SMM Morning Comment For SHFE Base Metals August 17

SHANGHAI, Aug 17 (SMM) –

Copper

LME copper prices closed with a drop of 0.06% at $8,173/mt last evening. Trading volume stood at 20,000 lots. Open interest stood at 274,000 lots. SHFE 2309 copper contract prices closed at 67,810 yuan/mt last evening, down 0.09%. Trading volume was 28,000 lots, and open interest stood at 156,000 lots. On the macro front, the minutes of the Federal Reserve's July policy meeting highlighted that policymakers are still divided on whether to raise interest rates further, and more economic data guidance is needed. In terms of fundamentals, spot quotes in east China surged yesterday, mainly because the price of copper fell below 68,000 yuan/mt, and downstream processing companies became more active in purchasing, resulting in a shortage of spot resources. South China region is also affected by the shortage of spot resources after the delivery, pushing up the premiums. However, with the warrants being offered for sale, the spot qutoes will fall back. Copper prices have fallen below recent lows, which will slightly boost demand in the near future. Due to the influence of macro sentiment, copper prices will have limited upside room in the near future.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,485 yuan/mt, with the lowest and highest prices at 18,450 yuan/mt and 18,540 yuan/mt before closing at 18,505 yuan/mt, up 30 yuan/mt or 0.16% from the previous trading day. LME aluminium opened at $2,142/mt on Wednesday with its high and low at $2,151.5/mt and $2,130/mt respectively before closing at $2,145.5/mt, an increase of $3/mt or 0.19% from the previous trading day.

On the macro side, as fears of a renewed interest rate hike resurfaced in the middle of the week, the positive macro sentiment came to an abrupt end. Recently, traders need to pay close attention to the multiple impacts of the Federal Reserve’s interest rate hike expectations and exchange rate fluctuations on the non-ferrous metal market. In terms of fundamentals, the output ratio of molten aluminum is still at a high level, and the amount of domestic ingots is still relatively small. It is difficult for the market to witness a large number of concentrated arrivals of ingots in the short term. Domestic aluminum ingots social inventory declined to nearly 500,000 mt, but with the resumption of production in Yunnan, aluminum ingots may arrive in some consumption areas. In mid-August, the downstream inventory restocking was active, which strengthened confidence over extended destocking of aluminum products and boosted spot premiums. In the short term, low inventories will still support aluminum prices. However, the uncertain macro sentiment and the expected supply increase will put pressure on the upward trend of aluminum prices. SMM predicted that the short-term aluminum prices will remain volatile, and follow-up attention should be paid to consumption and inventory.

Lead

LME lead prices opened at $2,120/mt and closed at $2,117.5/mt last evening, down 0.07%.

The most active SHFE lead contract prices gained 0.28% to close at 16,065 yuan/mt in the overnight trading.

Zinc

LME zinc prices closed down $6/mt or 0.26% at $2,302/mt in overnight trading. The trading volume rose to 12,546 lots, and open interest fell by 4,838 lots to 200,000 lots. LME zinc inventories increased sharply by 34,850 mt to 141,750 mt, an increase of 19.04%, showing sluggish overseas consumption. The minutes of the Federal Reserve meeting showed that inflation needs to further tighten monetary policy, and the dollar rebounded, which is expected to still put pressure on LME zinc. The most active SHFE 2309 zinc contract prices lost 110 yuan/mt or 0.55% to settle at 19,990 yuan/mt in overnight trading. Trading volumes decreased to 69,832 lots and open interest fell 2,719 lots to 86,445 lots. Overseas deliveries to LME warehouses continued, and the macro data did not perform well. But as the recent spot transactions have improved significantly, zinc prices may rebound.

Tin

Overnight, SHFE 2309 tin contract price rose rapidly after the low opening. After reaching a high price of around 213,300 yuan/mt, it turned gradually down and finally closed at 211,780 yuan/mt, down 0.15%.

Spot premiums and discounts changed little on August 16 morning. Small brand tin ingots were offered at discounts of 300 yuan/mt, and premiums of 100-500 yuan/mt for delivery brands, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt, premiums of 900-1,200 yuan/mt for Yunxi brand, and discounts of 700 yuan/mt for imported brand. Tin price rally and adequate stocks on hand after previous stocking caused trading activity to cool down.

Nickel

SHFE 2309 nickel contract opened at 163,330 yuan/mt at the night session on August 16, and closed at 162,300 yuan/mt, down 2,680 yuan/mt. Trading volume dropped by 15,175 lots, and open interest increased by 1,231 lots.

On the macro side, the Indonesian nickel mine investigation may reduce the nickel mine supply, making the SHFE nickel volatile yesterday. On the fundamentals, daily spot market transactions were still weak. The upstream was eager to ship to at lower premiums, but the downstream purchasing sentiment didn’t give a positive response. Overall, it is expected that the subsequent nickel price will shock downward.