SMM Morning Comment For SHFE Base Metals August 28

SHANGHAI, Aug 28 (SMM) –

Copper

LME copper prices opened at $8432/mt and closed at $8,359/mt last Friday evening, a rise of 0.02%, with the high-end of $8442/mt and the low-end of $8322/mt. Trading volume was 15,000 lots and open interest stood at 280,000 lots. The most active SHFE 2310 copper contract prices opened at 69010 yuan/mt and closed at 68770 yuan/mt last Friday evening, a drop of 0.09%,down 0.09%, with the high-end of 69040 yuan/mt and the low-end of 68600 yuan/mt. Trading volume was 32,000 lots, and open interest stood at 146,000 lots. On the macro front, Powell was slightly ambiguous in his speech last Friday. He hinted that interest rates may be raised again, while expressing a cautious attitude towards raising interest rates. Due to the Fed's unclear policy guidance, the conditions of the US consumer market and labor market will play an important role in the Fed's decision-making. On the fundamentals, as of August 25, SMM copper inventory across major Chinese markets increased by 1,300 mt from last Monday to 74,200 mt. Due to the inflows of imported copper and the weakening consumption due to rising copper prices, inventories in east China have increased. In south China, due to the lack of imported copper and domestic copper replenishment, the inventory has dropped for seven consecutive days. High copper prices put pressure on demand. In terms of prices, the U.S. economic data in the past week will have a strong guidance on copper prices, and it is expected that copper prices still have room to rise.

Aluminum

Last Friday night, the most-traded SHFE 2309 aluminium contract opened at 18,555 yuan/mt, with the lowest and highest prices at 18,550 yuan/mt and 18,620 yuan/mt before closing at 18,570 yuan/mt, up 25 yuan/mt or 0.13% from the previous trading day. LME aluminium opened at $2,155/mt on Friday with its high and low at $2,178.5/mt and $2,147/mt respectively before closing at $2,151/mt, a decrease of $6.50/mt or 0.30% from the previous trading day.

On the macro side, over the weekend, a variety of favorable policies were introduced in China, which boosted commodities. In the fundamentals, domestic supply and demand of aluminum maintained growth, and the proportion of molten aluminum output in the industry remained high while that of aluminum ingot stayed low. In the fundamentals, aluminum market maintained a state of simultaneous increase in supply and demand. The proportion of molten aluminum output remained high while aluminum ingot production was limited. The influx of imported aluminum ingots after the import window opened and the release of Southwest capacity may impede destocking progress, but inventory accumulation amount won’t be large. Overall, the imbalance between supply and demand is not prominent. Aluminum prices may fluctuate upward this week. In the follows-up, market participators still need to pay attention to changes in domestic aluminum inventories and downstream recovery.

Lead

LME lead prices opened at $2176.5/mt and closed at $2160/mt last Friday evening, down 0.58%, with the high-end of $2188/mt. Monday (August 28) is the British summer bank holiday, and the LME is closed for one day. The most active SHFE 2310 lead contract prices opened at 16380 yuan/mt last Friday evening and finally closed at 16360 yuan/mt, down 0.34%. Open interest decreased 739 lots to 115,000 lots.

Zinc

Last Friday evening, LME zinc prices opened at $2384.5/mt and closed at $2398.5/mt, up $12/mt or 0.5%. The trading volume reached 7,739 lots, and the open interest reached 204,000 lots. The contract posted a seven-day winning streak and met resistance from the 5-day moving average. Last Friday, LME inventories fell by 450 tons to 149,350 tons, a decrease of 0.3%, as overseas demand improved slightly. Federal Reserve Chairman Powell's speech was moderate, and the overall non-ferrous metals were under pressure. Last Friday evening, SHFE zinc prices opened at 20,660 yuan/mt, with the high-end of 20700 yuan/mt and the low-end of 20585 yuan/mt. Prices closed at 20640 yuan/mt, down 10 yuan/mt, or 0.05 yuan/mt.Trading volumes were 77503 lots, and open interest was 107,000 lots. SHFE zinc prices fluctuated rangebound as the drop in social inventory showed tight supply.

Tin

On last Friday’s night session, SHFE 2309 tin contract price rose slightly after the opening. Then it turned into a downward trend and rebounded slightly around the low price of 214,060 yuan/mt. The price finally closed at 214,470 yuan/mt, down 0.78%.

Spot premiums and discounts changed little on August 25 morning. Small brand tin ingots were offered at discounts of 200 yuan/mt to premiums of 100 yuan/mt, and premiums of 200-600 yuan/mt for delivery brands, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt, premiums of 800-1,300 yuan/mt for Yunxi brand, and discounts of 500 yuan/mt to 700 yuan/mt for imported brands. Last Friday, SHFE tin prices fell again, and some downstream enterprises conducted transactions based on rigid demand. Most traders reported that the shipment of tin ingots last Friday was average with small shipments or no transactions, while a few traders reported that the shipment situation improved. Overall, last Friday’s spot market recovered a little from last Thursday.

Nickel

SHFE 2309 nickel contract opened at 168,500 yuan/mt at the night session on August 25, and closed at 170,000 yuan/mt, up 1,200 yuan/mt. Trading volume dropped by 13,608 lots, and open interest decreased by 4,178 lots.

From a macro perspective, the US Department of Labor announced on the evening of last Thursday (August 24) that the number of people filing for unemployment benefits in the week ending August 19 was 230,000, lower than the previous value and the forecasted value of 240,000. This shows that the current US job market is still firm. The above-mentioned situation was good for the US dollar and bad for commodities, which will suppress the prices of commodities and put pressure on the non-ferrous metals sector. In the fundamentals, spot market transactions were depressed last Friday. Some upstream companies were eager to ship at lower premiums, but the downstream inventory was still at a high level due to previous purchases, causing downstream demand lack of support. So, nickel prices are expected to fluctuate in the future.