SMM Morning Comment For SHFE Base Metals On August 26

SHANGHAI, August 26 (SMM) –

Copper

Last Friday night, LME copper opened at $9,213.5/mt, initially fluctuating narrowly downward to a low of $9,174/mt. It then fluctuated widely upward, reaching a high of $9,299.5/mt. After a slight drop at the end of the session, it closed at $9,298/mt, up 1.95%. The trading volume was 16,000 lots and open interest was 280,000 lots. Last Friday night, the most-traded SHFE copper 2410 contract opened at 73,650 yuan/mt, initially dipped to 73,470 yuan/mt, and then fluctuated upward throughout the session, reaching a high of 74,330 yuan/mt near the end. It slightly retreated at the end, closing at 74,240 yuan/mt, up 0.9%. The trading volume was 65,000 lots and open interest was 155,000 lots. Macro-wise, last Friday night, Powell delivered the "strongest call for rate cuts" at the Jackson Hole Economic Symposium: the time for policy adjustment has come, and the probability of a 50 basis point rate cut by the US Fed in September increased after Powell's speech. The US dollar index fell, which was bullish for copper prices. Fundamentally, on the supply side, as the fourth quarter approaches, domestic smelters passively reduce production, and arrivals are limited. Domestic copper cathode social inventory continued to decline. On the consumption side, downstream restocking sentiment was high over the weekend, and overall consumption performed well. In terms of prices, influenced by a relatively strong macro sentiment, copper prices are expected to have some upward potential.

Aluminum

Market: Last Friday night, the most-traded SHFE aluminum 2410 contract opened at 19,880 yuan/mt, with a session high of 19,970 yuan/mt and a low of 19,840 yuan/mt, closing at 19,925 yuan/mt, up 130 yuan/mt or 0.66%. Last Friday, LME aluminum opened at $2,475/mt, with a high of $2,547.5/mt and a low of $2,473.5/mt, closing at $2,533.5/mt, up $67/mt or 2.72%.

Summary: Macro-wise, Fed Chairman Powell sent the strongest signal yet last Friday indicating an approaching rate cut, with the US dollar index hitting its lowest point in nearly a year, leading to a broad rise in non-ferrous metals. Fundamentally, domestic aluminum supply has nearly peaked, with only sporadic resumption of production expected in regions like Guizhou and Sichuan. Downstream consumption improved due to the traditional peak season and domestic economic stimulus policy. Additionally, tight supply in the aluminum scrap market has driven some incremental demand for primary aluminum. Domestic aluminum social inventory may enter a destocking cycle, boosting the aluminum market. In the short term, aluminum prices are expected to continue to fluctuate upward, with continued attention needed on macro changes and the sustainability of downstream aluminum consumption.

Lead

Last Friday, LME lead opened at a low of $2,062/mt and fluctuated upwards during the Asian session. Due to Powell's most dovish signal to date, the US dollar index plunged significantly. During the European session, LME lead surged to $2,122/mt and finally closed at $2,110/mt, an increase of 2.6%.

Last Friday night, the most-traded SHFE lead 2409 contract opened at 17,570 yuan/mt, briefly touched a low of 17,505 yuan/mt at the beginning of the session, and was boosted by the rise in LME lead to reach a high of 17,675 yuan/mt, closing at 17,665 yuan/mt, an increase of 1.58%.

Zinc

Last Friday, LME zinc opened at an intraday low of $2,857.5/mt. At the beginning of the session, LME zinc fluctuated around the daily moving average due to a tug-of-war between bulls and bears. Subsequently, increased long positions pushed LME zinc to rise steadily, with the focus moving above the daily moving average. During the night session, LME zinc briefly dipped to the daily moving average but continued its upward trend, peaking at $2,920/mt by the end of the session and closing at $2,918/mt, up $60.5/mt or 2.12%. Trading volume increased to 11,559 lots, and open interest rose by 3,785 lots to 215,000 lots. Last Friday, LME zinc recorded a bullish candlestick with support from various moving averages below. LME inventory decreased by 800 mt to 256,050 mt, a drop of 0.31%. Last Friday, the US Fed's dovish speech led to a decline in the US dollar, causing a broad rise in non-ferrous metals, with LME zinc reaching a nearly six-week high.

