SMM Morning Comments (Aug 3): Shanghai Base Metals Mostly Slid on Tuesday Morning following the lower ISM data

SHANGHAI, Aug 3 (SMM) – Shanghai base metals basically trended lower after opening on Tuesday morning, as the lower than expected US ISM data drove up the bearish sentiment in the market. Meanwhile, their counterparts on the LME mostly fell as well.

LME metals closed mixed on Monday. Copper fell 1%, zinc dropped 1.01%, and nickel slid 0.51%, while aluminium increased 0.6%, and lead rose 0.82%.

SHFE metals mostly went down in the overnight trading yesterday. Copper shed 1.22%, aluminium dropped 0.3%, zinc fell 0.91%, nickel decreased 0.97%, and tin fell 0.63%, while lead inched up 0.25%.

Copper: Three-month LME copper dropped 1% on Monday to close at $9,616.5/mt, and is expected to trade between $9,610-9,700/mt today.

The most-traded SHFE 2109 copper contract edged down 1.22% last night to close at 70,690 yuan/mt, and is expected to trade between 70,500-71,000 yuan/mt today, with spot premiums between 300-450 yuan.

On the macro level, US July ISM manufacturing data released last night was lower than expected, indicating that the growth in the manufacturing industry had been slowed down for two consecutive months. The recent spread of pandemic dragged down the oil yesterday, boosting the bearish sentiments in the commodity market, and copper futures fell significantly.

Spot premiums still fluctuated at high levels amid tight supply, but some major traders quickly sold their goods for cash, highlighting the market fragility. Sellers and buyers still could not agree on the high premiums.

Aluminium: Three-month LME aluminium edged up 0.6% to close at $2,613/mt on Monday as long positions increased. Open interest rose 5,548 lots to 681,000 lots.

The most-active SHFE 2109 aluminium contract decreased 0.30% to end at 19,900 yuan/mt last night, with open interest down 2,686 lots to 277,000 lots, and is expected to trade between 19,600-20,100 yuan/mt today.

Disturbances were frequent on the supply side of domestic aluminium. The power curtailment and production restrictions continued to strengthen in Inner Mongolia and south-west China, and the transportation in Henan was yet to be completely cleared in the short-term, while the demand stood stable. The social inventories of aluminium fell smoothly, giving strong support to aluminium prices. The guidance of Fed statements on the fund sentiments is worth attention. The impact of the spreading pandemic on logistics and production will be monitored.

Lead: Three-month LME lead advanced 0.82% to settle at $2,399/mt on Monday. Lead stocks across registered LME warehouses fell below 60,000 mt. Whether LME lead can stabilise at $2,400/mt will be monitored today.

The most-active SHFE 2109 lead contract rose 0.25% to close at 16,130 yuan/mt in the overnight trading yesterday. Bears continued to reduce positions, and LME lead strengthened, which boosted SHFE lead. However, SHFE lead weakened near the closing as the domestic social inventory of ead ingot hit a new high. Today’s focus will be whether the prices can stabilise around 16,100 yuan/mt. The impact of the pandemic prevention and control as well as the blockade on market sentiments is worth attention.

Zinc: Three-month LME zinc shed 1.01% to end at $3,025/mt on Monday, with open interest down 434 lots to 252,000 mt. Zinc stocks across LME-listed warehouses dropped by 175 mt or 0.07% to 246,775 mt. The Fed’s hawkish remarks eased US inflationary concerns. LME zinc is expected to fluctuate between $2,960-3,010/mt today.

The most-liquid SHFE 2109 zinc contract slid 0.91% to settle at 22,365 yuan/mt in overnight trading, with open interest down 4,429 lots to 106,000 lots. There was no major change in zinc fundamentals, and inventories increased slightly. The change in inventories is worth attention. The SHFE 2109 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 120-150 yuan/mt against the September contract.

Nickel: Three month LME nickel fell 0.51% to end at $19,470/mt on Monday, and is expected to trade with the support at $19,300/mt today.

The most traded SHFE 2109 nickel contract dropped 0.97% in the overnight trading to close at 144,260 yuan/mt amid decreasing open interest, likely to trade with the support at 144,000 yuan/mt today.

Tin: The most traded SHFE 2109 tin contract fell 0.63% to end at 232,410 yuan/mt last night.

Judging from the overall trend, funds were not active in participation, and the open interest did not change much.

The prices are still in the middle of the recent long-term price range, and the direction is still unclear.

SHFE tin is expected to move with the support at 230,000 yuan/mt, and the pressure from around 237,000 yuan/mt.