SMM Morning Comment For SHFE Base Metals (September 12)

SHANGHAI, Sep 12 (SMM) –

Copper

US CPI Data Was Lower than Expected; Copper Prices Rose Overnight [SMM Copper Morning Comment]

LME copper opened at $9,098/mt overnight. After a slight rise in early trading, it fell to an intraday low of $9,044/mt, and then climbed all the way up, peaking at $9,145/mt before closing at $9,138/mt, a 1.32% increase. The trading volume was 17,000 lots and open interest was 272,000 lots. The most-traded SHFE copper 2410 contract opened and peaked at 73,330 yuan/mt, then fell to an intraday low of 72,710 yuan/mt before climbing back up, and finally closed at 73,100 yuan/mt, a 0.51% increase. The trading volume was 35,000 lots and open interest was 154,000 lots. Macro-wise, the US August non-seasonally adjusted CPI year-on-year rate released last night was 2.5%, the fifth consecutive month of decline, hitting the lowest level since February 2021, below the market expectation of 2.6%. The non-seasonally adjusted core CPI year-on-year rate was 3.2%, flat with both expectations and the previous value, after four consecutive months of decline. Following the CPI data release, expectations for the US Fed to cut rates by a modest 25 basis points next week were strengthened, which is favorable for copper prices. Fundamentally, a large volume of imported copper was concentrated in domestic trade yesterday, increasing spot copper cathode supply. Traders actively sold, impacting the spot premiums and discounts. Consumption-wise, with the Mid-Autumn Festival approaching, downstream stockpiling sentiment has emerged, leading to a good overall consumption performance. Price-wise, the global market is closely monitoring the Fed's movements, and copper prices are expected to remain in a low-level fluctuation.

Aluminum

The fundamentals have turned positive, and aluminum prices may fluctuate upward. [SMM Aluminum Morning Comment]

SMM, Sep 12: Overnight, the most-traded SHFE aluminum 2410 contract opened at 19,450 yuan/mt, reached a high of 19,495 yuan/mt, a low of 19,385 yuan/mt, and closed at 19,465 yuan/mt, up by 15 yuan/mt, an increase of 0.08%. On Wednesday, LME aluminum opened at $2,342/mt, reached a high of $2,379.5/mt, a low of $2,337/mt, and closed at $2,379.5/mt, up by $37.5/mt, an increase of 1.60%.

Summary: On the macro side, a US Fed rate cut in September is almost certain. China continues to stimulate consumption. There are new developments in the hot war situation. On the fundamentals side, there has been a reduction in overseas supply, the demand is beginning to recover with the arrival of the peak season for consumption, and social inventory is starting to deplete. In the short term, aluminum prices may fluctuate upward driven by fundamentals. However, the sustainability of consumption recovery and changes in supply chain capacity need to be closely monitored.

Lead

Lead Futures Continued Gains Overnight, Fear of Declines Slightly Eased in the Spot Market [SMM Lead Morning Comment]

Overnight, LME lead opened at $1,956/mt. During the Asian session, it rose slightly, and in the European session, it fluctuated upward, reaching as high as $2,000/mt. Before the close, it saw a slight pullback, finally closing at $1,989.5/mt, up $34.5/mt or 1.76%.

Overnight, the most-traded SHFE lead 2410 contract opened at 16,635 yuan/mt. After lightly touching a high of 16,645 yuan/mt in the early session, it declined to a low of 16,525 yuan/mt. Subsequently, it rose to around 16,600 yuan/mt, and eventually closed at 16,580 yuan/mt, up 115 yuan/mt, or 0.7%.

Macro side, inflation data supports the US Fed's 25-basis point rate cut, and the US dollar index continued to fluctuate upward. Fundamentals side, secondary refined lead sellers were reluctant to sell, with secondary refined lead prices lower than primary lead. Spot transactions for primary lead in regions like Hunan and Henan gradually improved, with discounts slightly narrowing compared to before. As delivery approaches, in-plant inventory will continue to be transferred to social inventory and has already significantly declined since late August. Downstream enterprises are expected to have moderate growth in operating rates in September. Market sentiment gradually eased after lead prices stabilized. Support for lead prices remains acceptable, but attention should be paid to downstream operating performance and the increase in social inventory.

