SMM Morning Comment For SHFE Base Metals August 25

SHANGHAI, Aug 25 (SMM) –

Copper

LME copper prices opened at $8388.5/mt and closed at $8361/mt overnight, with the high-end of $8408/mt and the low-end of $8357/mt, a decline of 1.1%. Trading volume was 13,000 lots and open interest stood at 279,000 lots. The most active SHFE 2309 copper contract prices opened at 68990 yuan/mt and finished at 68960 yuan/mt overnight, with the high-end of 69490 yuan/mt and the low-end of 68920 yuan/mt, down 0.45%. Trading volume was 8,000 lots, and open interest stood at 122,000 lots. On the macro front, initial jobless claims in the United States recorded 230,000 in the week ending August 19, the lowest in three weeks, indicating that the labour market remained tight. Market caution grew ahead of Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole Symposium. In terms of fundamentals, yesterday in east China, as many traders needed to purchase standard-quality copper with front-month invoice. Spot quotes were relatively firm, and the futures market rose. It is necessary to pay attention to the purchasing willingness of downstream processing companies. In south China, a large quantity of warrants were offered for sale, resulting in higher inventories than the same period last year despite a drop for 6 consecutive days. The downstream buyers purchased as needed, lowering spot quotes. In terms of consumption, copper prices are expected to have downward space, and most of the market players are in a wait-and-see state. Copper prices are expected to remain strong as the market is awaiting the Fed officials’ speech.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,575 yuan/mt, with the lowest and highest prices at 18,525 yuan/mt and 18,635 yuan/mt before closing at 18,600 yuan/mt, down 15 yuan/mt or 0.08% from the previous trading day. LME aluminium opened at $2,177/mt on Thursday with its high and low at $2,182.5/mt and $2,154/mt respectively before closing at $2,154.5/mt, a decrease of $20.50/mt or 0.94% from the previous trading day.

On the macro side, August PMI data of Europe and the US was lower than expected and US index rebounded, causing industrial products’ prices under pressure. Market participants are waiting for clues from the Jackson Hole Conference on Friday. In the fundamentals, aluminum market maintains a state of simultaneous increase in supply and demand. The proportion of molten aluminum output remained high while aluminum ingot production was limited. The influx of imported aluminum ingots after the import window opened and the release of Southwest capacity may impede destocking progress, but inventory accumulation amount won’t be large. Overall, the imbalance between supply and demand is not prominent. Aluminum prices may fall back after digesting positive macro sentiment next week.

Lead

LME lead prices opened at $2185/mt and closed at $2172.5/mt last evening, down 0.8%, with the high-end of $2194/mt and the low-end of $2170/mt. Open interest increased by 2583 lots from the previous trading day to 127,000 lots, and trading volumes fell 1098 lots to 6005 lots. The mos traded SHFE 2310 lead contract opened at 16470 yuan/mt and fell 0.09% to 16435 yuan/mt, after briefly hitting the highest point at 16480 yuan/mt and the lowest point at 16410 yuan/mt. Open interest increased by 1165 lots from the previous trading day to 117,000 lots, and trading volumes fell 77280 lots to 28190 lots.

Zinc

Overnight, LME zinc prices opened at $2381/mt and closed up $13/mt or 0.99% at $2386.5/mt. The trading volume was 8561 lots, and open interest decreased 697 lots to 202,000 lots. The U.S. labor market is tight and supports the resilience of the economy. The market’s expectations for the Fed’s interest rate hikes to be suspended or converted to rate cuts have weakened. The U.S. dollar index has strengthened, and the performance of long funds has weakened.

Last evening, the most active SHFE 2310 zinc contract prices opened at 20460 yuan/mt and closed at 20540 yuan/mt, up 130 yuan/mt or 0.64%. Trading volume stood at 62,000 lots, and open interest gained by 1975 lots to 102,000 lots. SHFE zinc outperformed LME zinc. With tight supply, the performance of long funds is strong. However, with the successive arrivals of domestic zinc and the influx of imports, the support from fundamentals to zinc prices will weaken.

Tin

Overnight, SHFE 2309 tin contract price gradually rose slightly after the opening. After reaching a relatively high price of 216,010 yuan/mt, it fell back and finally closed at 216,680 yuan/mt, down 0.56%.

Spot premiums and discounts changed little on August 24 morning. Small brand tin ingots were offered at a discount of 200 to a small premium of 300 yuan/mt, delivery brands were offered at premiums of 200-600 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 discounts of 500-700 yuan/mt for imported brands. The purchasing sentiment of downstream enterprises remained sluggish yesterday. Only a few traders said that the transaction was acceptable with shipment of around 30-50 mt. Most upstream enterprises purchased on demand and inquirers were limited yesterday.

Nickel

SHFE 2309 nickel contract opened at 169,900 yuan/mt at the night session on August 24, and closed at 168,800 yuan/mt, down 280 yuan/mt. Trading volume dropped by 19,647 lots, and open interest decreased by 7,695 lots.

From a macro perspective, the current strengthening US Treasury yields and the US dollar index suppressed the prices of commodities and also affected the non-ferrous metals sector. In the fundamentals, yesterday’s spot market transactions remained depressed. The upstream was eager to ship at lower premium, but the downstream demand was weak due to accumulated inventory from last round of purchases and high SHFE price. Overall, nickel price is expected to be volatile.