SMM Morning Comment For SHFE Base Metals On September 24

SHANGHAI, September 24 (SMM) –

Copper

Overnight, LME copper opened at $9,454.5/mt, initially dipped to $9,453/mt, then rose steadily, fluctuated rangebound mid-session, peaked at $9,562.5/mt, and finally dropped back slightly to close at $9,400/mt, up 0.59%. Trading volume reached 24,000 lots, and open interest was 270,000 lots. Overnight, the most-traded SHFE copper 2410 contract opened at 75,500 yuan/mt, fluctuated rangebound initially, dipped to 75,490 yuan/mt mid-session, then rose to 75,810 yuan/mt, and finally dropped back to close at 75,640 yuan/mt, up 0.3%. Trading volume reached 21,000 lots, and open interest was 114,000 lots. Macro side, the preliminary US September S&P Global Manufacturing PMI recorded 47, lower than the expected 48.5, marking a 15-month low and contracting for the third consecutive month. The preliminary US September S&P Global Services PMI recorded 55.4, slightly above expectations but indicating slower growth. Following the data release, the US dollar index declined. Additionally, US Fed officials suggested potential future rate cuts, with several Fed policymakers scheduled to speak and economic data releases this week, potentially providing more market guidance. Fundamentals, supply side, spot copper cathode supply remained tight as previously arrived shipments struggled to enter the domestic trade market quickly. Demand side, pre-National Day restocking accelerated social inventory destocking. According to SMM data, as of Monday, September 23, SMM copper inventory in major regions nationwide fell sharply by 227,000 mt to 166,000 mt compared to last Thursday, continuing destocking with an accelerating speed. However, total inventory was still 81,000 mt higher compared to 85,000 mt in the same period last year, though the gap has significantly narrowed. Supported by this, copper prices are expected to fluctuate upward.

Aluminum

Futures market: Overnight, the most-traded SHFE aluminum 2411 contract opened at 19,785 yuan/mt, reaching a high of 19,875 yuan/mt and a low of 19,780 yuan/mt, closing at 19,830 yuan/mt, down 5 yuan/mt, a decrease of 0.05%. The previous trading day, LME aluminum opened at $2,485/mt, with a high of $2,499/mt and a low of $2,456/mt, closing at $2,486/mt, up $1/mt, an increase of 0.04%.

Summary: On the macro front, more US Fed officials have indicated another rate cut, but the specific extent of the cut is not unified, and the market is waiting for more economic data for guidance. The People's Bank of China cut the 14-day reverse repurchase interest rate by 10 basis points, improving market liquidity. Fundamentals side, domestic aluminum market supply slightly increased. As alumina prices showed upward fluctuations due to tight supply, domestic aluminum costs remained high. Under the influence of the September-October peak season, downstream aluminum weekly operating rates were stable, and downstream consumption steadily improved. However, caution is needed regarding the negative impact of overseas market tax policies on domestic aluminum processing enterprises. This week, aluminum inventory continued a slight destocking trend, and attention should be paid to the impact of pre-holiday stocking on future inventory trends. Overall, with a favorable macro atmosphere and stable fundamentals, the aluminum market is expected to fluctuate upward in the short term.

Lead

Overnight, LME lead opened at $2,048.5/mt. During the Asian session, LME lead consolidated around $2,040/mt. Entering the European session, the focus of LME lead gradually shifted upward, reaching an intraday high of $2,067/mt boosted by the rise in SHFE lead. By the end of the session, LME lead gave back some gains, closing at $2,051/mt, up 0.44%.

Overnight, SHFE lead warehouse warrant inventory decreased by over 10,000 mt. The most-traded SHFE lead 2410 contract opened higher at 16,530 yuan/mt, rising above 16,600 yuan/mt, and later consolidating between 16,620-16,665 yuan/mt, finally closing at 16,645 yuan/mt, up 1.46%. Its open interest was 25,541 lots, down 4,418 lots from the previous trading day. Additionally, the open interest of the SHFE lead 2410 contract has been gradually shifting to the SHFE lead 2411 contract, noting the rollover of the most-traded contract.

Macro side, the US September Markit Manufacturing PMI hit a 15-month low, with the service sector expansion slowing and price pressures re-emerging. Expectations for an ECB rate cut are rising, with the Eurozone September Manufacturing PMI hitting a new low for the year and both Germany and France seeing accelerating contraction. Today, the State Council Information Office held a press conference attended by Pan Gongsheng, Li Yunze, and Wu Qing. The central bank announced a recent RRR cut of 0.5 percentage points, with another cut of 0.25-0.5 percentage points possible by year-end, lowering the central bank policy rate. The 7-day reverse repurchase interest rate was cut by 0.2 percentage points, and mortgage rates on existing home loans are expected to decrease by about 0.5 percentage points to a level similar to those of newly issued housing loans. The minimum down payment ratio for second-home loans was reduced from 25% to 15%.