Zinc

Optimism about interest rate cuts drives SHFE zinc higher [SMM Morning Comment]

SMM, Sep 12: US August CPI year-on-year rate fell for the fifth consecutive month, and the core CPI year-on-year rate remained the same as the previous value. Interest rate futures showed that the probability of a 50-basis-point rate cut by the US Fed in September was only 17%. Hamas: Willing to immediately implement a ceasefire agreement based on the previously proposed truce plan by the US and reject any new conditions. Various factions in Libya agreed to resume talks on Thursday regarding the issue of the central bank governor. "Florence" upgraded to a Category 2 hurricane, and 39% of oil production activities in the US Gulf of Mexico have stopped. Taylor Swift publicly stated her support for Harris to become the US president. CSRC: China's capital market mergers and acquisitions are entering an "active phase." CATL responded to the rumors of the lithium mine shutdown in Jiangxi: Adjustments to production based on market conditions. It was reported that Hillhouse Investment and Singapore Government Investment Company were considering subscribing to Midea's IPO stock in Hong Kong.

Overnight, LME zinc opened at $2,706/mt. During the early trading hours, LME zinc briefly fluctuated around the daily average, dipping to $2,692/mt. During the midday, LME zinc trended upwards, retreated to near the daily average during the night session, and surged again at the close to a high of $2,800/mt, ending up $90/mt at $2,797/mt, an increase of 3.32%. Trading volume increased to 13,494 lots, and open interest rose by 1,100 lots to 236,000 lots. Overnight, LME zinc recorded a bullish candlestick, with support from the lower Bollinger Band. LME zinc inventory decreased by 1,725 mt to 232,725 mt, a decrease of 0.74%. The US August non-seasonally adjusted year-on-year CPI was recorded at 2.5%, lower than market expectations, marking the fifth consecutive monthly decline and the lowest level since February 2021. Investors' expectations for a rate cut by the US Fed next week continued, bolstering the rise of LME zinc.

Overnight, the most-traded SHFE zinc 2410 contract opened at 23,025 yuan/mt. After the opening, SHFE zinc slowly trended downwards to a low of 22,820 yuan/mt, then fluctuated upwards to a high of 23,095 yuan/mt, finally closing up 140 yuan/mt at 23,085 yuan/mt, an increase of 0.61%. Trading volume decreased to 91,897 lots, and open interest decreased by 2,455 lots to 84,017 lots. Overnight, SHFE zinc recorded a bullish candlestick, with support from the 10-day moving average below. Both domestic and imported ore TC remained low. The weak supply fundamentals continued, coupled with market optimism about US Fed interest rate cuts, driving SHFE zinc higher as well.

Tin

SHFE tin prices fluctuated rangebound during the night session, and the spot market activity was relatively low [SMM Tin Morning Comment]

SMM, September 12: In the night session yesterday, the most-traded SHFE tin contract closed at 252,790 yuan/mt, up by 1,430 yuan/mt, an increase of 0.57%, with a highest price of 254,340 yuan/mt and a lowest price of 251,410 yuan/mt. During the early trading session yesterday, trading companies' quotations for various domestic tin ingot brands showed little change compared to recent days. Specifically, smaller brands of tin ingots were quoted at premiums of 0-500 yuan/mt against the SHFE 2410 contract. Delivery brand tin ingots were quoted at premiums of 200-700 yuan/mt against the SHFE 2410 contract, while Yunnan Tin (Yunxi) brand was quoted at premiums of 200-800 yuan/mt against the SHFE 2410 contract. Imported tin brands were quoted for spot at a discount of 200-300 yuan/mt against the SHFE 2410 contract. During the early trading session yesterday, the tin prices fluctuated downward, and most downstream companies remained cautious, showing low buying interest. Most trading companies reported scattered transactions, with only a few trading a truckload of tin. Overall, the spot market was relatively quiet yesterday.

Nickel

On September 11, Jinchuan nickel was quoted at a premium of 1,900-2,200 yuan/mt, with an average of 2,050 yuan/mt, up 250 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 300 yuan/mt to a premium of 100 yuan/mt, with an average discount of 100 yuan/mt, unchanged from the previous trading day. On the morning of September 11, futures fluctuated at the bottom, but the spot premium slightly rose from the previous working day. The nickel briquette prices were 119,200-119,500 yuan/mt, down 100 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 7,923 yuan/mt (nickel sulphate prices were higher than nickel briquette prices by 7,923 yuan/mt).