SMM Morning Comment For SHFE Base Metals On September 4

SHANGHAI, September 4 (SMM) –

Copper

Overnight, LME copper opened at $8,968/mt. After a slight initial fluctuation, it peaked at $9,034/mt. The price then dipped to a low of $8,926.5/mt before rebounding and stabilizing towards the end of the session, closing at $8,988/mt, a drop of 2.49%. Trading volume reached 30,000 lots, and open interest was 280,000 lots. Overnight, the most-traded SHFE copper 2410 contract opened at 72,400 yuan/mt, peaked at 72,520 yuan/mt initially, then dipped to a low of 71,680 yuan/mt before slightly rebounding and stabilizing towards the end of the session, and finally closed at 72,170 yuan/mt, a drop of 1.74%. Trading volume reached 72,000 lots, and open interest was 168,000 lots. Macro-wise, the US August ISM manufacturing PMI recorded 47.2, with the manufacturing new orders index hitting its lowest since May 2023. Both PMI and July construction spending index were lower than expected. Ahead of the key data release on Friday, market fears of a recession reignited. Under this sentiment, all major European stock indices marked their worst performance since the global stock market plunge in early August. Additionally, signs emerged of an agreement to resolve the dispute disrupting Libya's oil production and exports, leading to a drop in oil prices. Copper prices significantly declined due to recession fears and falling oil prices. On the fundamentals side, the delay in the inflow of imported copper led to a slight reduction in supply. Holders firmed their offers, raising premiums. However, as copper prices fell, downstream enterprises saw an increase in orders on hand, indicating procurement demand. The overnight drop in copper prices is expected to further stimulate consumption. Overall, the market is once again gripped by recession fears, awaiting the key data release on Friday. Copper prices are expected to remain low today due to a lack of support.

Aluminum

Futures Market: The most-traded SHFE aluminum 2410 contract opened at 19,500 yuan/mt, with a high of 19,560 yuan/mt, a low of 19,360 yuan/mt, and closed at 19,410 yuan/mt, down 90 yuan/mt, a decrease of 0.46%. On Tuesday, LME aluminum opened at $2,424/mt, with a high of $2,428.5/mt, a low of $2,394/mt, and closed at $2,415.5/mt, down $8.5/mt, a decrease of 0.35%.

Summary: On the macro side, U.S. economic data fell short of previous expectations but has not yet strongly impacted rate cut expectations. The hot war is also escalating. On the fundamentals side, recent power rationing and other disturbances have not materially affected aluminum production, with supply remaining relatively stable. The demand side is entering the traditional peak season, with consumption gradually recovering, and the destocking turning point may have appeared. It is expected that aluminum prices will still have upside potential in the short term, and attention should still be paid to macro changes and the sustainability of downstream aluminum consumption.

Lead

Overnight, LME lead opened at $2,064/mt. With US manufacturing PMI shrinking, market concerns about economic slowdown intensified, leading to a sharp decline in major commodities like copper and oil. LME lead also showed a downward trend throughout the day, hitting a two-week low of $2,028.5/mt. By the end of the session, some bears exited, and LME lead reversed its trend, finally closing at $2,065/mt, up 0.15%.

Overnight, SHFE lead warehouse warrant inventory increased daily. The most-traded SHFE lead 2410 contract opened at 17,200 yuan/mt, with strong bearish forces causing SHFE lead to quickly drop to around 17,100 yuan/mt at the beginning of the session. Later, driven by the rise in LME lead and the support from domestic secondary lead costs, SHFE lead stopped falling and rebounded, finally closing at 17,205 yuan/mt, down 0.41%. Its open interest reached 54,448 lots, an increase of 622 lots from the previous trading day.

Macro-wise, the US August ISM Manufacturing Index remained in contraction for five consecutive months, reigniting concerns about economic slowdown and bets on significant rate cuts by the US Fed, leading to a drop in US and European stocks and a rise in bonds. However, the US dollar index hovered near a two-week high.

