SMM Morning Comment For SHFE Base Metals On July 5

SHANGHAI, July 5 (SMM) –

Copper

Overnight, LME copper opened at $9,874.5/mt, initially rose to a session high of $9,918/mt, then declined to a session low of $9,851/mt, and slightly rebounded by the end of the trading session, closing at $9,886/mt, with a gain of 0.35%. Trading volume reached 14,000 lots, and open interest reached 326,000 lots.

Overnight, the most-traded SHFE copper contract (2408) opened at 80,360 yuan/mt, initially rose slightly to a session high of 80,390 yuan/mt, then declined to a session low of 79,830 yuan/mt, and consolidated by the end of the trading session, closing at 80,000 yuan/mt, with a loss of 0.10%. Trading volume reached 32,000 lots, and open interest reached 198,000 lots.

Macro-wise, the European Central Bank's meeting minutes showed that officials were cautious about cutting rates too quickly and expressed concerns about the inflation-fighting process. Additionally, US officials announced a breakthrough in the stalemate of the Israel-Palestine ceasefire negotiations. Currently, the expectation of a US Fed rate cut and weak demand are jointly keeping copper prices relatively stable.

Fundamentals-wise, recent arrivals of imported copper in south China have increased, and although sellers are actively holding prices high, overall trading has slightly improved due to bullish sentiment. As of Thursday, July 4, SMM national mainstream copper stocks increased by 2,600 mt from Monday to 409,800 mt, and up by 10,700 mt from a week ago, marking two consecutive weeks of weekly stock accumulation.

Looking ahead, according to SMM, next week's arrivals of imported copper are expected to decrease from a week ago, but approaching delivery, smelters will actively deliver to warehouses. It is expected that next week's total supply will increase from this week. If copper prices remain high, consumption may also be suppressed. Overall, copper prices are expected to hover around the current level.

Aluminum

Overnight, the most-traded SHFE 2408 aluminum contract opened at 20,405 yuan/mt, reaching a high of 20,520 yuan/mt and a low of 20,340 yuan/mt, and closed at 20,395 yuan/mt, down 25 yuan/mt or 0.12% from the previous close. LME aluminum opened at $2,547/mt in the previous trading day, hitting a high of $2,552/mt and a low of $2,518/mt, and closed at $2,527/mt, down $22.5/mt or 0.88% from the previous closing price.

Summary: Macro side, the US dollar fell 0.19% overnight, marking its third consecutive decline. This followed the release of weak service and ADP employment reports, which indicated a slowing US economy and increased market expectations for a US Fed rate cut. Fundamentals, domestic aluminum operating capacity is slowly rising, with some capacity in Yunnan, Sichuan, and Guizhou still awaiting resumption. However, downstream aluminum processing and end-user demand have entered the off-season, leaving the aluminum market fundamentals lacking driving factors. Macro sentiment is highly volatile, and aluminum prices are expected to consolidate in the short term. Future attention should be paid to changes in macro sentiment, domestic consumption performance, and inventory changes.

Lead

Overnight, LME lead opened at $2,224.5/mt. The US dollar index continued to decline, and LME lead moved rangebound at a high level throughout the day, with its price center shifting upward compared to the previous trading day. During this period, although the lead inventory accumulation caused a slight pullback in LME lead's upward trend, it ultimately closed at $2,232/mt, up by 0.65%.

Overnight, the most-traded SHFE lead 2408 contract opened at 19,520 yuan/mt. Domestic supply remained tight while import expectations persisted. After the opening, SHFE lead twice attempted to break above 19,800 yuan/mt but failed, resulting in significant fluctuations in the market. In the night session, SHFE lead gave back some of its gains and ultimately closed at 19,715 yuan/mt, up by 1.05%. Its open interest reached 92,734 lots, an increase of 4,499 lots compared to the previous trading day.

Zinc

Overnight, LME zinc opened at $2,987.5/mt, briefly dipping to $2,974/mt, then reaching a high of $3,018/mt, and finally closed at $2,990/mt, up $7/mt or 0.23%. Trading volume was reduced to 6,219 lots, and open interest increased by 5,012 lots to 235,000 lots. Overnight, LME zinc recorded a long upper shadow bullish candlestick. LME zinc inventory decreased by 325 mt to 258,700 mt, a drop of 0.13%. Macro sentiment was bullish, with the US dollar index falling to a low point and rate cut expectations persisting. With concerns about zinc supply, LME zinc is expected to fluctuate today.

Overnight, the most-traded SHFE 2408 zinc contract opened at 24,770 yuan/mt, briefly reaching a high of 24,835 yuan/mt, then dipping to 24,570 yuan/mt, and finally closed at 24,800 yuan/mt, up 130 yuan/mt or 0.53%. Trading volume was reduced to 65,515 lots, and open interest increased by 1,071 lots to 90,552 lots. Overnight, SHFE zinc recorded a bullish candlestick. On the fundamentals side, supply shortage persisted due to mining issues, and downstream consumption remained weak, indicating continued upward pressure on SHFE zinc.SHFE zinc is expected to fluctuate today.

Tin

Last night, the most-traded SHFE tin futures contract closed at 275,790 yuan/mt, up 20 yuan/mt, with an increase of 0.01%. The highest price was 277,540 yuan/mt, and the lowest was 274,440 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 400-500 yuan/mt over SHFE 2408 tin contract, versus discounts of 0-500 yuan/mt for delivery brands and premiums of 200-400 yuan/mt for Yunxi brand. Yesterday morning, SHFE tin prices dropped slightly, but downstream producer sentiment remained sluggish, with most adopting a wait-and-see approach. Overall, the spot market was relatively quiet yesterday.

Nickel

On July 4, Jinchuan nickel was at a premium of 800-1,200 yuan/mt, with an average of 1,000 yuan/mt, down 350 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 0-500 yuan/mt, with an average of 250 yuan/mt, down 50 yuan/mt compared to the previous trading day. In the morning, as the market fluctuated upward, downstream purchasing willingness decreased. The circulating supply of various brands in the domestic spot market increased, leading to a decline in premiums for all brands. Nickel briquette prices were 136,200-136,600 yuan/mt, up 1,400 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 6,855 yuan/mt (nickel sulphate prices were 6,855 yuan/mt lower than nickel briquette prices).