SMM Morning Comment For SHFE Base Metals On July 23

SHANGHAI, July 23 (SMM) –

Copper

Overnight, LME copper opened and peaked at $9,269/mt, hitting a low of $9,172/mt during the session, and closed at $9,230/mt, down 0.58%. Trading volume reached 23,000 lots, and open interest reached 301,000 lots. Overnight, the most-traded SHFE 2409 copper contract opened at 75,390 yuan/mt, peaking at 75,530 yuan/mt in the early session, then declining to a low of 75,170 yuan/mt, and closed at 75,510 yuan/mt, down 0.93%. Trading volume reached 49,000 lots, and open interest reached 182,000 lots. Macro side, the International Copper Study Group stated a global surplus of refined copper, increasing market concerns. Bulls continuously closed positions and exited, leading to a continuous decline in copper prices. Fundamentals side, copper prices continuously fell, intensifying the wait-and-see sentiment among downstream buyers, and market transactions did not show a sustained increase. As of July 22, SMM copper stocks in major regions of China decreased by 16,400 mt compared to last Thursday, reaching 358,700 mt, marking the third consecutive week of destocking. Price side, under market concerns, copper prices were under pressure.

Aluminum

Market: Overnight, the most-traded SHFE aluminum 2409 contract opened at 19,360 yuan/mt, reaching a high of 19,400 yuan/mt and a low of 19,300 yuan/mt, and closed at 19,360 yuan/mt, down 90 yuan/mt, a decrease of 0.46%. The previous trading day, LME aluminum opened at $2,345/mt, reached a high of $2,364.5/mt, a low of $2,296/mt, and closed at $2,314.5/mt, down $35.5/mt, a decrease of 1.51%.

Summary: On the macro front, expectations for a rate cut in Europe have strengthened, and China has lowered the one-year and five-year LPR, resulting in ample market liquidity. On the fundamentals side, domestic aluminum supply continues to grow, with a significant YoY increase in net imports of primary aluminum. However, downstream aluminum processing and end-user demand have entered the off-season, and the operating rate in the aluminum processing industry has hit a low. Social inventory is at a three-year high for the same period, and spot discounts are expected to persist. In the short term, aluminum fundamentals remain relatively stable, continuing to exert downward pressure on aluminum prices, while macro fluctuations are relatively large. It is crucial to focus on the impact of macro changes on aluminum prices in the short term.

Lead

Overnight, LME lead opened at $2,127/mt and continued the weakness from the previous trading day, with the trading focus shifting downward throughout the day. Especially during the European session, LME lead inventory increased by nearly 1,000 mt, and LME lead expanded the decline, falling below $2,100/mt, reaching a low of $2,080/mt, the lowest since April 3, 2024, until it finally closed at $2,087.5/mt, down 1.6%.

Overnight, the most-traded SHFE 2409 lead contract opened at 19,030 yuan/mt, with intensifying expectations of domestic supply resumption. Bears entered the market in large numbers, causing SHFE lead to plummet significantly. SHFE lead at one point fell below 19,000 yuan/mt, reaching a low of 18,970 yuan/mt. By the night session, some bears exited after taking profits, and SHFE lead returned to above 19,000 yuan/mt, finally closing at 19,040 yuan/mt, down 1.27%. The open interest reached 120,000 lots, an increase of 6,979 lots from the previous trading day.

Zinc

Overnight, LME zinc opened at $2,784/mt. At the beginning of the session, LME zinc fluctuated near the average daily line, reaching a high of $2,800/mt. During the European trading hours, bulls reduced their positions, causing LME zinc to decline, hitting a low of $2,712/mt during the night session. It then rebounded to around $2,730/mt and consolidated, eventually closing lower at $2,734.5/mt, down $39.5/mt or 1.42%. Trading volume increased to 15,468 lots, and open interest decreased by 846 lots to 222,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME zinc inventory increasing by 5,500 mt to 245,775 mt, an increase of 2.29%. Fundamentals show that the increase in LME inventory, together with ongoing market concerns about overall non-ferrous metal consumption, led to a general decline in non-ferrous metals. LME zinc is expected to trade weakly today.

Overnight, the most-traded SHFE zinc 2409 contract opened at 23,130 yuan/mt, hitting the intraday low at the opening. Subsequently, shorts reduced their positions, causing SHFE zinc to rise, reaching a high of 23,350 yuan/mt at the end of the trading session. It eventually closed lower at 23,325 yuan/mt, down 105 yuan/mt or 0.45%. Trading volume decreased to 88,782 lots, and open interest increased by 843 lots to 96,341 lots. Overnight, SHFE zinc recorded a bullish candlestick. The central bank cut interest rates, with both the one-year and five-year LPR reduced by 10 basis points, and domestic inventory continued to decrease. SHFE zinc opened low and moved higher, and it is expected to fluctuate today.

Tin

In the night session yesterday, the most-traded SHFE tin contract closed at 250,990 yuan/mt, down 7,010 yuan/mt, a decrease of 2.72%, with a high of 253,580 yuan/mt and a low of 249,600 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 0-300 yuan/mt over SHFE 2408 tin contract, versus premiums of 500-800 yuan/mt for delivery brands and premiums of 1,000 yuan/mt for Yunxi brand. Yesterday morning, SHFE tin prices dropped significantly, and some traders' inventories were cleared out. Although the spot market's tin ingot premiums and discounts increased, it did not dampen the purchasing enthusiasm of downstream producers. Overall, the spot market transactions remained active yesterday.

Nickel

On July 22, Jinchuan nickel was at a premium of 1,900-2,000 yuan/mt, with an average of 1,950 yuan/mt, an increase of 250 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a premium of 0-100 yuan/mt, with an average of 50 yuan/mt, an increase of 50 yuan/mt compared to the previous trading day. In the morning, as the market fluctuated downward, spot premiums saw a slight increase. Nickel briquette prices were 126,800-127,000 yuan/mt, a decrease of 1,700 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 2,645 yuan/mt (nickel sulphate prices were 2,645 yuan/mt higher than nickel briquette prices).