SMM Morning Comment For SHFE Base Metals (September 18)

SHANGHAI, Sep 18 (SMM) –

Copper

Terrifying data was released, US dollar rose, copper prices may be guided by the overseas market today [SMM Copper Morning Comment]

LME copper opened at $9,417.5/mt overnight, initially reaching a high of $9,421/mt, then falling all the way down to $9,337/mt, before rebounding to a high of $9,417/mt, forming a V-shape. It then fell again, fluctuating slightly at the end of the session, and finally closed at $9,379/mt, up 0.07%. Trading volume reached 13,000 lots, and open interest reached 268,000 lots. SHFE copper was closed overnight. Macro side, US August retail sales recorded a monthly rate of 0.1%, higher than expected, causing the dollar to rise again. This put some pressure on copper prices, which had previously risen due to expectations of a US Fed rate cut. Fundamentally, a large amount of imported copper arrived earlier, but copper cathode stocks continued to deplete due to pre-holiday restocking, providing some support for consumption. The first working day after the holiday will be the delivery of the SHFE 2409 contract, and premiums are expected to rise. If copper prices remain high and stable, post-holiday consumption may be suppressed. Overall, with expectations of a US Fed rate cut, LME copper rose, and the domestic market is expected to follow the guidance. Additionally, the People's Bank of China recently released positive signals indicating room for further RRR cuts, which is expected to drive copper prices today. Today's focus will be on the US Fed's interest rate decision announcement in the evening.

Aluminum

Support from Fundamentals is Strong, Aluminum Prices Expected to Consolidate at Highs in the Short Term [SMM Aluminum Morning Comment]

SMM, Sep 18: On the previous trading day, the most-traded SHFE aluminum 2410 contract opened at 19,775 yuan/mt, reached a high of 19,830 yuan/mt, a low of 19,720 yuan/mt, and closed at 19,745 yuan/mt, unchanged from the previous closing price. LME aluminum opened at $2,517/mt, hit a high of $2,539.5/mt, a low of $2,505.5/mt, and closed at $2,506.5/mt, down $8.5/mt, a decrease of 0.34%.

Summary: On the macro front, the US Fed will announce its rate decision on Wednesday afternoon Eastern Time, with a rate cut already a certainty, but there is still disagreement in the market about the extent of the rate cut. On the fundamentals side, domestic aluminum supply is expected to remain stable in the short term, while overseas production cuts are occurring, and future supply is gradually peaking. On the demand side, the market is gradually entering the peak consumption season, with aluminum demand performing well and aluminum social inventory decreasing significantly. With the fundamentals shifting to strong support, aluminum prices are expected to consolidate strongly amid strong fundamentals and macro uncertainties.

Lead

Lead Ingot Inventory Accumulation During Mid-Autumn Festival: Focus on Post-Holiday Lead-Acid Battery Consumption Changes [SMM Lead Morning Comment]

On Tuesday, LME lead opened at $2,035.5/mt, fluctuated upward during the Asian session, and peaked at $2,052/mt during the European session. Due to the increase in domestic lead inventory, bulls reduced their positions, causing LME lead to plunge to $2,005.5/mt, finally closing at $2,011/mt, down 1.11%. Due to the Mid-Autumn Festival holiday, SHFE lead market was closed during the night session last Friday and resumed trading this morning.

Macro aspects: U.S. retail sales for August recorded a month-on-month increase of 0.1%, higher than the expected -0.2%, with the previous value revised from 1.00% to 1.1%. Six percent of oil and 10% of natural gas production in the Gulf of Mexico were halted. According to a Bank of America survey, global investor confidence improved in September for the first time since June. China's Ministry of Commerce: China and Germany had in-depth and candid exchanges on issues such as the EU's anti-subsidy investigation into Chinese electric vehicles.

Spot fundamentals: Due to the Mid-Autumn Festival holiday, SHFE lead market only had three trading days this week; and today (September 18) is the delivery day for the SHFE lead 2409 contract. During the Mid-Autumn Festival, most lead-acid battery companies had holidays ranging from 1 to 3 days, while smelters, except for maintenance, generally maintained normal production. Post-holiday lead market inventory accumulation is expected to rise. Focus on changes in post-holiday downstream lead-acid battery consumption. If battery producers actively purchase lead ingots for restocking, lead prices may maintain a rebound trend.

Zinc

During the Mid-Autumn Festival holiday, the domestic market was closed while LME zinc fluctuated at highs [SMM Zinc Morning Comment].

