SMM Morning Comment For SHFE Base Metals September 20

SHANGHAI, Sep 20 (SMM) –

Copper

LME copper prices opened at $8268.5/mt and closed at $8309.5/mt in overnight trading, a decline of 0.51%, with the low-end of $8268.5/mt and the high-end of $8333.5/mt. Trading volume was 18,000 lots, and open interest stood at 260,000 lots. The most active SHFE 2310 copper contract prices opened at 68660 yuan/mt and closed at 68740 yuan/mt last evening, a drop of 0.35%, with the high-end of 68900 yuan/mt and the low-end of 68600 yuan/mt. Trading volume was 24,000 lots, and open interest stood at 139,000 lots. On the macro front, the Federal Reserve is widely expected to keep interest rates steady on Wednesday. Still, impact from rising oil prices put the Fed in a difficult position because they drive up inflation while dampening economic growth. In addition, U.S. housing starts fell to their lowest level since June 2020, highlighting the toll of declining housing affordability. In terms of fundamentals, spot quotes fell in East China yesterday. Even though the copper prices shifted downwards and downstream purchasing intentions recovered, the oversupply put pressure on premiums; inventories in South China also increased for five consecutive days, downstream demand did not picked up significantly despite the drop in copper prices. With high inventories and market expectations that the Federal Reserve will maintain high interest rates, copper prices are unlikely to rebound in the near future.

Aluminum

Overnight, the most-traded SHFE 2310 aluminum contract opened at 19,325 yuan/mt and went down before closing at 19,160 yuan/mt, down 75 yuan/mt or 0.39% compared with the previous trading day. LME aluminum opened at $2,219.5/mt on Tuesday, with its high and low at $2,225/mt and $2,205/mt respectively before closing at $2,215.5/mt, a decrease of $1.5/mt or 0.07%. On the macro front, the US dollar index rose slightly overnight. The Fed will announce the latest meeting results and policy statement at 2 a.m. on Thursday. The US dollar remained wobbly overnight despite market consensus that the Fed will keep policy rates on hold. In addition, the central banks of the United States, United Kingdom, and Japan will make interest rate decisions this week. On a fundamental level, the growth rate of domestic aluminum supply is decelerating, the import window is open, and the market's overseas aluminum ingot supply is on the rise. In addition, due to no obvious improvement in the downstream operating rate during the peak season, both aluminum ingots and aluminum billet faced inventory accumulation this week. Short-term low inventory and low warehouse receipts will support aluminum prices, though. SHFE aluminum contract is anticipated to oscillate at a high level. Follow-up attention should be paid to domestic aluminum inventories and downstream consumption.

Lead

Overnight, LME lead prices opened at $2249/mt and closed at $2220/mt, a decrease of 1.22%. During the Asian session, LME lead moved between $2240-2250/mt. During the European session, LME lead stocks increased over 10,000. Prices fell to $2215/mt.

The most active SHFE 2310 lead contract prices opened at 17,310 yuan/mt, jumping to the highest in two weeks. The contract closed at 17260 yuan/mt, an increase of 0.26%. Open interest stood at 85876 lots, a decrease of 656 lots from the previous trading day.

Zinc

Overnight, LME zinc prices opened at $2537/mt and closed down $50/mt or 1.97% at $2489/mt. The trading volume was 10042 lots, and open interest increased 2383 lots to 226,000 lots. Eurozone CPI data has declined month-on-month. U.S. real estate data shows that the economy is quite resilient. This supports the signal from the Federal Reserve to raise interest rates again, and bearish sentiment is fermenting.

Last evening, the most active SHFE 2311 zinc contract prices opened at 21500 yuan/mt and closed at 21375 yuan/mt, down 150 yuan/mt or 0.7%. Trading volume stood at 39,000 lots, and open interest increased by 1666 lots to 94,000 lots. Recently, the SHFE/LME zinc price ratio has dropped slightly from 9.2 to 8.8, and the import profit and loss has dropped from more than 1,000 yuan/mt to about 500 yuan/mt. However, the current import window is still open. At the same time, as imported zinc continues to arrive, there is still significant impact on domestic spot prices, weakening support for SHFE zinc prices.

Tin

SHFE 2310 tin contract rose slightly after opening on the Tuesday night session, then maintained sideways fluctuations and finally closed at 221,940 yuan/mt, up 0.79%.

Spot premiums and discounts barely changed yesterday. Small brand tin ingots were offered at a discount of 100 yuan/mt to a premium of 300 yuan/mt, premiums of 300-600 yuan/mt for delivery brands, premiums of 1,000-1,200 yuan/mt for Yunxi brands, and discounts of 200-500 yuan/mt for imported tin brands. The SHFE tin prices fell sharply yesterday, but the overall purchasing sentiment in the downstream market was still not high, with trading status divided.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 162,250 yuan/mt, and closed at 161,670 yuan/mt, down 1,230 yuan/mt. Trading volume dropped by 29,007 lots, and open interest decreased by 2,008 lots. On the macro front, market participants should pay attention to the Fed’s interest rate decision on September 21, CST. The current market expectation is 5.50%, which is unchanged from the previous value. Market participants mostly believe that the Fed won’t raise interest rates this time, which will have a positive effect on commodities. In terms of fundamentals, as advance purchasing came to an end, yesterday’s spot market transaction activity declined. In summary, it is expected that nickel prices may continue to fluctuate downward in the future.