SMM Morning Comment For SHFE Base Metals On July 26

Published: Jul 26, 2024 10:05 (GMT+8)

Source: SMM

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Overnight, LME copper opened at $9,000/mt, dipping to $8,996.5/mt at the beginning of the session, then fluctuating upwards to a high of $9,169.5/mt, and closed at $9,091/mt, up 0.45%.

SHANGHAI, July 26 (SMM) –

Copper

Overnight, LME copper opened at $9,000/mt, dipping to $8,996.5/mt at the beginning of the session, then fluctuating upwards to a high of $9,169.5/mt, and closed at $9,091/mt, up 0.45%. Trading volume reached 29,000 lots, and open interest was 297,000 lots. Overnight, the most-traded SHFE 2409 copper contract opened at 73,550 yuan/mt, dipping to 73,380 yuan/mt at the beginning of the session, then reaching a high of 74,450 yuan/mt, and finally closed at 74,150 yuan/mt, up 0.58%. Trading volume reached 91,000 lots, and open interest was 177,000 lots. Macro side, US Q2 GDP recorded 2.8%, higher than the expected 2%. Interest rate futures continued to price in bets on the US Fed starting to cut rates in September, and the US dollar index declined, which was bullish for copper prices. Additionally, the market focuses on the US PCE index to be released tonight. Fundamentals side, due to the continuous decline in copper prices, downstream producers still adopted a wait-and-see stance, with market purchases mainly for essential replenishment. As of Thursday, July 25, SMM copper stocks in major regions across China decreased by 1,200 mt from Monday to 357,500 mt, marking the third consecutive week of destocking, but up 258,300 mt YoY from 99,200 mt. Price-wise, copper prices are expected to have limited downward room.

Aluminum

Market: Overnight, the most-traded SHFE aluminum 2409 contract opened at 19,130 yuan/mt, reaching a high of 19,240 yuan/mt and a low of 19,090 yuan/mt, and closed at 19,180 yuan/mt, up 5 yuan/mt, an increase of 0.02%. The previous trading day, LME aluminum opened at $2,298/mt, hit a high of $2,303/mt and a low of $2,266/mt, and closed at $2,277.5/mt, down $17.5/mt, a decrease of 0.76%.

Summary: On the macro side, China lowered deposit rates, and Canada's rate cut was in line with expectations, leading to increasing global market liquidity. Regional conflict remains volatile. On the fundamentals side, domestic aluminum supply continues to grow, with a significant YoY increase in net imports of primary aluminum. Downstream aluminum processing and end-user demand have entered the off-season, with the operating rate in the aluminum processing industry hitting a low point, and some stimulus measures have yet to show effect. Social inventory is at a three-year high for the same period, and spot discounts persist. On the cost side, there is also a risk of collapse. In the short term, aluminum fundamentals are relatively stable, continuously exerting downward pressure on aluminum prices, while macro fluctuations are relatively large. In the short term, attention should be paid to the impact of macro changes on aluminum prices.

Lead

Overnight, LME lead opened at $2,037/mt and continued its stepwise downward trend, hitting a low of $2,026/mt, a new low since April 3, 2024. During the session, LME lead twice attempted to regain $2,050/mt but failed, eventually closing at $2,035.5/mt, down 0.15%, marking its ninth consecutive decline.

Overnight, the most-traded SHFE 2409 lead contract opened at 18,720 yuan/mt. The large supply divergence between domestic delivery and non-delivery products intensified market speculation, leading to significant volatility. SHFE lead initially dipped to 18,630 yuan/mt, and then gradually fluctuated upwards, briefly touching 18,910 yuan/mt but failing to hold. It finally closed at 18,810 yuan/mt, down 0.27%. The open interest increased by 3,223 lots to 119,000 lots compared to the previous trading day.

Zinc

Overnight, LME zinc opened at $2,674.5/mt. In the early session, LME zinc fluctuated widely along the average daily line and dipped to $2,632.5/mt during European trading hours. As shorts reduced their positions in the night session, LME zinc quickly surged to a high of $2,692/mt and closed at $2,692/mt, up $17.5/mt or 0.65%. Trading volume increased to 12,538 lots, and open interest decreased by 54 lots to 219,000 lots. Overnight, LME zinc recorded a bullish candlestick, with LME inventory decreasing by 1,575 mt to 243,975 mt, a drop of 0.64%. US GDP and PCE data were lower-than-expected, causing the dollar to decline. The slowdown in inflation kept expectations for a US Fed rate cut in September unchanged, leading to a rebound in LME zinc. It is expected that LME zinc will fluctuate today.

Overnight, the most-traded SHFE zinc 2409 contract opened at 23,050 yuan/mt. In the early session, funds entered the market, pushing SHFE zinc upward, with its price center shifting to around 22,740 yuan/mt. During this period, it reached a high of 22,780 yuan/mt and finally closed at 22,760 yuan/mt, up 190 yuan/mt or 0.84%. Trading volume decreased to 95,358 lots, and open interest increased by 1,191 lots to 97,801 lots. Overnight, SHFE zinc recorded a bullish candlestick. Domestic inventory continued to decrease, together with lower-than-expected US economic data, causing the dollar to decline and non-ferrous metals prices to strengthen. It is expected that SHFE zinc will consolidate today.

Tin

In the night trading session yesterday, the main SHFE tin contract closed at 246,730 yuan/mt, down 420 yuan/mt, a decrease of 0.17%. The highest price was 247,480 yuan/mt, and the lowest was 242,020 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 500-1,000 yuan/mt for Yunxi brands, premiums of 1,000-1,200 yuan/mt for Yunxi brand. SHFE tin prices continued to decline during the morning session yesterday, and downstream producers' demand for tin ingots was lower than the previous day. Overall, the spot market remained active yesterday.

Nickel

On July 25, Jinchuan nickel was quoted at a premium of 2,100-2,200 yuan/mt, with an average of 2,150 yuan/mt, an increase of 250 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 50 yuan/mt to a premium of 200 yuan/mt, with an average premium of 75 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 123,000-123,200 yuan/mt, a decrease of 3,550 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 6,445 yuan/mt (nickel sulphate prices were 6,445 yuan/mt higher than nickel briquette prices).

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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