Overnight, multiple pager explosions occurred in Lebanon, with reports suggesting that Mossad had planted explosives; US August retail sales exceeded expectations, with the previous value slightly revised upward; sources indicated that the US would seek to replenish 6 million barrels of strategic reserves taking advantage of relatively low oil prices; experts suggested that 5% might be the current lower limit for the reserve requirement ratio; During the Mid-Autumn Festival holiday, the domestic market was closed, while overseas LME zinc opened at $2,900/mt. Boosted by expectations of a US Fed rate cut, LME zinc fluctuated upward, reaching a high of $2,977.5/mt during European trading hours yesterday. Subsequently, a significant increase of 12,950 mt in LME zinc inventory, combined with unexpected growth in US retail sales, led to a decrease in expectations for a substantial US Fed rate cut, supporting the dollar and causing non-ferrous metals to decline. LME zinc's center of gravity shifted downward to $2,920/mt, ultimately closing down at $2,924/mt, a drop of $21/mt or 0.71%. Trading volume increased to 11,710 lots, while open interest decreased by 1,175 lots to 241,000 lots. Overnight, LME zinc recorded a long upper shadow bearish candlestick, with various moving averages below providing support. Overnight, LME inventory increased by 12,950 mt to 247,100 mt, an increase of 5.53%, indicating a significant rise in LME inventory. The expectation of a substantial US Fed rate cut has weakened, and attention will be focused on the upcoming US Fed rate decision.

Tin

Interest Rate Meeting Approaches, Tin Prices Fluctuate Rapidly with Macro Influences [SMM Tin Morning Comment]

SMM, Sep 18: In the economic data sector, the US Department of Labor released a report on Thursday indicating that the Producer Price Index (PPI) for August rose by 0.2% YoY, aligning with market expectations. This data, being a key inflation indicator ahead of the US Fed's upcoming monetary policy meeting, has garnered significant market attention. Currently, the market widely predicts that the US Fed will take measures to cut interest rates. Meanwhile, the European Central Bank has also announced another 25 basis point rate cut. Rate cuts are often seen as a means to stimulate the economy and are expected to boost the prices of commodities, including tin. With the arrival of the September-October peak season, domestic demand has shown a positive trend. Notably, the continuous rise in tin prices in August led most end-users to use their previous inventories for production, thereby reducing overall inventory levels. However, with the significant drop in tin prices in September, the market situation has improved. The decline in tin prices has spurred many end-users to increase their purchases and start appropriate inventory stocking. This trend has already begun to emerge, with some solder companies reporting an increase in orders at the beginning of September. In the short term, tin prices are expected to fluctuate upward. Additionally, the US Fed's interest rate meeting after the Mid-Autumn Festival will have a significant impact on the commodity market. Therefore, investors should closely monitor various economic indicators, policy dynamics, and market supply and demand changes to make more informed investment decisions.

Nickel

Last week, nickel prices rebounded from the bottom. The macroeconomic forecast for the US in September mainly revolves around the US Fed's rate cut expectations. Currently, the likelihood of a rate cut is quite high, but the specific extent remains uncertain. Overall, a rate cut would have a relatively positive impact on the US economy. The refined nickel market is currently in a surplus situation, and with the expectation of weakening exports, domestic inventories may continue to accumulate. This means that supply-side pressure may continue to suppress nickel prices. Although the demand for nickel in the electric vehicles market continues to grow, the current global economic situation and market pessimism may have some impact on demand. Additionally, the weakness in the stainless steel market will also drag down nickel prices. Indonesia, a major global nickel ore producer, has significant influence on the global nickel market through its policy changes. Recently, the Indonesian nickel ore market has been under pressure, with the September reference price down 5.38% MoM, reflecting the current weak state of the nickel ore market. The instability of the global macroeconomic environment, such as changes in the US Fed's rate hike policy and the risk of economic recession in Europe and the US, could indirectly affect nickel prices. Based on the above analysis, we believe that nickel prices may continue to be under pressure in September. Under the combined effects of supply surplus, weak demand, and external unfavourable factors, nickel prices may continue to be suppressed. However, the specific price trend still needs to closely monitor market dynamics and related policy changes. In summary, nickel prices are likely to fluctuate downward in the short term due to fundamental pressures, but it is still necessary to be vigilant about the resurgence of macro sentiment. The upcoming US Fed meeting on Sep 18 should be closely watched.