Fundamentals, in late September, maintenance at primary and secondary lead smelters gradually ended, with lead ingot production stable to rising, while lead consumption was mediocre. Downstream enterprises showed less enthusiasm for pre-holiday stocking compared to the same period last year. Meanwhile, the retirement volume of battery scrap was limited, with prices remaining high, even rising instead of falling. Secondary lead companies held firm on prices, with regions like Anhui and Henan seeing secondary refined lead prices surpassing primary lead prices, causing a price inversion. Changes in the price spread may cause downstream enterprises' rigid demand to return to the primary lead sector. Additionally, this week is the week before the National Day holiday, and downstream enterprises may conventionally conduct pre-holiday stocking, with continued attention to the fulfillment of pre-holiday stocking.

Zinc

Overnight, LME zinc opened at $2,873.5/mt. Initially, it fluctuated rangebound around the daily average line with a range of $30/mt. During European trading hours, it fluctuated downward below the daily average, briefly centering around $2,845/mt, and dipped to $2,833.5/mt. Subsequently, as shorts reduced positions, LME zinc fluctuated upward above the daily average, reaching a high of $2,894.5/mt. It then fluctuated slightly around $2,885/mt, closing at $2,885/mt, an increase of $18/mt or 0.63%. Trading volume decreased to 74,378 lots, and open interest decreased by 2,038 lots to 238,000 lots. Overnight, LME zinc recorded a long lower shadow bullish candlestick, with resistance from the 5-day moving average above and support from the 40/60-day moving averages below. LME social inventory increased by 1,900 mt to 258,050 mt, a rise of 0.74%. The US September S&P Global Manufacturing PMI preliminary value was 47, lower than the expected 48.5 and the lowest in 15 months, marking the third consecutive month of contraction. Meanwhile, US Fed officials indicated that more rate cuts might be needed in the coming year. LME zinc is expected to maintain a fluctuating trend today.

Overnight, the most-traded SHFE zinc 2411 contract opened higher at 23,600 yuan/mt. Initially, with longs increasing positions, SHFE zinc traded above the daily average, reaching a high of 23,725 yuan/mt. Subsequently, SHFE zinc attempted to move downward but was driven by longs above the daily average. During the session, as longs reduced positions, SHFE zinc moved downward in a stepwise manner, reaching a low of 23,575 yuan/mt. By the end of the session, it fluctuated rangebound around 23,590 yuan/mt, closing at 23,610 yuan/mt, an increase of 130 yuan/mt or 0.55%. Trading volume decreased to 59,156 lots, and open interest increased by 5,889 lots to 107,000 lots. Overnight, SHFE zinc recorded a long upper shadow bullish candlestick, with resistance from the 5-day moving average above and support from the 10/20-day moving averages below. Currently, domestic inventory increases slightly, but demand remains weak. Coupled with the US September S&P Global Manufacturing PMI being lower-than-expected, SHFE zinc is expected to continue fluctuating today.

Tin

In the night session yesterday, the most-traded SHFE tin contract closed at 259,770 yuan/mt, up 660 yuan/mt, an increase of 0.25%, with a high of 261,000 yuan/mt and a low of 258,350 yuan/mt.

During the morning session yesterday, trading companies' quotes for 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 brand at premiums of 200-700 yuan/mt, Yunnan Tin brand at premiums of 200-800 yuan/mt, and imported tin brands at discounts of 700-200 yuan/mt against the SHFE 2410 contract. In the morning session, tin prices jumped initially and then pulled back slightly, prompting some downstream and end-user companies to make small purchases after the price drop. Most trading companies had scattered transactions, with a few trading companies completing transactions of about one truckload. Overall, the spot market transactions were mediocre yesterday.

Nickel

On September 23, Jinchuan nickel was quoted at a premium of 1,700-1,800 yuan/mt, with an average of 17,500 yuan/mt, unchanged from the previous trading day. Norilsk nickel was quoted at a discount of 300-100 yuan/mt, with an average of 200 yuan/mt, up 50 yuan/mt from the previous trading day. On the morning of September 23, the futures market fluctuated, and spot premiums narrowed compared to the previous working day. Nickel briquette prices were 123,100-123,800 yuan/mt, down 425 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 3,414 yuan/mt (nickel sulphate prices were 3,414 yuan/mt higher than nickel briquette prices).