SMM Morning Comments (Aug 25): Shanghai Base Metals Basically Rose after US $3.5 Billion Budget

SHANGHAI, Aug 25 (SMM) – Shanghai base metals basically rose across the board on Wednesday morning as the market sentiments were boosted by the approval of the US $3.5 billion budget. Meanwhile, their counterparts on LME traded mixed.

LME metals mostly increased in the trading on Tuesday. Copper increased 1.29%, aluminium rose 0.39%, lead gained 0.5%, and zinc advanced 2.35%.

SHFE metals performed similarly overnight. Copper won 0.89%, aluminium increased 0.07%, zinc gained 0.99%, while lead lost 0.1%.

Copper: Three-month LME copper increased 1.29% on Tuesday night to close at $9,357.5/mt, and is expected to trade between $9,280-9,360/mt today.

The most liquid SHFE 2110 copper contract won 0.89% to settle at 69,110 yuan/mt last night, and is likely to trade between 68,700-69,300 yuan/mt today, with spot premiums between 140-230 yuan/mt.

On the macro front, the US House of Representatives approved the $3.5 trillion budget blueprint supported by Biden, which boosted market sentiments. The US dollar index fell back to 92.88 points, and copper futures continued the upward trend. The market is still waiting for this week’s annual Jackson Hole Meeting to learn more about when the Fed will begin to reduce bond purchases. Spot prices continued to rebound, and downstream users still actively inquired to purchase at low prices. The market purchase also picked up in the last two delivery days of the monthly long-term orders.

Aluminium: Three-month LME aluminium opened at $2,592/mt on Tuesday morning and closed at $2,604/mt, an increase of $10/mt or 0.39%.

The most-traded SHFE 2110 aluminium contract opened Tuesday’s night session at 20,490 yuan/mt, with the highest and lowest prices at 20,705 yuan/mt and 20,435 yuan/mt before closing at 20,440 yuan/mt, up 15 yuan/mt or 0.07%.

The US House of Representatives passed a $3.5 trillion budget resolution blueprint with a vote of 220-212 on Tuesday, paving the way for the Senate to implement budget coordination procedures to complete the legislation. The Speaker of the US House of Representatives Pelosi promised to pass the infrastructure bill before September 27. As a result, the US dollar index fell to a one-week low of 92.81, boosting commodity prices. Despite supply disruptions, aluminium ingot social inventory in China continued to grow slightly due to weak consumption. The most-traded SHFE 2110 aluminium contract is expected to range 23,000-20,800 yuan/mt on Wednesday.

Lead: Three-month LME lead gained 0.5% to end at $2,292/mt on Tuesday night. Shorts reduced positions for the third consecutive trading day as US dallor kept falling, and LME lead broke through $2,300/mt. SMM will monitor whether LME lead will continue to fluctuate higher and stabilise around $2,300/mt.

The most-active SHFE 2109 lead contract lost 0.10% to close at 15,450 yuan/mt in the overnight trading yesterday. The bullish news in the macroeconomics was gradually digested, and SHFE lead failed to follow the increase in the overseas market. Longs reduced positions to leave the market, and the upward momentum was slightly insufficient. Today’s focus will be the pressure from 15,500 yuan/mt.

Zinc: Three-month LME zinc opened at $2,934.5/mt on Tuesday, and hit a high of $3,020/mt before closing at $3,009/mt, an increase of $69/mt or 2.35%. The trading volume was 12,000 lots, and open interest decreased by 36 lots to 245,000 lots. LME zinc inventory increased by 200 mt to 239,300 mt, an increase of 0.08%. A weaker US dollar boosted base metals prices. LME zinc is expected to move between $2,960-3,010/mt on Wednesday.

The most-traded SHFE 2110 zinc contract opened Tuesday’s night session at 22,450 yuan/mt and rose to 22,610 yuan/mt before closing at 22,495 yuan/mt, up 220 yuan/mt or 0.99%. Trading volume was 78,470 lots, and open interest increased by 3,581 lots to 86,261 lots. Weak short-term fundamentals and thin trades in the spot market following delivery of long-term orders will put a cap on SHFE zinc. The most-traded SHFE 2110 zinc contract is expected to move between 22,200-22,700 yuan/mt on Wednesday. #0 domestic Shuangyan zinc is likely to trade at premiums of 160-180 yuan/mt over the SHFE 2109 zinc contract.

Tin: SHFE tin rebounded to 239,810 yuan/mt during Tuesday’s night session and then fluctuated within a narrow range, boosted by rising base metals in general. Supply in the spot market remains tight. SHFE and LME tin warrants remain low. However, considering that the export window is closed, supply tightness will be eased to a certain extent in the future. SHFE tin will challenge resistance at 240,000 yuan/mt on Wednesday.