SMM Morning Comment For SHFE Base Metals August 29

SHANGHAI, Aug 29 (SMM) –

Copper

The most active SHFE 2309 copper contract prices closed at $68,940/mt overnight, a rise of 0.01%. Trading volume was 20,000 lots and open interest stood at 150,000 lots, down 0.01%.

Macroscopically, the market continued to track Powell’s speech last week, with the market betting that the probability of a 25 basis point rate hike in November increased to 51% from 33% a week ago. There were no more US economic data guidance overnight, with the market awaiting key data due later in the week. In the fundamentals, as of August 28, SMM copper stocks in mainstream areas nationwide increased by 3,200 mt to 77,400 mt from the previous Friday, 4,100 mt higher than the 73,300 mt in the same period last year. The inventory increase at the end of last week was mainly in East China, due to the large inflow of imported copper. In South China, small arrivals and shipments caused inventory to decline slightly. In terms of consumption, since enterprises are short of funds near the end of the month and a rise in copper prices inhibits the enthusiasm for downstream procurement, demand is expected to decline. The market remains cautious before the release of more US macroeconomic data, and copper prices are expected to remain strong.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,620 yuan/mt, with the lowest and highest prices at 18,590 yuan/mt and 18,645 yuan/mt before closing at 18,635 yuan/mt, up 55 yuan/mt or 0.30% from the previous trading day. LME was closed for a bank holiday, so there was no aluminum price.

On the macro side, domestic positive policies boosted markets, but speculation on the Fed’s interest rate hike increased macro uncertainty. 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

The LME was closed yesterday for the summer bank holiday, and resumed today. The most active SHFE 2310 lead contract prices closed at 16,235 yuan/mt overnight, a decrease of 0.82%. The open interest decreased by 2,747 lots to 111,000 lots compared to the previous trading day.

On the macro level, the National Development and Reform Commission (NDRC) stated that in the second half of the year, macro policy control should focus on expanding domestic demand to implement targeted policies and optimize land use structure. The Ministry of Finance also mentioned that efforts will be made to implement proactive fiscal policies effectively and prevent and resolve local government debt risks.

Demand remained strong as the yield rate on two-year Treasury notes topped 5 percent for the first time since 2006, and the yield rate on five-year notes is the highest since 2007. In terms of fundamentals, the supply of primary lead and secondary lead is expected to increase from August to September. The consumption performance of the downstream lead-acid battery market was average. The inventory of lead smelters is also generally rising, which may cause the lead price to fluctuate and fall in the short term.

Zinc

Overnight, LME was closed on the British summer public holiday. The most active SHFE 2310 zinc contract prices closed at 20,765 yuan/mt, up 95 yuan/mt or 0.46%. Trading volume stood at 47,784 lots, and open interest was 107,000 lots. KDJ moves up as a whole, and domestic favorable policies prompted a pick-up in macro sentiment. In addition, September and October are traditional peak seasons, leading to an overall rebound in SHFE zinc prices. Market participants need to pay attention to the subsequent impact of the implementation of macro policies on price trends.

Tin

Overnight, SHFE 2309 tin contract price maintained a slight downward trend after the opening. Then it stabilized near the low price of 211,670 yuan/mt and went back down later. The price finally closed at 212,150 yuan/mt, down 1.16%.

Spot premiums and discounts changed little on August 28 morning. Small brand tin ingots were offered at discounts of 200 yuan/mt, and premiums of 200-500 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 300 yuan/mt for imported brands. Transactions were thin and mostly driven by rigid demand yesterday morning, but improved greatly after SHFE tin prices fell back in the afternoon.

Nickel

SHFE 2309 nickel contract opened at 170,300 yuan/mt at the night session on August 28, and closed at 167,600 yuan/mt, down 2,400 yuan/mt. Trading volume rose by 7,306 lots, and open interest decreased by 4,964 lots.

From a macro perspective, Federal Reserve Chairman Jerome Powell said in his speech yesterday night that the Fed was ready to raise interest rates further under appropriate circumstances. 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. Yesterday, Norilsk nickel was sold at a discount for the first time. 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.