Fundamentally, domestic lead ingot inventory gradually increased. Coupled with the upcoming delivery of the SHFE lead 2409 contract, holders moved inventory to warehouses, turning invisible inventory into visible inventory, putting pressure on lead prices. Meanwhile, the supply of battery scrap showed no significant improvement, and smelters maintained reduced production. Additionally, electric bicycle lead-acid battery companies continued to promote sales by lowering battery prices, improving dealers' purchasing enthusiasm. Future attention will be on the destocking of batteries by producers and the impact on production and procurement.

Zinc

Overnight, LME zinc opened at $2,830/mt. Initially, with an increase in short positions, LME zinc fluctuated downward to a low of $2,890/mt. Subsequently, with an increase in long positions, LME zinc fluctuated upward during the night session, reaching a high of $2,851.0/mt, and then fluctuated around $2,835/mt. It finally closed at $2,849.5/mt, an increase of $16/mt or 0.56%. Trading volume increased to 11,434 lots, and open interest rose by 1,205 lots to 221,000 lots. Overnight, LME zinc recorded a long lower shadow bullish candlestick, with LME zinc inventory decreasing by 1,900 mt to 241,325 mt, a drop of 0.78%. The US ISM Manufacturing New Orders Index fell to its lowest level since May 2023. Both PMI and July construction spending data were lower than expected, reigniting market concerns about economic slowdown, leading to a weaker dollar and an upward shift in LME zinc focus.

Overnight, the most-traded SHFE zinc 2410 contract opened at 23,430 yuan/mt. Initially, SHFE zinc fluctuated near the daily moving average. Subsequently, with a reduction in short positions, SHFE zinc fluctuated upward, reaching a high of 23,705 yuan/mt by the end of the session, and finally closed at 23,650 yuan/mt, an increase of 110 yuan/mt or 0.49%. Trading volume decreased to 109,000 lots, and open interest decreased by 836 lots to 111,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 5/10-day moving averages forming resistance above and the 20-day moving average providing support below. Macro sentiment was positive, with US manufacturing PMI data lower than expected, and there were still certain expectations for traditional "September-October peak season" consumption in China, leading to an upward shift in SHFE zinc focus driven by LME zinc.

Tin

Overnight, the most-traded SHFE tin contract closed at 252,310 yuan/mt, down 3,610 yuan/mt, a decrease of 1.41%. The highest price was 254,350 yuan/mt, and the lowest was 251,110 yuan/mt.

During yesterday's morning session, trading companies' quotes for domestic tin ingot brands did not change much compared to recent days. Small brand tin ingots were quoted at a premium of 0-300 yuan/mt over the SHFE 2410 contract, delivery brands were quoted at a premium of 400-800 yuan/mt over the SHFE 2410 contract, Yunnan Tin brand was quoted at a premium of 800 yuan/mt over the SHFE 2410 contract, and imported tin brand was quoted at a discount of 400 yuan/mt against the SHFE 2409 contract. Yesterday, tin prices fluctuated rangebound, and most downstream companies had already made small restocks at the beginning of the week, showing low purchasing enthusiasm. Most trading companies had scattered transactions, with a few trading companies transacting around one truckload. Overall, yesterday's spot market transactions were relatively sluggish.

Nickel

On September 3, Jinchuan nickel was quoted at a premium of 900-1,000 yuan/mt, with an average of 950 yuan/mt, an increase of 50 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 400-100 yuan/mt, with an average of 250 yuan/mt, an increase of 50 yuan/mt compared to the previous trading day. The futures market ran weak, but the spot market premiums fluctuated slightly compared to the previous working day. The nickel briquette prices were 126,900-127,200 yuan/mt, an increase of 1,250 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 1,222 yuan/mt (nickel sulphate prices were 1,222 yuan/mt higher than nickel briquette prices).