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SMM Morning Comment For SHFE Base Metals On June 28

iconJun 28, 2024 09:52
Overnight, LME copper opened at $9,560/mt, initially fluctuating upwards to a high of $9,610/mt, then declining throughout the session, hitting a low of $9,496/mt near the end of trading, and finally closing at $9,514/mt.

SHANGHAI, June 28 (SMM) –
Overnight, LME copper opened at $9,560/mt, initially fluctuating upwards to a high of $9,610/mt, then declining throughout the session, hitting a low of $9,496/mt near the end of trading, and finally closing at $9,514/mt. Trading volume reached 16,000 lots, and open interest was 326,000 lots. Overnight, the most-traded SHFE copper 2408 contract opened at 78,080 yuan/mt, initially reaching a high of 78,340 yuan/mt, then fluctuating downwards, hitting a low of 77,630 yuan/mt near the end of trading, and finally rebounding slightly to close at 77,910 yuan/mt. Trading volume reached 59,000 lots, and open interest was 179,000 lots.
On the macro front, the final annualized quarterly rate of the US core PCE price index for Q1 recorded 3.7%, higher than the previous value and market expectations of 3.6%. However, the final quarterly rate of actual personal consumption expenditures for Q1 was significantly revised down to 1.5%, lower than the previous value and market expectations of 2%. The US dollar index fluctuated, impacting copper prices.
On the fundamentals side, current demand remains weak. After two weeks of destocking, inventories have increased again. As of this Thursday, copper inventories in major regions nationwide increased by 12,500 mt from Monday to 399,100 mt. In terms of prices, under the fundamentals of high inventory and weak demand, copper prices face significant upward pressure.

Overnight, the most-traded SHFE aluminum contract 2408 opened at 20,235 yuan/mt, reached a high of 20,285 yuan/mt, a low of 20,175 yuan/mt, and closed at 20,195 yuan/mt, down 65 yuan/mt, a decrease of 0.32%. On the previous trading day, LME aluminum opened at $2,506.5/mt, reached a high of $2,519.5/mt, a low of $2,486/mt, and closed at $2,496/mt, down $16.54/mt, a decrease of 0.66%.
Summary: From a macro perspective, the US Fed's core PCE price index performed better than expected in the first quarter, indicating that inflationary pressures still exist. On the other hand, personal consumption expenditures grew at a rate lower than expected, creating a contradiction between inflation data and consumption data, which brings uncertainty to future policy-making. Domestically, the policy of trade-in continues to gain momentum, and new real estate policies are being introduced across various regions to further stimulate domestic consumption demand. On the fundamentals, domestic aluminium capacity remains at a high level. Boosted by a rebound in aluminium billet conversion margins, the proportion of aluminium liquid alloying increased, and the production of ingots decreased. Due to the pullback in aluminium prices, daily inventory of aluminium ingots dropped slightly, but social inventory of aluminium ingots remains at a historically high level for the same period, posing some resistance to the destocking. According to the SMM survey, new orders in industries such as photovoltaics and automobiles are not ideal, and the operating rate of aluminium processing enterprises will remain sluggish. Amid a weak macro front, together with the expectation of weakening downstream consumption, market sentiment remains cautious. SMM expects aluminium prices to swing on a soft note in the short term.

Overnight, LME lead opened at $2,192.5/mt, initially rising and then falling during the Asian session, reaching a high of $2,202.5/mt. Entering the European session, due to the continued strength of the US dollar, LME lead remained under pressure, fluctuating downwards, hitting a low of $2,176.5/mt near the end of trading, and finally closing at $2,187/mt, down 0.21%.
Overnight, the most-traded SHFE lead 2408 contract opened with a gap up at 19,275 yuan/mt, initially touching a low of 19,190 yuan/mt, then boosted by LME lead, rising to a high of 19,335 yuan/mt. After a pullback, it fluctuated downwards, and finally rebounded slightly to close at 19,280 yuan/mt, up 0.1%.


Overnight, LME zinc opened at $2,935/mt, initially dipping slightly along the average daily line, then bulls entered the market at low levels, pushing LME zinc upwards to a high of $2,961.5/mt. Entering the night session, LME zinc rose again, but the upward momentum was insufficient, hitting a low of $2,918/mt, and finally slightly pulling back to close flat at $2,944/mt. Overnight, LME zinc recorded three consecutive days of gains, with the 40-day moving average forming resistance. Overnight, LME zinc inventory decreased by 250 mt to 239,600 mt, a drop of 0.1%. A series of weak economic data overnight increased the likelihood of a US interest rate cut, but the downward revision of US economic growth kept zinc prices fluctuating.

Overnight, the most-traded SHFE zinc 2408 contract opened at 24,215 yuan/mt, initially rising along the average daily line to a high of 24,340 yuan/mt, then slightly dipping to 24,260 yuan/mt. Subsequently, bulls took profits and exited the market, accelerating the decline of SHFE zinc to a low of 24,140 yuan/mt, and finally closing lower at 24,210 yuan/mt, down 5 yuan/mt, a drop of 0.02%. Trading volume decreased to 93,667 lots, and open interest increased by 1,119 lots to 92,635 lots. On the fundamentals side, the expectation of smelter production cuts supports high zinc prices, but overall performance in the off-season is poor, and social inventories have increased again, indicating insufficient upward momentum for zinc prices.

In the night trading session yesterday, the closing price of the most-traded SHFE tin contract was 268,700 yuan/mt, up 2,140 yuan/mt, an increase of 0.80%. The highest price was 271,070 yuan/mt, and the lowest was 267,650 yuan/mt.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0 yuan/mt over SHFE 2407 tin contract, versus premiums of 0-500 yuan/mt for delivery brands and premiums of 600-800 yuan/mt for Yunxi brand. Tin prices fluctuated upward, and downstream companies were less willing to purchase. Overall, the spot market transactions were not as active as the previous day. Yesterday, SHFE tin warrants decreased by 137 mt to 14,915 mt, while LME tin inventory remained flat at 4,780 mt.

On June 27, Jinchuan nickel was at a premium of 1800-2000 yuan/mt, with an average of 1900 yuan/mt, down 50 yuan/mt compared to the previous trading day. Russian nickel was at a discount of 200 yuan/mt to a premium of 100 yuan/mt, with an average discount of 50 yuan/mt, flat compared to the previous trading day. In the morning, the market fluctuated at recent lows. The shortage of electro-deposited nickel in the spot market continued, and the premiums and discounts for various brands remained firm. Nickel briquette prices were 133,500-133,800 yuan/mt, up 1,300 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,105 yuan/mt (nickel sulphate prices were 4,105 yuan/mt lower than nickel briquette prices).

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