SMM Morning Comment For SHFE And LME Base Metals (July 10)

SHANGHAI, Jul 10 (SMM) –

Copper

On Friday night copper opened at $8318 / ton, the beginning of the day briefly lower to reach the bottom at $8286 / ton, and then on the way up towards the end of the day to touch higher than $8380 / ton, the end of the day horizontal finishing finally closed at $8366.5 / ton, the volume to 15,000 tons, positions 257,000 tons, up 1.08%. Overnight Shanghai copper main 2308 contract opened at 67790 yuan / ton, the beginning of the session lower to touch the bottom at 67700 yuan / ton, and then higher intraday touch higher than 68020 yuan / ton, and then sideways finishing to the end of the session, the final close at 67940 yuan / ton, the volume to 27,000 hands, positions to 190,000 hands, up 0.32%. On the macro front, the U.S. non-farm payrolls in June fell back beyond market expectations, and signs of weakening labor market resilience reduced the prospect of the Fed maintaining high interest rates for a long time, and the market is once again skeptical about the trajectory of interest rate hikes after July. The U.S. index dived sharply, favoring copper prices. Fundamentally, as of last Friday, July 7, SMM national mainstream regional copper inventories increased by 15,300 tons to 120,300 tons in the ring compared to last Monday, up 21,200 tons from last Friday, with weekly accumulation for two consecutive weeks. Specifically, inventories in East China increased substantially due to the arrival of a large amount of imported copper clearances and more limited consumer demand; inventories in South China continued to decline, mainly due to fewer arrivals and more direct downstream shipments from refineries.

On the consumption side, copper prices are running high, and demand is weaker under the low consumption season. Price, the path of the U.S. interest rate hike is still affected by economic data, copper prices are expected to be in a relatively high range oscillation before the rate hike resolution is executed.

Aluminum

The most-traded SHFE 2308 aluminium contract opened at 17,880 yuan/mt last Friday’s night session, with its low and high at 17,850 yuan/mt and 17,950 yuan/mt before closing at 17,940 yuan/mt. It rose by 95 yuan/mt or 0.53%. LME aluminium opened at $2,134/mt last Friday, with its low and high at $2,127/mt and $2,151/mt respectively before closing at $2,141/mt, up $11/mt or 0.52%. 

U.S. non-farm payrolls increased less than expected in June and the labour market is losing some momentum as high interest rates and months of sluggish consumer spending have raised concerns about the economic outlook. Market players were pining hopes on economic stimulus policies from China. In terms of fundamentals, the restarts of idled aluminum capacity in Yunnan Province will translate into greater supply pressure in late July. At the same time, there were rumours of power rationing in Sichuan. Aluminum ingot social inventory is expected to accumulate further as downstream consumption is in the off-season. In the short term, the resumption of aluminum production in Yunnan and weakening consumption will weigh down aluminum prices, but low inventory may curb the downside room. The most-traded SHFE aluminium contract and LME aluminium are likely to move between 17,500-18,500 yuan/mt and $2,100-2,200/mt respectively this week.

lead

Last Friday, LME Lead opened at $2050 per ton, stabilizing sideways during the Asian session; Entering the European period, it lightly hit a high of $2,064.5 per ton, then rose and fell back. Under pressure, it fell as low as $2,030 per ton. Due to the lower than expected increase in non farm employment in the United States after the June quarter adjustment, the possibility of the Federal Reserve raising interest rates again this year has decreased, and the US dollar has plunged and LME lead has rebounded from the deep V, ending at $2,058.5 per ton, up 0.34%. Its holdings increased by 677 to 125,000 compared to the previous trading day, and trading volume increased by 431 to 7,095.

Last Friday evening, the main 2308 contract of Shanghai Lead jumped short and opened at 15,490 yuan/ton, hitting a low of 15,425 yuan/ton at the beginning of the trading session. Later, due to the upward trend of Lun Lead, it was lifted to 15500 yuan/ton and finally closed at 15,465 yuan/ton, a decrease of 0.23%. Its holdings decreased by 2956 to 95,435 compared to the previous trading day, and trading volume decreased by 7,855 to 32,086.

