SMM Morning Comment For SHFE Base Metals On July 29

SHANGHAI, July 29 (SMM) –

Copper

Last Friday night, LME copper opened at $9,132.5/mt, initially peaking at $9,147/mt, then trending downward to a session low of $9,076/mt. By the end of the trading session, it rebounded but then fell again, hitting a session low of $9,071/mt, and finally closed at $9,073/mt, down 0.2%. Trading volume reached 17,000 lots, and open interest was 295,000 lots. Overnight, the most-traded SHFE 2409 copper contract opened at 74,250 yuan/mt, initially fluctuating upward to a high of 74,540 yuan/mt, then trending downward to a session low of 74,120 yuan/mt. By the end of the trading session, it rebounded and maintained slight fluctuations, finally closing at 74,410 yuan/mt, up 0.42%. Trading volume reached 37,000 lots, and open interest was 175,000 lots. Macro side, the US core PCE price index for June recorded a YoY increase of 2.6%, higher than expected. The market is betting that the US Fed will start cutting interest rates in September. Meanwhile, under high inflation pressure, the US economy has begun to slow down. With expectations of an economic recession and weak fundamentals, copper prices remained low. Fundamentals side, as copper prices stopped falling, downstream stocking sentiment slightly warmed up, and consumption may continue to recover this week. Overall, overseas inventories have increased for two consecutive weeks, and there are expectations of an overseas economic recession. At the same time, there is a lack of confidence in the recovery of domestic consumption. Copper prices are expected to remain weak.

Aluminum

Market: Last Friday, the most-traded SHFE 2409 aluminum contract opened at 19,290 yuan/mt, reaching a high of 19,395 yuan/mt and a low of 19,280 yuan/mt, and closed at 19,370 yuan/mt, up 120 yuan/mt, or 0.62%. The previous trading day, LME aluminum opened at $2,275/mt, hit a high of $2,298/mt and a low of $2,270/mt, and closed at $2,281/mt, up $3.5/mt, or 0.15%.

Summary: On the macro side, global market liquidity is becoming increasingly abundant, and regional conflicts are intensifying again. 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 the effects of some stimulus measures have yet to be seen. 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 continue to exert 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

Last Friday, LME lead opened at $2,035/mt. During the Asian session, it consolidated around the intraday moving average. Entering the European session, LME lead fluctuated upward and reached a high of $2,083.5/mt. Before the close, it slightly declined and closed at $2,076/mt, up $40.5/mt, an increase of 1.99%.

Last Friday night, the most-traded SHFE 2409 lead contract opened at 18,665 yuan/mt. It initially declined to a low of 18,485 yuan/mt. Subsequently, it was boosted by the strengthening of LME lead and climbed to a high of 18,745 yuan/mt. After a slight consolidation, it closed at 18,725 yuan/mt, down 50 yuan/mt, a decrease of 0.27%.

Zinc

Last Friday, LME zinc opened at $2,684.5/mt. In the early session, LME zinc rose to a high of $2,704/mt, then fell back to near the average daily line. By midday, LME zinc dropped to a low of $2,648/mt, then rebounded to near the average daily line. At the end of the trading session, LME zinc fluctuated around the average daily line and finally closed lower at $2,663/mt, down $29/mt, a decrease of 1.08%. Trading volume reduced to 9,095 lots, and open interest increased by 635 lots to 220,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with the 5-day average daily line forming resistance above. LME zinc inventory decreased by 1,625 mt to 242,350 mt, a drop of 0.67%. The US core PCE price index for June recorded 2.6%, slightly higher than the previous value. US inflation data showed moderate growth, while US consumer spending in June remained flat compared to the previous value. These data supported expectations for a US Fed rate cut in September, temporarily easing the decline in LME zinc prices.

Last Friday, the most-traded SHFE zinc 2409 contract opened at 22,600 yuan/mt. In the early session, SHFE zinc fell to a low of 22,575 yuan/mt. After the opening, it rose to a high of 22,735 yuan/mt, then fell back to near the average daily line. Subsequently, it fluctuated above the average daily line and finally closed higher at 22,720 yuan/mt, up 120 yuan/mt, an increase of 0.53%. Trading volume reduced to 59,801 lots, and open interest increased by 217 lots to 93,660 lots. Last Friday, SHFE zinc recorded a bullish candlestick, with the lower Bollinger Bands providing support. Market concerns about demand persisted, but the continued reduction in zinc concentrate TC in August both domestically and internationally, along with the ongoing tightness at the mine, continued to support zinc prices. Amid the tug-of-war between bulls and bears, SHFE zinc prices fluctuated.

Tin

In the night session last Friday, the most-traded SHFE tin contract closed at 248,210 yuan/mt, up by 2,000 yuan/mt, an increase of 0.81%. The highest price was 248,600 yuan/mt, and the lowest was 245,680 yuan/mt.

Last Friday, 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 500-600 yuan/mt over SHFE 2408 tin contract, versus premiums of 800-1,400 yuan/mt for delivery brands, and premiums of 1,200-1,600 yuan/mt for Yunxi brand. Last Friday morning, SHFE tin prices fluctuated upwards, but overall prices remained at relatively low levels recently, with downstream purchasing enthusiasm still high. Overall, the spot market remained active.

Nickel

Last week, SHFE nickel continued its downward trend, down approximately 2.67% WoW. By the close on Friday, SHFE nickel recorded 126,700 yuan/mt. Last week, nickel prices were influenced by both fundamentals and macro factors, experiencing wide fluctuations. Macro side, in Q2 2024, the US real GDP grew at a 2.8% annualized pace, higher than the expected 2.0% and significantly rebounding from 1.4% in Q1. This indicates a strong recovery in the US economy in Q2. Alongside economic growth, inflationary pressures eased. The PCE price index grew by 2.6% in Q2, lower than 3.4% in Q1. The core PCE price index, which excludes food and energy prices and is the US Fed's most important inflation measure, grew by 2.9%, also lower than the previous value of 3.7%. Multiple data indicate the market expectation for the US Fed to make its first rate cut in September has increased. It is necessary to continuously monitor the US Fed's actions and the upcoming FOMC meeting next Wednesday. Fundamentally, last week saw a hot trading atmosphere in the spot market, with downstream concentrated procurement occurring as prices fell to yearly lows. However, it is important to note that this was merely essential restocking due to downstream conservative purchasing at high nickel prices earlier, rather than a genuine recovery in end-user demand. Therefore, as nickel prices entered a downward channel, end-user demand did not significantly increase. Spot market transactions may change in the future. In summary, the macro side has not yet provided a clear direction, but positive sentiment has emerged. However, the supply-demand mismatch persisted, with high downstream short-term procurement sentiment but significantly shrinking orders.