Last Friday, the most-traded SHFE zinc 2410 contract opened at 24,010 yuan/mt. At the beginning of the session, SHFE zinc briefly dipped to a low of 23,870 yuan/mt. Subsequently, in the tug-of-war between bulls and bears, the bulls prevailed, pushing the focus up to 24,010 yuan/mt, with a peak of 24,100 yuan/mt during the session. It finally closed at 24,075 yuan/mt, up 75 yuan/mt or 0.31%. Trading volume decreased to 115,000 lots, and open interest increased by 959 lots to 127,000 lots. Last Friday, SHFE zinc recorded four consecutive bullish candlesticks, with the daily K-line focus moving up. Improved macro sentiment, combined with expectations of joint production cuts by zinc smelters, led to high bullish sentiment, driving zinc prices upward.

Tin

On Friday night, the most-traded SHFE tin futures contract closed at 267,660 yuan/mt, up 750 yuan/mt, an increase of 0.28%, with a high of 271,130 yuan/mt and a low of 266,550 yuan/mt.

During the early trading session on Friday, domestic tin ingot brands' premiums and discounts quoted by trading companies did not change much compared to recent days. Small brand tin ingots were quoted at a premium of 0-500 yuan/mt over the SHFE 2409 contract. Delivery brand prices were quoted at a premium of 500-1,000 yuan/mt over the SHFE 2409 contract. Yunnan Tin brand was quoted at a premium of 1,000-1,100 yuan/mt over the SHFE 2409 contract. Imported tin brands were quoted at a premium of 0 yuan/mt over the SHFE 2409 contract. On Friday, tin prices fluctuated upwards. Only a few companies restocked as needed, while most downstream companies remained on the sidelines. Most trading companies had sporadic transactions, with a few trading companies transacting 10-20 mt. Overall, the spot market was relatively quiet on Friday.

Nickel

Last week, nickel prices showed a strong overall performance, rebounding to 130,720 yuan/mt by Friday's close, returning to the 130,000 yuan/mt range. The nickel price trend was mainly influenced by both macroeconomic sentiment and industry fundamentals. From a macro perspective, as September approached, market expectations for a rate cut gradually heated up, especially after dovish statements from Fed Chairman Powell and other officials, leading investors to widely anticipate a rate cut in September. Data showed that the number of initial jobless claims in the US for the week ending August 17 was 232,000, higher than the expected 230,000, with the previous value revised from 227,000 to 228,000. Similarly, the US Bureau of Labor Statistics revised down the number of non-farm employment additions for the year ending March 2024 by 818,000, marking the largest adjustment in fifteen years. These indicate a cooling job market, further reinforcing market expectations for Powell's dovish speech on the evening of August 23, thereby driving the trading logic for a rate cut in September. On the fundamentals side, last week, nickel ore prices in the Philippines continued to rise. With the rainy season approaching in the fourth quarter, downstream pre-stocking demand remained strong, supporting ore prices. Additionally, in Indonesia, due to no further progress in RKAB, downstream nickel ore inventories were low, while restocking demand persisted, supporting Indonesian nickel ore prices. In the midstream smelting sector, refined nickel maintained normal scheduled production last week, but import volumes decreased due to the recovery of the SHFE/LME nickel price ratio. According to an SMM survey, resources under some overseas long-term contract orders are expected to be delayed in August due to shipping schedule issues, leading to lower-than-expected overall nickel plate supply, although supply remains in surplus. On the downstream demand side, purchasing enthusiasm was low, affected by rising nickel prices and the completion of previous pre-stocking. Currently, end-users have no urgent procurement needs, with some end-user inventories stocked for the end of September. Overall, current nickel prices may still have room to rise driven by macro news, but fundamental risks remain.