SMM Morning Comment For SHFE Base Metals On September 10

SHANGHAI, September 10 (SMM) –

Copper

Last night, LME copper opened at $9,120/mt. It initially peaked at $9,124.5/mt, then fluctuated downwards to a low of $9,051.5/mt. Towards the end of trading, it rose again, finally closing at $9,096.5/mt, up 1.59%. The trading volume was 16,000 lots and open interest was 279,000 lots. The most-traded SHFE copper 2410 contract opened and peaked at 72,860 yuan/mt. It initially dropped to a low of 72,460 yuan/mt, then fluctuated rangebound before rising near the close to a high of 72,960 yuan/mt, closing ultimately at 72,900 yuan/mt, up 1.08%. The trading volume was 39,000 lots and open interest was 157,000 lots. Macro front, international oil prices rebounded as the market worried that Hurricane, expected to strike Louisiana on Wednesday, might damage the oil production and refining facilities along the US Gulf Coast, driving up copper prices as well. Additionally, it was reported that the US Fed plans to halve the capital requirement increase for large banks from an earlier 19% to 9%. The market eagerly awaits the release of the CPI data on Wednesday night, which might be a crucial indicator affecting the extent of the Fed's rate cuts. Fundamentally, on the supply side, it was noted that a significant amount of imported copper arrived at ports last weekend, with nearly half being hydro or non-registered sources. On the consumption side, with the decline in copper prices, downstream procurement increased, also driven by the upcoming Mid-Autumn Festival holiday, resulting in good consumption performance and significant destocking. According to an SMM survey, as of Monday, September 9, SMM copper stocks in major regions across China decreased by 24,000 mt WoW to 231,000 mt, continuing the destocking trend with an accelerating speed. However, the total stocks were still 136,000 mt higher YoY from last year's 95,000 mt. On the price side, supported by expectations of a Fed rate cut, copper prices are projected to have some upward potential.

Aluminum

Futures: Last night, the most-traded SHFE aluminum 2410 contract opened at 19,190 yuan/mt, hitting a high of 19,325 yuan/mt and a low of 19,155 yuan/mt before closing at 19,320 yuan/mt, up 105 yuan/mt, a 0.55% increase. On Monday, LME aluminum opened at $2,344.5/mt, reached a high of $2,365/mt and a low of $2,326.5/mt before closing at $2,362.5/mt, up $21/mt, a 0.90% increase.

Summary: On the macro side, a rate cut by the US Fed in September is almost certain, China's August CPI year-on-year rate was higher than the previous value but below expectations, and China's August PPI year-on-year rate was below expectations. On the fundamentals side, recent supply has been relatively stable. The demand side is gradually shifting towards peak season, with domestic spot market transactions improving, and consumption starting to recover, leading to a decline in social inventory. Yesterday, China released the "National Carbon Emission Trading Market Coverage for Cement, Steel, and Aluminum Industry Work Plan (Exposure Draft)," sparking market concerns about the supply side and rising costs in the aluminum industry, providing some support to aluminum prices. In the short term, aluminum prices are expected to maintain a fluctuating trend. Continued attention is needed on macro changes and the sustainability of downstream aluminum consumption.

Lead

Overnight, LME lead opened at $1,965.5/mt. It fluctuated downward during the Asian session, rose to a high of $1,979/mt in the European session before dropping to a low of $1,946/mt, and finally rebounded slightly before the close, closing at $1,958/mt, down $12/mt, or 0.61%.

Overnight, the most-traded SHFE lead 2410 contract opened at 16,475 yuan/mt. It initially dropped to a low of 16,280 yuan/mt before rebounding to stabilize above the daily moving average, ending at 16,355 yuan/mt, down 235 yuan/mt, or 1.42%.

