SMM Morning Comment For SHFE Base Metals September 11

SHANGHAI, Sep 11 (SMM) –

Copper

LME copper prices opened at $8230.5/mt and closed at $8230/mt last Friday evening, a drop of 0.9%, with the low-end of $8213/mt and the high-end of $8259.5/mt. Trading volume was 17,000 lots and open interest stood at 283,000 lots. The most active SHFE 2310 copper contract prices opened at 68600 yuan/mt and finished at 68590 yuan/mt last Friday evening, down 0.36%, with the low-end of 69410 yuan/mt and the high-end of 68640 yuan/mt. Trading volume was 29,000 lots, and open interest stood at 148,000 lots. On the macro front, New York Fed President Williams, who has permanent voting rights in the United States, believes that monetary policy is in a good position, and actions depend on more data to be released in September. In addition, the market has high expectations that the United States will maintain high interest rates for a longer period of time, extending the rise of the U.S. dollar index. As of Friday September 8, SMM data showed that copper inventory across major Chinese markets stood at 100,500 mt, up 3,800 mt from last Monday and up 11,900 mt from two Fridays ago. Inventories have increased for two consecutive weeks. Due to the inflow of imported copper in east China, the inventory increased; the inventory in south China declined, mainly due to the increase in downstream purchases after the copper price fell. As delivery approaches and given the big price spread between the SHFE front-month and SHFE next-month copper contracts, demand is expected to be limited. Before more economic data from the United States is released, it is expected that there will be limited room for copper price increases.

Aluminum

Last Friday’s nigh session, the most-traded SHFE 2310 aluminium contract opened at 19,045 yuan/mt, with its lowest and highest at 18,940 yuan/mt and 19,080 yuan/mt before closing at 19,035 yuan/mt, down 180 yuan/mt or 0.94%. LME aluminium opened at $2,194.5/mt last Friday, with its high and low at $2,195/mt and $2,171mt respectively before closing at $2,181/mt, a drop of $15/mt or 0.68%.

Macro sentiment over this past weekend was positive, with eyes on the Fed’s future interest rate path and changes in exchange rate. On a fundamental level, China's aluminium supply is approaching historical highs with continued releases from large-scale production resumptions in Yunnan. However, with high share of molten aluminium output, spot ingot inventory may remain low, even though it has returned to above 500,000 mt. Inflow of imported aluminium ingots may affect domestic market. Demand uncertainty in the peak season and supply growth will put pressure on aluminium price.

Lead

LME lead prices opened at $2229/mt and closed at $2227/mt last Friday evening, up 0.02%, with the high-end of $2230/mt and the low-end of $2200/mt.

The most active SHFE 2310 lead contract prices opened at 17025 yuan/mt last Friday evening, and closed at 17040 yuan/mt, an increase of 0.12%, with the high-end of 17065 yuan/mt and the low-end of 16830 yuan/mt.

Zinc

Last Friday evening, LME zinc prices opened at $2489.5/mt and went down to close at $2440/mt, down $49.5/mt or 1.99%. Trading volume increased to 9076 lots, and open interest added 1428 lots to 203,000 lots. LME zinc inventories decreased by 1750 mt to 143425 mt, a drop of 1.21%. The strengthening US dollar put pressure on non-ferrous metals last Friday, and non-ferrous metals generally fell.

Last Friday evening, the most active SHFE 2310 zinc contract prices opened at 21190 yuan/mt and lost 130 yuan/mt or 0.61% to settle at 21290 yuan/mt. Trading volumes decreased to 76563 lots and open interest increased 160 lots to 107,000 lots. Last Friday, SHFE zinc prices followed LME zinc prices up. Zinc concentrate supply tightened as domestic zinc concentrate TCs fell along with imported zinc concentrate TCs. Meanwhile, SMM social zinc inventories remained low. Zinc prices may have a chance to rebound.

Tin

At last Friday’s night session, SHFE 2310 tin contract price closed at 216,600 yuan/mt, down 1.7%. Spot premiums and discounts barely changed little on September 8. Small brand tin ingots were offered at premiums of 0-300 yuan/mt, and premiums of 100-500 yuan/mt for delivery brands, premiums of 800-1,100 yuan/mt for Yunxi brand, and discounts of 400-200 yuan/mt for imported brands. Downstream buyers mostly stood on the sidelines, even as tin price fell. Trades were still muted.

Nickel

The Institute for Supply Management released data last week showing that the PMI for August was 54.5, higher than both market expectations of 52.5 and the July figure of 52.7. The data indicates that there are still inflation concerns in the United States. As a result, market expectations for the Federal Reserve to raise interest rates have increased. After the data was released, the US dollar index and US Treasury yields saw significant gains, while commodities, particularly in the non-ferrous metal sector, weakened. SHFE nickel prices, was on an upward trend earlier in last week, took a sharp decline starting from the evening of September 6. Overseas nickel remained consistently discounted, and Jinchuan nickel premiums kept falling. This was mainly due to a continuous influx of overseas nickel plates, but the spot market still experienced sluggish trading. On the demand side, according to SMM research, there was limited demand for pure nickel last week due to production stoppages at some steel mills in the 300-series stainless steel. However, it's anticipated that in September, there will be a 60,000 mt increase in production of 300-series stainless steel, representing a 3.57% MoM growth. This is expected to provide support for nickel plate demand. In the alloy sector, military orders showed steady growth. However, there is limited support for pure nickel demand from civilian alloy orders, and it is widely believed within the industry that civilian orders are likely to decline slightly in September. Consequently, it is expected that the increase in pure nickel demand in the alloy sector in September will be constrained by the decline in civilian orders. In summary, nickel supply was tightening, but demand was weakening, which is likely to put downward pressure on prices However, intermediate products were being affected by a short-term supply disruption, leading to a tight supply. Combined with the impact of the Indonesian nickel ore quota issue, nickel prices are expected to have some short-term support. Macro and fundamental factors are mixed. It is anticipated that SHFE nickel prices will be volatile this week.