SMM Morning Comment For SHFE Base Metals On July 19

SHANGHAI, July 19 (SMM) –
Copper
Overnight, LME copper opened at $9,540/mt, initially hitting a high of $9,541/mt before declining throughout the session. After a brief rebound, it continued to fluctuate downward, hitting a session low of $9,370.5/mt at the end of the trading session and finally closed at $9,371/mt, down 2.55%. Trading volume reached 38,000 lots, and open interest reached 310,000 lots.
Overnight, the most-traded SHFE copper 2409 contract opened at 77,310 yuan/mt, initially hitting a high of 77,460 yuan/mt before fluctuating downward throughout the session. It hit a session low of 76,600 yuan/mt during the end-of-session consolidation and finally closed at 76,640 yuan/mt, down 2.21%. Trading volume reached 77,000 lots, and open interest reached 176,000 lots.

Macro-wise, the European Central Bank maintained its interest rates, and the likelihood of a US Fed rate cut increased. However, due to the continuous increase in LME Asian inventories and COMEX inventories, and the domestic Third Plenary Session still awaiting policy guidance, market sentiment weakened, and copper prices fell to a three-month low.

Fundamentals-wise, sellers held back cargoes in anticipation of higher premiums, and downstream purchasing sentiment was somewhat suppressed. Overall trading activity only slightly warmed up, and it is expected that copper prices will improve somewhat after a significant decline. As of Thursday, July 18, SMM copper stocks in national major regions decreased by 9,800 mt from Monday to 375,100 mt, and by 13,500 mt from last Thursday, marking the second consecutive week of weekly destocking.

In summary, the market is waiting for guidance, and copper prices are expected to remain low today.

Aluminum
The most-traded SHFE 2409 aluminum contract opened at 19,630 yuan/mt overnight, reaching a high of 19,680 yuan/mt and a low of 19,555 yuan/mt, and closed at 19,575 yuan/mt, down 130 yuan/mt, a decrease of 0.66%. The previous trading day, LME aluminum opened at $2,405.5/mt, reached a high of $2,430/mt, a low of $2,380/mt, and closed at $2,385.5/mt, down $20/mt, a decrease of 0.83%.
Summary: On the macro front, the US dollar index saw its largest single-day gain since June 20, as the Philadelphia Fed Manufacturing Index for July exceeded expectations, indicating signs of a resilient US economy. Domestically, the 20th Third Plenary Session of the CPC Central Committee may bring new positive news. However, the assassination attempt on Trump over the weekend has increased his chances of winning, and the market expects his policies to be favorable to the dollar. Together with the uncertain situation of the Israel-Palestine conflict, this has added uncertainty to the market. Fundamentally, domestic aluminum production is increasing, with some capacity yet to be resumed. Downstream aluminum processing and end-user demand have entered the off-season, with demand in some areas being impacted. The operating rate in the aluminum processing industry is declining, social inventory destocking is weak, and inventory levels are at a three-year high for the same period. Spot discounts may persist in the short term. The aluminum market currently lacks upward drivers, as the fundamentals during the off-season remain bearish. SMM expects short-term aluminum prices to remain weak, with attention needed on macro changes and material-related events that may impact aluminum prices.

Lead
Overnight, LME lead opened at $2,188/mt, fluctuating upward during the Asian session. Entering the European session, LME lead briefly touched a high of $2,207/mt, then retreated and fluctuated downward. Together with the strengthening of the US dollar index, SHFE lead in the night session dipped to $2,149.5/mt and closed at $2,155/mt, down by 1.35%.
Overnight, the most-traded SHFE 2408 lead contract opened at 19,850 yuan/mt. At the beginning of the session, longs took profits and reduced positions, causing SHFE lead to fluctuate downward to 19,765 yuan/mt. After touching the low, it rebounded slightly and closed at 19,850 yuan/mt, down by 0.3%.

Zinc
Overnight, LME zinc opened at $2,849/mt, briefly reaching a high of $2,856.5/mt, then dipping to $2,790.5/mt, and finally closed at $2,809/mt, down $33/mt, a decrease of 1.16%. The trading volume increased to 12,682 lots, and the open interest decreased by 327 lots to 224,000 lots. Overnight, LME zinc recorded three consecutive bearish candlesticks, with the lower Bollinger Band providing support. Overnight, LME inventory continued to decrease by 3,500 mt to 242,600 mt, a drop of 1.42%. The strong signs in the US economy strengthened the dollar, suppressing the advantage of non-ferrous metals, and the price focus of LME zinc shifted downward.

Overnight, the most-traded SHFE 2409 zinc contract opened at 24,370 yuan/mt, briefly reaching a high of 23,610 yuan/mt, then dropping to 23,450 yuan/mt, and finally closed at 23,465 yuan/mt, down 245 yuan/mt, a decrease of 0.91%. The trading volume decreased to 89,671 lots, and the open interest increased by 3,730 lots to 97,041 lots. Overnight, SHFE zinc recorded a small bearish candlestick, with various moving averages above forming resistance and the MACD bearish candlestick expanding. Although the price focus of SHFE zinc shifted downward again, market trading and consumption performed poorly. However, the supply reduction is confirmed, and SMM zinc inventory fell to 191,900 mt, indicating that zinc prices have relatively limited downside room.

Tin
In the night trading session yesterday, the most-traded SHFE tin contract closed at 261,860 yuan/mt, down 7,130 yuan/mt, a decrease of 2.65%. The highest price was 264,300 yuan/mt, and the lowest was 261,080 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 discounts of 200-700 yuan/mt over SHFE 2408 tin contract, versus discounts of 400 to premiums of 500 yuan/mt for delivery brands, premiums of 400-700 yuan/mt for Yunxi brand. The SHFE tin price dropped significantly during the morning session yesterday, leading to high enthusiasm for downstream procurement, with most downstream producers restocking. Overall, the spot market was quite active yesterday.

Nickel
On July 18, Jinchuan nickel was quoted at a premium of 1,600-1,800 yuan/mt, with an average of 1,700 yuan/mt, an increase of 150 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 100 yuan/mt to a premium of 100 yuan/mt, with an average discount and premium of 0 yuan/mt, a decrease of 50 yuan/mt compared to the previous trading day. In the morning, as the market fluctuated downward, spot premiums saw a slight increase. Some traders reported an improvement in the trading atmosphere in the spot market. Nickel briquette prices were 128,300-128,500 yuan/mt, a decrease of 2,700 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 1,045 yuan/mt (nickel sulphate prices were 1,045 yuan/mt higher than nickel briquette prices).