Macro side, the latest non-farm payrolls data released last Friday were lower than expected. The US job market continued to cool down, but market traders lowered their expectations for significant rate cuts by the US Fed, with the US dollar index fluctuating upward. Fundamentals side, according to the survey, amid continuous drops in lead prices, inventory holders showed significant divergence in their selling strategies, with both holding prices firm, reluctance to sell, and dumping over fear of further decline coexisting. Meanwhile, this week is the week before the delivery of the SHFE lead 2409 contract, leading to increased inventory transfers to delivery warehouses by holders, causing a sharp rise in social inventory. Furthermore, the limited decline in battery scrap prices after the lead price drops has expanded losses in secondary refined lead, severely impacting the production enthusiasm of secondary lead smelters. Combined with the fulfillment of the maintenance expectations at the primary lead smelters in early September, the subsequent supply of circulating goods may change. It is expected that before delivery, downstream will mostly stay on the sidelines, consumption will remain mediocre, inventory holders will continue transferring stocks to delivery warehouses, and social inventory of lead ingots will likely keep rising.

Zinc

Overnight, LME zinc opened at $2,701/mt. After the opening, LME zinc fluctuated rangebound around the daily moving average, rising to a high of $2,756/mt during midday, then falling below the daily moving average to a low of $2,690/mt. By the end of the session, LME zinc rebounded, moving back above the daily moving average, and finally closed at $2,731.5/mt, up $26.5/mt, or 0.98%. Trading volume decreased to 11,730 lots, while open interest increased by 2,323 lots to 232,000 lots. LME zinc recorded a bullish candlestick overnight, with the 5-day moving average forming resistance above. LME zinc stocks decreased by 1,825 mt to 236,550 mt, down 0.77%. The market awaited further disclosure of U.S. inflation data this week, and the previously bearish macro sentiment continued, keeping LME zinc fluctuating at low levels.

Overnight, the most-traded SHFE zinc 2410 contract opened at 22,940 yuan/mt. At the beginning of the session, it peaked at 22,940 yuan/mt before declining to a low of 22,690 yuan/mt, then rebounding to move above the daily moving average. It finally closed at 22,825 yuan/mt, down 20 yuan/mt or 0.09%. Trading volume decreased to 69,114 lots, and open interest decreased by 833 lots to 92,078 lots. Overnight, the most-traded SHFE zinc 2410 contract recorded a bearish candlestick, with the lower Bollinger Bands providing support. The tight supply of mines continued to support SHFE zinc. Although SMM reported that social inventory declined again on Monday, this was mostly due to output cuts at smelters. Ferrous metals prices continued to drag down galvanizing consumption, resulting in low-level fluctuations for SHFE zinc with no significant improvement.

Tin

In the night session yesterday, the most-traded SHFE tin contract closed at 252,060 yuan/mt, up 1,310 yuan/mt, or 0.52%. The highest price was 252,890 yuan/mt, and the lowest was 250,800 yuan/mt.

During the early session yesterday, quotes from trading companies for various domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at premiums of 0-500 yuan/mt against the SHFE 2410 contract. Delivery brands were quoted at premiums of 200-700 yuan/mt against the SHFE 2410 contract. The Yunnan tin brand was quoted at premiums of 200-800 yuan/mt against the SHFE 2410 contract. Imported tin brands were quoted at discounts of 300-200 yuan/mt against the SHFE 2410 contract. Tin prices fluctuated narrowly yesterday. Most downstream companies had undertaken necessary restocking and partial inventory replenishment last week; thus, they mostly remained on the sidelines yesterday. Scattered transactions were reported by most trading companies, with a few concluding around one truckload. Overall, the spot market saw relatively mediocre trading yesterday.

Nickel

On September 9, Jinchuan nickel was quoted at 1,600-1,800 yuan/mt, with an average of 1,700 yuan/mt, representing an increase of 200 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 500-0 yuan/mt, with an average of 250 yuan/mt, showing a decrease of 150 yuan/mt compared to the previous trading day. On the morning of September 9, the futures market fluctuated downward, but the spot premiums slightly increased compared to the previous working day, and trading activity in the spot market was relatively strong, with active purchasing downstream. The nickel briquette prices were 120,500-120,700 yuan/mt, down 1,350 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 7,582 yuan/mt (nickel sulphate prices were 7,582 yuan/mt higher than nickel briquette prices).