SMM Morning Comment For SHFE Base Metals August 22

SHANGHAI, Aug 22 (SMM) –

Copper

LME copper prices closed at $8,288/mt on Monday, a rise of 0.14%. Trading volume was 12,000 lots and open interest stood at 277,000 lots. The most active SHFE 2309 copper contract prices closed at 68,350 yuan/mt overnight, a rise of 0.09%. The trading volume was 15,000 lots, and open interest stood at 142,000 lots. Macroscopically, the San Francisco Fed research report pointed out that the divergence among Fed officials on the direction of interest rates was widening, which exceeded the average level in the first two quarters of 2023. Markets remained cautious ahead of the Fed’s Jackson Hole annual meeting. SMM data showed that as of Monday, August 21, copper inventory across major Chinese markets stood at 72,900 mt, down 1,900 mt from last Friday. Last weekend, East China’s inventory was unchanged, while South China’s inventory fell due to outflows of warrants into the market. The imported copper flowing into the market released the supply tightness in East China. Most downstream buyers already purchased sufficient stocks when copper prices were low, so it’s difficult to see a sustained increase in consumption. The market is waiting for the US economic data and copper prices may remain volatile in the near future.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,460 yuan/mt, with the lowest and highest prices at 18,460 yuan/mt and 18,530 yuan/mt before closing at 18,515 yuan/mt, up 25 yuan/mt or 0.14% from the previous trading day. LME aluminium opened at $2,147/mt on Monday with its high and low at $2,150.5/mt and $2,115/mt respectively before closing at $2,145.5/mt, an inecrease of $7/mt or 0.33% from the previous trading day.

On the macro side, according to the minutes of the Federal Reserve meeting in July, most Fed members saw significant upside risks to inflation that might warrant further policy tightening. However, there are also many members who support maintaining the current interest rate, leading to large differences in the decision-making level. In terms of fundamentals, the amount of domestic ingots is still relatively small. It is difficult for the market to witness a large number of concentrated arrivals of ingots in the short term. Domestic aluminum ingots social inventory declined to nearly 500,000 mt but with the resumption of production in Yunnan, supplies may be gradually restored. In mid-August, the downstream inventory restocking was active, which strengthened confidence over the extended destocking of aluminum products and boosted spot premiums. In the short term, low inventories will still support aluminum prices. However, the uncertain macro sentiment and the expected supply increase will put pressure on the upward trend of aluminum prices. SMM predicted that the short-term aluminum prices will remain volatile, and follow-up attention should be paid to consumption and inventory.

Lead

LME lead prices closed at $2,168/mt in overnight trading, up 1%. Open interest increased by 1,344 lots to 121,000 lots. Trading volumes dropped 1,865 lots to 6,176 lots.

The most active SHFE 2309 lead contract prices closed at 16,230 yuan/mt last evening, down 0.68%. Open interest decreased by 1,390 lots to 81,152 lots from the previous trading day, and trading volumes fell by 10,227 lots to 27,529 lots.

Zinc

LME zinc prices closed up $14.5/mt or 0.58% at $2,323.5/mt on Monday. The trading volume stood at 7,706 lots, and open interest dropped 1,926 lots to 205,000 lots. In July, China imported more than 70,000 mt of refined zinc, while large-scale overseas delivery is continuing. As overseas consumption weakens, market players need to be alert to the possibility of a subsequent pullback.

Overnight, the most active SHFE 2310 zinc contract prices closed at 20,010 yuan/mt, up 70 yuan/mt or 0. 35%. Trading volume stood at 53,000 lots, and open interest increased by 5,095 lots to 102,000 lots. The PBOC adjusted interest rates to drive the real estate market, but the market is still wait-and-see about the subsequent consumption performance. The spot zinc price slightly rose but lacks impetus since longs are cautious. Market players need to pay attention to how the futures market will perform after the cooling of the purchasing sentiment.

Tin

Overnight, SHFE 2309 tin contract price rose gradually after the opening. After reaching a high of 217,470 yuan/mt, it fell slightly and finally closed at 217,300 yuan/mt, up 1.61%.

Spot disocunts in the domestic spot market narrowed to zero or even turned into premiums on August 21 morning. Small brand tin ingots were offered at premiums of 300 yuan/mt, delivery brands were offered at premiums of 300-600 yuan/mt, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt. Yunxi brand was offered at premiums of 800-1,300 yuan/mt, and premiums of 500-700 yuan/mt for imported brands. Although tin prices rebounded on Monday, the trading sentiment was still depressed as many downstream buyers had stocked enough raw materials earlier. Most traders reported no transactions or few shipments.

Nickel

SHFE 2309 nickel contract opened at 166,440 yuan/mt at the night session on August 21, and closed at 166,620 yuan/mt, down 550 yuan/mt. Trading volume dropped by 4,631 lots, and open interest decreased by 7,514 lots. From a macro perspective, the number of weekly initial jobless claims in the United States is lower than the forecast value and the previous value reached 239,000, indicating that the current U.S. economy still has strong resilience, which may affect the Fed’s decision in September, thereby impacting commodity market. On the fundamentals, daily spot market transactions were still weak. The upstream was eager to ship at lower premiums. However, end of restocking cycle and the high SHFE nickel prices made the downstream demand sluggish. Overall, it is expected that the subsequent nickel price will be volatile.