SMM Morning Comment For SHFE Base Metals (September 5)

SHANGHAI, Sep 5 (SMM) –

Copper

With Concerns of Economic Recession, Improved Consumption Stabilized Copper Prices [SMM Copper Morning Comment]

LME copper opened at $8,955/mt overnight, initially dipped to $8,937/mt, then fluctuated upwards to a high of $9,038/mt during the session, but fell back towards the end, closing at $8,965/mt, down 0.26%. Trading volume reached 23,000 lots, and open interest was 278,000 lots. The most-traded SHFE copper 2410 contract opened at 71,960 yuan/mt overnight, initially fluctuated downwards but then rose to a high of 72,360 yuan/mt during the session, subsequently fell back, hitting a low of 71,820 yuan/mt towards the end, and finally closed at 71,920 yuan/mt, down 0.1%. Trading volume reached 45,000 lots, and open interest was 167,000 lots. On the macro front, US job openings in July recorded 7.673 million, the lowest level since January 2021. The probability of the US Fed cutting interest rates by 50 basis points in September rose to 44%, and the US dollar index plunged. Meanwhile, major European stock indices fell to a two-week low on Wednesday, with concerns of economic recession persisting. However, as copper prices fell significantly, domestic consumption buying increased, stabilizing copper prices. On the fundamentals, as copper prices fell significantly, trading improved to some extent. At the same time, due to the narrowing price spread between front-month and next-month contracts, the willingness to sell among holders increased, leading to a rise in both supply and demand. If copper prices stabilize, it may lead to a sustained release of consumption. Overall, the significant drop in copper prices and the improvement in consumption provided some support to copper prices. Today, attention will be on the US non-farm payrolls data, and it is expected that copper prices will stabilize before the data is released.

Aluminum

Spot discounts continue to narrow, demand may improve [SMM Aluminum Morning Comment]

SMM, Sep 5: Overnight, the most-traded SHFE aluminum 2410 contract opened at 19,345 yuan/mt, reaching a high of 19,420 yuan/mt, a low of 19,305 yuan/mt, and closed at 19,365 yuan/mt, up 15 yuan/mt, an increase of 0.08%. On Wednesday, LME aluminum opened at $2,412.5/mt, reached a high of $2,418.5/mt, a low of $2,370.5/mt, and closed at $2,399.5/mt, down $16/mt, a decrease of 0.66%.

Summary: On the macro side, the newly released US economic data has strengthened market expectations for a 50 basis point rate cut by the US Fed in September. On the fundamentals side, the supply side has been relatively stable recently. The demand side is entering the traditional peak season, consumption is gradually recovering, and the inventory reduction turning point may have appeared. It is expected that short-term aluminum prices will still have upside potential, and attention should still be paid to macro changes and the sustainability of downstream aluminum consumption.

Lead

Inventory accumulation dragged down lead prices, awaiting "trade-in" transmission on the consumption side [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,064/mt. Lower-than-expected US economic data heightened market concerns about a recession and increased bets on a rate cut in September, leading to a general decline in base metals. LME lead also fell sharply, hitting a low of $2,015/mt during the session, a new two-week low. By the end of the session, LME lead closed at $2,015.5/mt, down 2.4%.

Overnight, the SHFE lead warehouse warrant inventory continued to accumulate, and the overall trading focus of SHFE lead shifted downward day by day. The most-traded SHFE lead 2410 contract opened at 17,065 yuan/mt. After intensified long-short competition, SHFE lead rebounded from a low but failed to stand at 17,200 yuan/mt, finally closing at 17,160 yuan/mt, down 0.12%. Its open interest was 53,650 lots, a decrease of 1,842 lots from the previous trading day.

Macro-wise, this year's voting member and Atlanta Fed President Bostic supported an immediate rate cut without waiting for inflation to drop to 2%. The US Fed's Beige Book confirmed slowing economic growth, falling prices, and cooling hiring. The US July JOLTS job openings unexpectedly fell to a three-and-a-half-year low, significantly increasing market bets on a 50 basis point rate cut by the Fed in September.

