SMM Morning Comments (Aug 2): Shanghai Base Metals Mostly Trending Mixed ahead of Final PMI Values

SHANGHAI, Aug 2 (SMM) – Shanghai base metals trended mixed on Monday morning as the market was awaiting final PMI values of manufacturing and service industries, and US monetary policy is expected to remain dovish. Meanwhile, their counterparts on LME performed similarly.

LME metals basically cruised higher last Friday. Copper rose 1.28%, aluminium increased 0.04%, lead rose 0.57%, and zinc went up 1.12%.

SHFE metals traded mixed last Friday night. Copper dropped 0.07%, aluminium fell 0.03%, and tin shed 0.06%, while lead rose 1.17%, and zinc increased 0.57%.

Copper: Three-month LME copper advanced 1.28% last Friday night to close at $9,714/mt, and is expected to trade between $9,720-9,800/mt today.

The most-traded SHFE 2109 copper contract slid 0.7% last Friday night to close at 71,180 yuan/mt, and is expected to trade between 71,000-71,600 yuan/mt today, with spot premiums between 330-420 yuan/mt.

Last week’s Fed meeting settled to maintain the interest rate unchanged, and Fed chairman Powell also stated that it was not time to tighten the monetary policy. The meeting result was basically in line with market expectations, but copper prices fell back significantly amid cooled bullish sentiments after the sharp gains. European and US policies will remain dovish in the short-term. This week’s focus will be the final PMI values of manufacturing and service industries in many countries. US dollar is expected to get bottom support if the US employment data improves in July.

On the first trading day in August, the continuous short squeeze in LME market limited the increase in the SHFE/LME ratio. As domestic social inventories failed to increase, traders had to raise spot premiums to over 400 yuan/mt to deliver the long-term orders.

Aluminium: Three-month LME aluminium inched up 0.04% to end at $2,597.5/mt on Friday, with open interest increasing 5,575 lots to 676,000 lots, and is expected to trade between $2,570-2,620/mt today.

The most-active SHFE 2109 aluminium contract decreased 0.03% to end at 19,900 yuan/mt last Friday night, with open interest down 9,706 lots to 279,000 lots, and is expected to trade between 19,800-20,200 yuan/mt today.

Aluminium plants in Yunnan, Guizhou and Guangxi will reduce production amid stricter power curtailment, which has also caused market concerns about the smooth launch of new capacities in the southwest regions. Aluminium prices are expected to fluctuate at high levels amid the falling inventories in the off-peak season. Attention needs to be paid to the impact of fundamentals and macroeconomic on the bulls’ sentiments.

Lead: Three-month LME lead ended 0.57% higher at $2,379.5/mt las Friday. Lead stocks acrossed registered LME warehouses fell close to a new low at 60,000 mt. Whether LME lead can test $2,400/mt will be monitored today.

The most-active SHFE 2109 lead contract rose 1.17% to close at 16,045 yuan/mt in the overnight trading Last Friday. Bears reduced positions to avoid risks, driving SHFE lead to rebound to over 16,000 yuan/mt. Whether the prices can stabilise above 16,000 yuan/mt and maintain an upward trend will be the focus today.

Zinc: Three-month LME zinc gained 1.12% to close at $3,031.5/mt last Friday, with open interest increasing 3,024 lots to 252,000 lots. US senators roughly completed the text of the $550 billion infrastructure bill, boosting the market sentiments. However, the global COVID-19 pandemic limited the price increase. LME zinc is expected to fluctuate between $2,990-3,040/mt today.

The most-liquid SHFE 2109 zinc contract edged up 0.51% to settle at 22,530 yuan/mt last Friday night, with open interest up 976 lots to 106,000 lots. Some smelters in Yunnan and Guangxi were still under the impact of power curtailment, suppressing the increase in the TCs for domestic concentrate. The expectations of concentrate shortage within the year was intensified, and the zinc ingot inventories did not increased significantly, which boosted bullish sentiments. The pandemic situation will be the focus in the short term. The SHFE 2109 zinc contract is expected to move between 22,200-22,700 yuan/mt today, and spot premiums for domestic 0# Shuangyan zinc will be seen at 120-130 yuan/mt against the September contract.

Tin: The most traded SHFE 2109 tin contract fell 0.06% to end at 233,010 yuan/mt last Friday night.

The prices failed to make an effective breakthrough, as the long funds lacked continuity after the active actions. Whether long funds can rally is worth attention. SHFE tin is expected to move with the support at 230,000 yuan/mt, and the pressure from around 237,000 yuan/mt.