SMM Morning Comments (Sep 1): Shanghai Base Metals Fell Across the Board Before The Third Round Release of National Metal Reserves

SHANGHAI, Sep 1 (SMM) – Shanghai base metals generally fell on Wednesday morning awaiting the third round release of national metals reserves. Meanwhile, their counterparts on LME fell as well.

LME metals all increased in the trade on Tuesday. Copper rose 1.22%, aluminium went up 1.98%, lead gained 0.24%, and zinc increased 0.55%.

SHFE metals fell across the board in the overnight trading. Copper dipped 0.09%, aluminium decreased 0.7%, lead fell 1.03%, and zinc slid 0.11%.

Copper: Three-month LME copper rose 1.22% to end at $9535/mt on Tuesday night, and is expected to trade between $9,460-9550/mt.

The most liquid SHFE 2110 copper contract dipped 0.09% to settle at 70,110 yuan/mt last night, and is likely to trade between 69,800-70,400 yuan/mt today, with spot premiums between 140-200 yuan/mt.

On the macro front, Fed’s reverse repurchase hit a new high at $1.19 trillion on Tuesday night, indicating that the money market still has an oversupply of funds. US dollar index hit a three-week low last night, and SHFE copper fluctuated. The spot trade was sluggish in the last trading day in August. The third round of national copper reserve will be released today, and downstream users have a wide choice of sources. A large amount of imported copper has also entered the social warehouses last weekend. Therefore, holders can hardly keep the prices high.

Aluminium: Three-month LME aluminium rose 1.98% to end at $2,706.5/mt on last night.

The most-active SHFE 2110 aluminium contract decreased 0.7% to end at 21,235 yuan/mt last night.

The output of aluminium and alumina in Guangxi are required to cut due to dual energy consumption control.

However, the China Nonferrous Metals Industry Association held a meeting on August 30 and stated that there was no obvious shortage of aluminium supply.

SHFE aluminium fell slightly for the second consecutive day.

Energy consumption policy and inventory changes across regions remain as the market focus.

Lead: Three-month LME lead closed $5.5 or 0.24% higher at $2,263.5/mt in the overnight trading yesterday. Today’s focus will be the pressure from the 60-day moving average.

The most active SHFE 2109 lead contract fell below the intraday average and closed 14,915 yuan/mt, down 155 yuan/mt or 1.03% from Monday night. Today’s focus will be the pressure from 15,000 yuan/mt.

Zinc: Three-month LME zinc rose 0.55% to stand at $3,004/mt in the trading of last night, with open interest down 2,306 lots to 247,000 lots. Zinc stocks across LME-listed warehouses dropped by 1,200 mt or 0.5% to 237,075 mt.

SHFE zinc contract slid 0.11% to stand at 22,325 yuan/mt in overnight trading, with open interest up 633 lots to 89,710 lots. Zinc supply is likely to increase as some smelters were recovering from power curtailment, coupled with 50,000 mt of zinc ingots stockpiled by government. The most-traded SHFE zinc contracts are expected to move between 22,100-22,500 yuan/mt today and spot premiums for domestic #0 Shuangyan zinc will be seen at 150-170 yuan/mt against the October contract.

Market sentiment has been affected by China PMI which indicated that China’s growth rate will be restricted. Economy in Europe is recovering, but companies still faced supply shortage and rising prices.

Tin: SHFE tin prices moved between 245,000-248,500 yuan/mt in the trading of last night. TCs increased at smelters, boosting the production willingness. Export profit window for tin ingots closed in August. Exported tin ingots in the previous period are forced to sell in China, helping to ease tight supply. Downstream producers lowered restocking volume due to rising costs. The correction intraday remains as the market focus. SHFE tin prices are expected to stand at 242,000-248,000 yuan/mt today.