Today's lead price forecast:

Macroscopically, in the morning, we focused on China's announcement of the annual CPI rate in June, and in the evening, we focused on two hawkish officials of the Federal Reserve: the 2025 FOMC Voting Committee, Mestes, chairman of the Cleveland Federal Reserve, and Daly, the 2024 FOMC Voting Committee, chairman of the San Francisco Federal Reserve, delivering speeches. On the spot basis, the supply of primary lead and recycled lead has increased simultaneously in July, and the pressure on lead ingot accumulation has increased. At the same time, next week is the week before the delivery of the Shanghai Lead 2307 contract. We need to focus on the explicit inventory realization brought about by the delivery and relocation. On the other hand, the pre increase in lead supply exacerbates the tight supply pattern of raw materials such as waste batteries, making their prices easy to rise but difficult to fall. The cost increase factor may limit the space for lead prices to fall.

Zinc

The U.S. added 209,000 non-farm payrolls after seasonal adjustment in June, lower than the expected 225,000, the smallest increase since December 2020. The Fed swap slightly reduces the chances of the Fed raising interest rates for the second time this year (again); Chicago Fed President Goolsbee said that it can raise interest rates 1-2 times this year, and has not yet decided what rate the Fed should adopt in July Policy, still hope to see inflation data before making a decision; U.S. Treasury Secretary Yellen met with Chinese Premier, Chinese Vice Premier, Party Secretary of the People's Bank of China, State Administration of Foreign Exchange and Finance Minister and other Chinese officials during her visit to China from July 7 to 9.. Yellen reiterated that the United States does not seek to "decouple" from the Chinese economy.

Last Friday, LME Zinc opened at US$2369.5/ton, fluctuated and fell rapidly in the night session, hit as low as US$2,336/ton, and then recovered slightly. It finally closed at US$2,361/ton, decline by US$11.5/ Tons with 0.48% drops, the trading volume decreased to 5,146 lots, and the open position increased by 3,772 lots to 182,000 lots. LME Zinc recorded a long shadow column overnight, suppression on the 40-day average price line. LME inventories decreased by 800 tons to 73,935 tons, and LME inventories recorded a decrease. The small non-agricultural data brought market stronger expectations for further interest rate hikes, and LME Zinc was slightly under pressure.

Zinc

Last Friday, SHFE Zinc main contract 2308 opened at a low price of 19,955 yuan / ton. After the opening, it fluctuated all the way up, and finally closed at 20,050 yuan / ton, down 110 yuan / ton,  with 0.55% drops, and the trading volume decreased to 64,140 lots. Holding positions increased by 2,995 lots to 108,000 lots. SHFE Zinc recorded a small positive column overnight, and the 40-day average price provided support. Last Friday night, the trend of the China internal and external market diverged slightly. The internal market rebounded to repair the price decline. The social inventory was slightly destocked to provide support for the zinc price back to 20,000 yuan/ton. The overall support is limited, and zinc prices still have downside risks.

Tin

Last Friday’s night session, the price of the SHFE tin 2308 contract fell sharply after the opening of the market, and stabilized around the low price of 229,950 yuan/mt, and then reversed the trend and fluctuated upwards. The night trading price closed at 233,630 yuan/mt, up 0.34%.

Nickel

Last week, the SHFE Ni 2308 contract rose by about 4.23% during the week, showing an oscillating upward trend, basically in line with SMM expectations.

Macroscopically, it is worth noting that the US June quarterly non-farm payrolls data released at 20:30 this Friday evening, the current market forecast is 225,000 and the previous value is 339,000.

However, on Thursday evening, July 6, the U.S. Department of Labor released initial jobless claims for the week 248,000, more than the expected value of 245,000 and more than the previous value of 236,000, but at the same time released the U.S. June ADP employment data surged to 497,000, more than the previous value of 278,000, is more than twice the market expectation of 228,000, the largest monthly increase since July 2022 The growth rate.

At a time when the Fed's rate hike prospects are wavering, this represents the current US labor market is still hot, prompting growing expectations that the Fed will restart rate hikes this month.

Fundamentally, according to SMM research understand today's spot lift overall continue downward, but because Shanghai nickel is at a high level, the absolute price of spot is higher, the actual market transaction is weak.

To sum up, it is expected that the subsequent nickel price may show the oscillating trend.

The current macro news frequently, need to pay attention to the U.S. June unquartered CPI annual rate published this week, if the published value is higher than the previous value of 4.0%, then will be good for the dollar, negative commodities.

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