SMM Morning Comment for SHFE Base Metals on August 3

SHANGHAI, August 3 (SMM) –

Copper

LME copper prices opened at $8,563/mt overnight, and rose to $8599.5/mt at the beginning of the session, and then fluctuated downwards to $8,490/mt before closing at $8506/mt, falling 1.51%, with trading volume of 23,000 lots and open interest of 287,000 lots. SHFE 2309 copper contract was opened at 69,100 yuan/mt overnight, and rose to 69,220 yuan/mt at the beginning of opening, and then fluctuated to 68,770 yuan/mt. Finally, it closed at 68,880 yuan/mt, a decrease of 1.3%, with trading volume of 49,000 lots and open interest of 188,000 lots.

On the macro level, yesterday's data showed that the growth rate of private employment in the United States in July was greater than expected, indicating the resilience of the labor market, which lifted US dollar and led to a bearish outlook on copper prices. In fundamentals, copper prices decreased yesterday, and spot traders in East China actively received spot goods. The current supply of copper goods in the spot market was relatively scarce. Inventory in South China increased for four consecutive days. Although copper prices decreased, the wait-and-see sentiment of downstream enterprises was relatively high. Copper prices may lack upward momentum.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,435 yuan/mt, with the lowest and highest prices at 18,385 yuan/mt and 18,495 yuan/mt before closing at 18,415 yuan/mt, down 125 yuan/mt or 0.67% from Wednesday. LME aluminium opened at $2,252.5/mt on Wednesday, with its high and low at $2,257/mt and $2,203/mt respectively before closing at $2,210/mt, a decrease of $43/mt or 1.91%.

On the macro level, the US dollar index rose strongly again overnight. Data showed that the number of US private jobs increased more than the expected in July, which supported the US dollar and put downward pressure on non-ferrous metals price. 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, potentially fueling the total domestic operating capacity to a record high. At present, the amount of resumed production is mainly liquid aluminum, and there is no large aluminum ingot oversupply pressure. On the demand side, favorable policies have promoted real estate, automobile, and other related consumption to gradually pick up, but the impact of follow-up policies still needs further observation. In addition, some end-users have asked employees to take a break recently against slack demand in summer, so the downstream demand may be weakened. In the short term, SHFE aluminium will remain volatile, and consumption and inventory still need attention.

Zinc

LME zinc prices opened at 2,550.5 on Wednesday, with high and low at 2,550.5 and 2,475, and closed at $2,491/mt, down $64/mt, or 2.5%. Trading volume decreased to 10,447 lots, and open interest increased by 929 lots to 199,000 lots. LME zinc inventory increased by 125 mt to 99,225 mt, a decrease of 0.13%. US ADP employment data far exceeded expectations, which shored up US dollar. The downgrade of US ratings dampened global risk appetite, sending LME zinc down.

The most traded SHFE 2309 zinc contract opened at 21,030 on Wednesday, with high and low at 21,030 and 20,810, and closed at $20,865/mt, down $265/mt, or 1.25%. Trading volumes decreased to 76,243 lots, and open interest was down to 108,000 lots. Rising US dollar kept SHFE zinc from going up. Zinc ore supply was ample. Trade in spot market was weak. Galvanised sheet plants in some regions shut down 30-40% of production due to poor orders and profits.

Tin

Overnight, SHFE 2309 tin contract price gradually shook up after the opening. After reaching a high price of around 228,610 yuan/mt, it fell back and closed at 225,950 yuan/mt, down 0.49%.

Nickel

SHFE 2309 nickel contract opened at 172,000 yuan/mt at the night session on August 2, and closed at 172,020 yuan/mt, up 750 yuan/mt. Trading volume fell by 34,639 lots, and open interest increased 1,083 lots.

On the macro level, SHFE nickel fluctuated upwards yesterday due to the good news of the Politburo meeting. From a fundamental perspective, excluding the monthly difference factor, the overall spot premium continued to decline. According to SMM research, in demand side, as nickel price was still at a high level, even though the spot premium reduced, the absolute price was still high, downstream enterprises’ willingness to purchase was low, and the warehouses of some downstream factories still had nickel plate stocks, so the transaction in the spot market yesterday was weak. In summary, it is expected that nickel prices will fluctuate rangebound in the future.

Lead

LME lead opened at $2135.5/mt on Wednesday, with high and low at $2154.5/mt and $2131/mt before closing up 0.54% at $2147/mt. Open interest decreased by 840 lots to 120,000 lots. Trading volumes rose 572 lots to 4,401 lots.
The most active SHFE 2309 lead contract opened at 15935 yuan/mt, with high and low at 15965 yuan/mt and 15890 yuan/mt before closing down 0.16% at 15920 yuan/mt. Open interest increased by 484 lots to 107,000 lots from the previous trading day, and trading volumes fell by 21,068 lots to 22,242 lots.
On the macro level, in the morning the July China Caixin Services PMI will be issued, and in the evening, the number of initial jobless claims in the US for the week ending July 29, and the final value of the July Markit Services PMI will be announced. In terms of fundamentals, the supply of lead ingots is expected to increase in August, and the actual consumption recovery still needs attention. Lead ingots at home and abroad are currently in a trend of accumulation, dragging down the increase in lead prices. The prices of lead concentrate and waste batteries remain high, supporting the prices of lead ingots. On the whole, in the case of relatively stable macroeconomic conditions, short-term lead ingot prices may maintain boundrange movement.