SMM Morning Comment For SHFE Base Metals September 18

SHANGHAI, Sep 18 (SMM) –

Copper

LME copper prices opened at $8430/mt and closed at $8409/mt last Friday evening, a drop of 0.34%, with the high-end of $8442.5/mt and the low-end of $8388/mt. Trading volume was 15,000 lots and open interest stood at 264,000 lots. The most active SHFE 2310 copper contract prices opened at 69490 yuan/mt and finished at 69320 yuan/mt last Friday evening, down 0.47%, with the low-end of 69210yuan/mt and the high-end of 69529 yuan/mt. Trading volume was 31,000 lots, and open interest stood at 164,000 lots. On the macro front, the Federal Open Market Committee (FOMC) is expected to keep interest rates unchanged in the range of 5.25-5.5% at its meeting on September 19 and 20, and will maintain this level until the first interest rate cut in May next year. As of Friday September 15, SMM data showed that copper inventory across major Chinese markets stood at 100,900 mt, up 5,800 mt from last Monday and up 400 mt from two Fridays ago. Inventories have increased for three consecutive weeks. The inventory in East China increased due to the large arrivals of imported copper, while the increase in inventory in South China was mainly caused by the large shipments from smelters before delivery and weak consumption. Copper prices will not change much in the near future.

Aluminum

Last Friday night, the most-traded SHFE 2310 aluminum contract opened at 19,280 yuan/mt, with its lowest and highest at 19,155 yuan/mt and 19,285 yuan/mt before closing at 19,175 yuan/mt, down 160 yuan/mt or 0.83% compared with the previous trading day. LME aluminum opened at $2,220.5/mt on last Friday, with its high and low at $2,231.5/mt and $2,187/mt respectively before closing at $2,196/mt, a decrease of $24/mt or 1.08%.

Domestic policies, like those concerning real estate, continue to progress, and measures to stimulate domestic demand are gradually being enacted. On a fundamental level, the growth rate of domestic aluminum supply is decelerating, import window is open, and the market's overseas aluminum ingot supply is on the rise. Yet, domestic downstream consumption remains robust, with sustained low inventory throughout the week, and no significant shifts in market trading logic for now. In the short term, low inventory and warehouse receipt volumes may disrupt the hedging of future short positions. Near-term contracts are expected to maintain relatively strong fluctuations. SHFE aluminum contract is anticipated to oscillate at a high level.

Lead

LME lead prices opened at $2245/mt and closed at $2265/mt last Friday evening, up 0.87%, with the high-end of $2269/mt.

The most active SHFE 2310 lead contract prices opened at 17005 yuan/mt last Friday evening and finally closed at 17120 yuan/mt, up 0.71%. Open interest decreased 1633 lots to 89231 lots.

Zinc

Last Friday evening, LME zinc contract prices opened at 2572 yuan/mt and closed at 2515 yuan/mt, down 45 yuan/mt or 1.76%. Trading volume stood at 9737 lots, and open interest increased by 6908 lots to 217,000 lots. LME inventories continued to fall by about 10,000 tons, driven by warehouses in Southeast Asia. There can be inflows of imported goods in China.

Last Friday evening, the most active SHFE 2310 zinc contract prices opened at 21875 yuan/mt and closed at 21705 yuan/mt, down 250 yuan/mt or 1.14%. Trading volume stood at 74,000 lots, and open interest decreased by 5380 lots to 99,000 lots. The market has returned to its fundamentals. As imported zinc arrives at the port and continues to flow in, the support for spot market weakens, and zinc prices may show a downward trend.

Tin

SHFE 2310 tin contract quickly fell to a low of around 217,380 yuan/mt after opening on the Friday night session, then rebounded and finally closed at 217,760 yuan/mt, down 0.43%.

Spot premiums and discounts barely changed yesterday. Small brand tin ingots were offered at premiums of 300 yuan/mt, premiums of 200-500 yuan/mt for delivery brands, and premiums of 1,000-1,200 yuan/mt for Yunxi brand, and a discount of 300 yuan/mt for imported tin brands. Downstream enterprises stocked early last week when tin prices were lower, but made few purchases after tin prices rebounded in the second half of the week.

Nickel

The key focus last week was on the U.S. Labor Department's announcement that the CPI in August on a seasonally adjusted basis increased to 3.7%, surpassing both the market's earlier expectation of 3.6% and the previous reading of 3.2%. In August, inflation data came in higher than expected, but the core CPI continued to decline. As a result, there is still little expectation of a rate hike in September, but the outlook for rate cuts later in the year is less clear. Overall, the macro factors affecting nickel prices are less negative than they were, but the fact that markets are less sure of a rate cut later in the year is making it difficult for commodities to gain momentum. SHFE nickel saw a significant decline in the week ending September 15, dropping 2.36% compared to the week ending September 8. However, there was a slight uptick in trading activity in the spot market last week. From a fundamental perspective, the spot supply of pure nickel in Shanghai was relatively tight last week. This is due to the downward fluctuations in SHFE nickel prices, which have pushed nickel prices to recent lows. Additionally, with the upcoming National Day holiday, downstream demand was gearing up for pre-holiday inventory replenishment. Consequently, overall trading activity was robust last week. Jinchuan and other nickel plate shipments will arrive in Shanghai this week. Once the delivery is done, some warrants will be released back into the market. With the ongoing rise in domestic electrowinning nickel production, the overall nickel market supply is expected to increase significantly. Furthermore, the ongoing Indonesian nickel ore event has not yet been resolved, leading to tight expectations for nickel raw material supply in the fourth quarter. This sentiment continues to support nickel prices. From a cost perspective, the current support level for pure nickel raw material costs is around 159,000, and it rebounded after dropping near 159,000 on Wednesday evening last week. In summary, it is expected that nickel prices will see a slight rebound in the short term.