Fundamentally, the domestic lead ingot inventory accumulation trend remains unchanged. Before there is a significant improvement in lead consumption, holders transfer inventory to warehouses, turning invisible inventory into visible inventory. Inventory accumulation remains the main factor dragging down lead prices. Additionally, some secondary lead enterprises are expected to resume production, increasing demand for scrap, and the high prices of battery scrap may provide some cost support for lead prices. Continued attention should be paid to the impact of the "trade-in" policy on the consumption transmission in the lead-acid battery market for electric bicycles and automobiles.

Zinc

US Job Openings Below Expectations, LME Zinc Shows Weak Performance [SMM Zinc Morning Comment]

SMM, Sep 5: Overnight, US job openings in July fell to their lowest level since January 2021; Bostic: Inflation and employment risks are now balanced; Bank of Canada cut interest rates by 25 basis points for the third consecutive time; Israeli Prime Minister reiterated that the Israeli army will not withdraw from the "Philadelphi Corridor"; Nvidia stated it has not received a subpoena from the US Department of Justice; China's Caixin China Services PMI for August fell to 51.6; Taobao App will soon fully support WeChat Pay.

Overnight, LME zinc opened at $2,848.5/mt, briefly rose to $2,854.5/mt at the beginning of the session, then shorts increased their positions, causing LME zinc to fluctuate downward, hitting a low of $2,775/mt during European trading hours. Subsequently, LME zinc fluctuated upward during the night session, consolidating at $2,800/mt, and finally closed down at $2,803.5/mt, a decrease of $46.5/mt or 1.63%. Trading volume increased to 11,990 lots, and open interest increased by 4,511 lots to 226,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME inventory decreasing by 1,575 mt to 239,750 mt, a drop of 0.65%. Due to US July JOLTs job openings data falling below expectations, the US dollar index plunged nearly 50 points, raising concerns about an economic recession, leading to capital profit-taking and exit, causing LME zinc to shift downward. It is expected to have downside potential today.

Overnight, the most-traded SHFE zinc 2410 contract opened at 23,360 yuan/mt, with longs reducing their positions at the beginning of the session, causing SHFE zinc to fluctuate downward to a low of 23,320 yuan/mt. Subsequently, shorts reduced their positions, causing SHFE zinc to shift upward, reaching a high of 23,490 yuan/mt. At the end of the session, both longs and shorts intertwined, with SHFE zinc consolidating along the daily moving average, and finally closed down at 23,410 yuan/mt, a decrease of 10 yuan/mt or 0.04%. Trading volume decreased to 83,990 lots, and open interest decreased by 2,509 lots to 106,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the MACD column turning bearish. Concerns about weak economic growth prospects suppressing demand for base metals led to a bearish market sentiment, causing SHFE zinc to shift downward. It is expected to have downside potential today.

Tin

SHFE tin prices opened lower and remained stable during the night session. The spot market saw brisk trading yesterday [SMM Tin Morning Comment]

SMM, September 5: The most-traded SHFE tin contract closed at 248,940 yuan/mt in the night session yesterday, down 2,480 yuan/mt, a decrease of 0.99%. The highest price was 251,080 yuan/mt, and the lowest was 247,780 yuan/mt. During the morning session yesterday, trading companies' quotes for various domestic tin ingot brands' premiums and discounts did not change much compared to recent days. Small brand tin ingot quotes against the SHFE 2410 contract were +0 to +300 yuan/mt, delivery brand prices were +400 to +800 yuan/mt, Yunnan Tin brand quotes were +800 yuan/mt, and imported tin brand spot quotes against the SHFE 2409 contract were -400 yuan/mt. Tin prices continued to decline in the afternoon yesterday, and many downstream companies restocked actively. Most trading companies completed transactions of around one truckload, while a few completed 2-3 truckloads. Overall, the spot market saw brisk trading yesterday.

Nickel

On September 4, Jinchuan nickel was quoted at a premium of 1,100-1,200 yuan/mt, with an average of 1,150 yuan/mt, up 200 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 350 yuan/mt to a premium of 100 yuan/mt, with an average discount of 125 yuan/mt, up 125 yuan/mt from the previous trading day. On the morning of September 4, the futures market fluctuated downward, but the spot premium slightly increased compared to the previous working day. Nickel briquette prices were 123,750-123,850 yuan/mt, down 3,250 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,472 yuan/mt (nickel sulphate prices were 4,472 yuan/mt higher than nickel briquette prices).