SMM Morning Comment For SHFE Base Metals July 25

SHANGHAI, Jul 25 (SMM) – 

Copper

LME copper opened at $8,382/mt overnight, with its low and high at $8,398/mt and $8,538/mt near the beginning and the end respectively before closing at $8,521/mt, up 1.04%. Trading volume was 17,000 lots and open interest was 270,000 lots.

The most-traded SHFE 2309 copper contract opened at 68,450 yuan/mt. After moving sideways at the beginning, its high reached over 68,770 yuan/mt before closing at 68,640 yuan/mt, up 0.69%. Trading volume was 35,000 lots and open interest was 160,000 lots. From a macro perspective, the U.S. announced a strong performance in manufacturing PMI on Monday, while the PMI fell back in service sector, and concerns about persistence of inflation remain. The market is focusing on the meetings of a number of central banks later this week for clues on the monetary policy. In terms of fundamentals, by this Monday, July 24, SMM copper stocks in national mainstream areas decreased by 6,900 mt to 109,000 mt compared to last Friday, but 11,500 mt higher than the same period last year. Specifically, East China inventory reduction is mainly caused by the low arrival of imported copper and the downstream replenishment at low price; South China inventory increase is mainly caused by more weekend arrival. For consumption, downstream demand will decline near the end of the month; if copper prices run high, consumption will continue to be suppressed. Copper prices will maintain great fluctuation before the Fed’s policy decision.

Aluminum

The most-traded SHFE 2309 aluminum contract opened at 18,230 yuan/mt overnight, with its low and high at 18,225 yuan/mt and 18,310 yuan/mt respectively before closing at 18,290 yuan/mt, up 30 yuan/mt or 0.16%. LME aluminum opened at $2,207.5/mt on Monday, with its low and high at $2,185/mt and $2,213.5/mt respectively before closing at $2,207.5/mt, down $3/mt or 0.14%.

On the macro level, the Fed is about to raise interest rates, but there is an expectation to stop raising interest rates in the future. Domestic stimulus policies are frequent, and the macro front is relatively stable. In terms of fundamentals, the resumption of aluminium production in Yunnan is speeding up, and it is expected that some large smelters in the region will be able to produce at full capacity by the end of August. At present, the production in Yunnan is gradually climbing, and the supply pressure in the South China market will gradually be reflected. In terms of consumption, domestic downstream operating rates are in the off-season. So far, the domestic aluminium ingot inventory accumulation is lower than expected. The low inventory in the off-season gives support to aluminium prices. SHFE aluminium may move rangebound in the short term.

Lead

 LME lead opened at $2,136/mt on Monday and touched a high of $2,177/mt before closing at $2,165/mt, an increase of 1.43%.
Overnight, the most-traded SHFE lead contract went up to 16210 yuan/mt after opening at 15,975 yuan/mt, and closed at 16170 yuan/mt, up 230 yuan/mt or 1.44%. Trading volume fell 3646 lots to 63698 lots.

On the macro front, the U.S. employment data still showed resilience, and the market continued to strengthen the prospect of the Fed raising interest rates, but the rebound of the U.S. dollar index did not significantly suppress the lead price. Fundamentally, towards the end of July, downstream orders at large-scale lead-acid batteries are gradually improving, and rigid demand purchases are still maintained after the lead price strengthened, and the peak season expectations are gradually being fulfilled. On the supply side, the impact of the maintenance of primary lead enterprises will wane, and the profit of secondary lead is improving, thus the supply of refined lead is expected to increase month-on-month. However, considering the tight supply of raw materials and other factors, some smelters are unable to fully recover from maintenance.

Zinc

LME zinc opened at $2379.5/mt on Monday and fell on poor macro data, but then rallied, closing up 1.57% at $2420/mt. Trading volume was 7700 lots and open interest fell 312 lots to 195,000 lots.

SHFE 2308 zinc contract opened at 20115 yuan/mt overnight, and closed up 1.12% at 20290 yuan/mt.  Trading volume was 114,000 lots and open interest rose 4720 lots to 119,000 lots.

The initial value of the manufacturing PMI in the euro zone in July was lower than the expected 43.5 and recorded 42.7. At the same time, it was lower than the previous value. The US dollar rose, sending LME zinc prices down, but zinc prices rallied rapidly.

In terms of spot goods, the social inventory of zinc ingots across seven major markets in China accumulated 124,200 mt. Since June, the inventory has maintained a slight accumulation trend, and the support for zinc prices has gradually weakened.

Tin

SHFE 2308 tin contract jumped to around 233300 yuan/mt overnight and then rose further to 234950 yuan/mt before falling back to close at 234020 yuan/mt, up 0.72%.

Nickel

SHFE 2308 nickel contract opened at 169,040 yuan/mt overnight, and closed at 168,910 yuan/mt, down 1620 yuan/mt. Trading volume increased by 10397 lots, and open interest decreased by 4447 lots. From a macro point of view, due to the limited economic recovery in the second quarter, combined with market expectations that the Federal Reserve will raise interest rates in July, SHFE nickel fell yesterday. From the perspective of demand, high nickel prices dented downstream buying appetite. To sum up, it is expected that the subsequent nickel price may show a volatile trend. 

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