mt lower than nickel briquette prices).