SMM Morning Comment For SHFE Base Metals On July 16

SHANGHAI, July 16 (SMM) –
Copper
Overnight, LME copper opened at $9,834/mt, initially touched a high of $9,867/mt, then fell to a session low of $9,753/mt after some fluctuations, and finally closed at $9,768/mt, down 1.10%. Trading volume reached 15,000 lots, and open interest reached 324,000 lots. Overnight, the most-traded SHFE copper 2408 contract opened at 79,330 yuan/mt, initially fluctuated upwards to a high of 79,740 yuan/mt, then fell to a session low of 79,310 yuan/mt, and finally closed at 79,390 yuan/mt, down 0.33%. Trading volume reached 22,000 lots, and open interest reached 188,000 lots.

Macro-wise, the assassination attempt on Trump significantly increased his chances of winning the election, with the market expecting his policies to benefit the dollar. The US dollar index saw some rebound, putting pressure on copper prices. Meanwhile, US Fed's Powell and other officials made dovish remarks, stating that "if the Fed waits until the inflation rate reaches 2% to cut rates, it will be too late."

According to the NBS, China's GDP grew by 5% YoY in H1. Fundamentals-wise, approaching delivery, trading was relatively quiet, maintaining only the necessary restocking. Notably, due to Fair Competition Review Regulations, the market holds certain expectations for subsequent demand for copper cathode. As of Monday, July 15, SMM's copper stocks in major regions across China decreased by 3,700 mt from last Thursday to 384,900 mt, hitting a new low since March 11, but up 259,500 mt YoY.

In summary, the US Fed's dovish remarks increased rate cut expectations, and domestic economic data showed positive signs, suggesting that copper prices are likely to remain high.
Aluminum
Market: Overnight, the most-traded SHFE aluminum 2409 contract opened at 19,970 yuan/mt, reaching a high of 20,050 yuan/mt and a low of 19,955 yuan/mt, and closed at 19,955 yuan/mt, down 90 yuan/mt, a decrease of 0.45%. The previous trading day, LME aluminum opened at $2,479.5/mt, hit a high of $2,489.5/mt, a low of $2,458/mt, and closed at $2,460/mt, down $29.5/mt, a decrease of 1.18%.
Summary: On the macro front, Powell's statement last night indicated progress in the fight against inflation, boosting market expectations for a rate cut, but his speech did not change the expectation of holding interest rates unchanged in August. The upcoming 20th Third Plenary Session of the CPC Central Committee in China may bring new positive news. However, the weekend's assassination attempt on Trump increased his chances of winning, and the market expects his policies to benefit the dollar. Together with the complex situation of the Israel-Palestine conflict, this has added uncertainty to the market. On the fundamentals, domestic aluminum supply is increasing, with some capacity yet to be resumed. Downstream aluminum processing and end-user demand have entered the off-season, with some sectors experiencing demand shocks. The operating rate in the aluminum processing industry is declining, social inventory destocking is weak, and remains at a high level for the same period in nearly three years. Spot discounts may persist in the short term. The aluminum market currently lacks upward driving factors, as the off-season fundamentals continue to be bearish. SMM expects short-term aluminum prices to remain weak, with attention needed on macro changes and disruptions in the raw material sector impacting aluminum prices.

Lead
Overnight, LME lead opened at $2,206/mt, briefly touched a high of $2,212.5/mt during the Asian session, then fluctuated downward, reaching a low of $2,185/mt during the European session, and finally closed at $2,191.5/mt, down by 1.02%.
Overnight, the most-traded SHFE lead 2408 contract opened at 19,585 yuan/mt, briefly touched a low of 19,585 yuan/mt at the beginning of the session, then was boosted by LME lead, leading the bulls to increase their positions. SHFE lead rose to a high of 19,745 yuan/mt before consolidating, and finally closed at 19,730 yuan/mt, up by 0.66%.

Zinc
Overnight, LME zinc opened at $2,928.5/mt, quickly dropping to $2,923/mt, then consolidating around $2,950/mt, reaching a high of $2,972/mt during the night session, and finally closed at $2,952/mt, up $3/mt, or 0.1%. Trading volume was reduced to 6,470 lots, and open interest decreased by 3,963 lots to 232,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the 20-day moving average providing support below, but the MACD bullish candlestick narrowed. Overnight, LME inventory continued to decrease by 3,650 mt to 247,475 mt, a drop of 1.45%. The US Fed's dovish remarks further fueled market expectations for a rate cut, causing LME zinc to fluctuate upward.

Overnight, the most-traded SHFE 2409 zinc contract opened at 24,325 yuan/mt, reaching a high of 24,460 yuan/mt, and closed at 24,450 yuan/mt, up 150 yuan/mt, or 0.62%. Trading volume was reduced to 33,499 lots, and open interest increased by 688 lots to 81,567 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 10-day moving average forming resistance above. In the evening, as macro sentiment improved, SHFE zinc showed strong performance. From a fundamentals perspective, SMM zinc social inventory recorded another decrease to below 200,000 mt, with bullish sentiment boosting the price center of SHFE zinc upward.

Tin
In the night session yesterday, the most-traded SHFE tin contract closed at 272,670 yuan/mt, down 1,920 yuan/mt, a decrease of 0.7%. The highest price was 274,590 yuan/mt, and the lowest was 272,170 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 to premiums of 500 yuan/mt for delivery brands, and premiums of 400-700 yuan/mt for Yunxi brand. Tin prices moved rangebound yesterday. Downstream producers restocked as needed, but most still maintained a wait-and-see attitude. Overall, the spot market transactions were weak yesterday.

Nickel
On July 15, Jinchuan nickel was at a premium of 1,300-1,500 yuan/mt, with an average of 1,400 yuan/mt, up 100 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 0-200 yuan/mt, with an average of 100 yuan/mt, up 25 yuan/mt compared to the previous trading day. In the morning, as the market fluctuated upwards, downstream purchasing sentiment was hindered, and some traders reported moderate spot market transactions. Nickel briquette prices were 132,800-133,200 yuan/mt, up 1,700 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 3,455 yuan/mt (nickel sulphate prices were 3,455 yuan/mt lower than nickel briquette prices).