SMM Morning Comment For SHFE Base Metals On July 31

SHANGHAI, July 31 (SMM) –

Copper

LME copper opened at $8,954/mt overnight, experienced wide fluctuations initially and hit a session low of $8,915/mt. It then rebounded, reaching a session high of $9,046.5/mt, and finally closed at $9,031/mt, up 0.07%. Trading volume reached 19,000 lots, and open interest reached 291,000 lots. Overnight, the most-traded SHFE 2409 copper contract opened at 73,040 yuan/mt and initially fluctuated downward, hitting a session low of 72,740 yuan/mt. It then rebounded, reaching a session high of 73,580 yuan/mt, and finally closed at 73,510 yuan/mt, up 0.04%. Trading volume reached 70,000 lots, and open interest reached 181,000 lots. Macro front, several Japanese media outlets reported late at night that the Bank of Japan would raise interest rates by 15 basis points at the meeting ending today, exceeding market expectations. Meanwhile, as the market awaited, the US Fed's spokesperson indicated that a rate cut in July was almost impossible, but changes in the Fed's statement should be closely monitored, which might suggest an increased possibility of a rate cut in September. Although copper prices opened lower overnight due to overseas inventories and market uncertainties, they ultimately closed slightly higher. Fundamentals side, copper prices continued to run weak, but downstream trading sentiment did not significantly rebound for fear of falling prices. Supply side, the inflow of imported copper is expected to decrease in early August. Overall, attention should be paid to the Bank of Japan's interest rate decision today. If it raises rates as expected, copper prices may be boosted.

Aluminum

Market: The most-traded SHFE aluminum 2409 contract opened at 18,840 yuan/mt overnight, reaching a high of 19,040 yuan/mt and a low of 18,790 yuan/mt, and closed at 19,010 yuan/mt, up 60 yuan/mt, or 0.32%. The previous trading day, LME aluminum opened at $2,249.5/mt, hit a high of $2,253/mt and a low of $2,209.5/mt, and closed at $2,238/mt, down $9/mt, or 0.40%.

Summary: On the macro side, global market liquidity is gradually increasing, and regional conflict remain unpredictable. 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 are in 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, some material prices are at risk of falling. 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

Overnight, LME lead opened at $2,038.5/mt, fluctuated downward during the Asian session, dipped to $2,030/mt in the European session, and after a slight consolidation, closed at $2,035.5/mt, down $27/mt, a decrease of 1.31%.

Overnight, the most-traded SHFE 2409 lead contract opened at 18,460 yuan/mt, slightly consolidated at the beginning of the session, and then climbed to a high of 18,970 yuan/mt. It slightly fell to around 18,800 yuan/mt, and closed at 18,835 yuan/mt, up 145 yuan/mt, an increase of 0.78%.

Zinc

Overnight, LME zinc opened at $2,641/mt. After the opening, LME zinc fluctuated widely around the average daily line, reaching a high of $2,651/mt during the midday session. It then retreated and fell to a low of $2,615/mt. At the end of the trading session, LME zinc rose again and closed at $2,650.5/mt, up $11.5/mt, or 0.44%. The trading volume increased to 9,714 lots, and the open interest rose by 3,355 lots to 221,000 lots. LME zinc inventory decreased by 2,125 mt to 238,425 mt, a drop of 0.88%. Overnight, LME zinc recorded a bullish candlestick, with the 5-day moving average forming resistance above. Although the US June JOLTs job openings were higher than expected and the previous value was revised upwards, indicating that the labour market remained resilient, the market's optimistic sentiment towards a US Fed rate cut in September persisted, and LME zinc continued to fluctuate.

Overnight, the most-traded SHFE zinc 2409 contract opened at 22,450 yuan/mt. At the beginning of the session, SHFE zinc fell to 22,360 yuan/mt, then fluctuated upwards above the average daily line, reaching a high of 22,685 yuan/mt. Subsequently, SHFE zinc retreated to near the average daily line, and at the end of the trading session, it rose again and closed at 22,650 yuan/mt, up 155 yuan/mt, or 0.69%. The trading volume increased to 97,354 lots, and the open interest decreased by 1,423 lots to 92,536 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the lower Bollinger Bands providing support. Recently, the non-ferrous metals market prices has shown a weak trend. However, on July 30, the Central Committee of the Communist Party of China held a meeting, proposing to expand domestic demand with a focus on boosting consumption. Market sentiment was somewhat lifted, and SHFE zinc prices center rose. Attention should be paid to the subsequent performance of domestic consumption.

Tin

In the night session yesterday, the most-traded SHFE tin futures contract closed at 244,360 yuan/mt, down by 70 yuan/mt, a decrease of 0.03%, with a high of 244,980 yuan/mt and a low of 237,830 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 500-1,500 yuan/mt over SHFE 2409 tin contract, versus premiums of 500-1,500 yuan/mt for delivery brands, and premiums of 700-1,100 yuan/mt for Yunxi brand. Tin prices fluctuated downward yesterday, with a slight rebound in the night session. Most downstream producers made small restocking purchases. Overall, the spot market remained active yesterday.

Nickel

On July 30, Jinchuan nickel was quoted at a premium of 1,900-2,000 yuan/mt, with an average of 1,950 yuan/mt, down 200 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 0-300 yuan/mt, with an average of 150 yuan/mt, down 225 yuan/mt compared to the previous trading day. In the morning, the market fluctuated downward, and spot premiums fell significantly as the contract that quotes are based on changed (the current futures structure is contango). Nickel briquette prices were 125,600-125,900 yuan/mt, an increase of 450 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 2,659 yuan/mt (nickel sulphate prices were 2,659 yuan/mt higher than nickel briquette prices).