SMM Morning Comment For SHFE Base Metals On August 12

SHANGHAI, August 12 (SMM) –

Copper

LME copper opened at $8,923.5/mt overnight, peaked at $8,950/mt in early trading, then fluctuated downward, hitting a low of $8,829.5/mt at the end of the session, and finally closed at $8,831/mt, up 0.25%. Trading volume reached 17,000 lots, and open interest reached 287,000 lots. The most-traded SHFE copper 2409 contract opened at 71,750 yuan/mt overnight, peaked at 72,150 yuan/mt in early trading, then fluctuated downward, hitting a low of 71,330 yuan/mt at the end of the session, and finally closed at 71,510 yuan/mt, up 0.12%. Trading volume reached 39,000 lots, and open interest reached 166,000 lots.

Macro side, the US Fed turned hawkish again. Fed Governor Bowman stated that inflation poses an upside risk, the labour market continues to strengthen, and a cautious stance will be maintained at the September meeting, causing copper prices to fluctuate downward. Meanwhile, the latest assessment from Israeli intelligence is that Iran has decided to directly attack Israel. Additionally, Ukraine has entered Russian territory, and the International Atomic Energy Agency has indicated that the conflict could endanger nuclear power plants, raising geopolitical conflict risks again.

Fundamentals side, from the consumption perspective, copper prices rebounded, and downstream purchasing sentiment significantly improved. Overall, with the US Fed's hawkish remarks and rising geopolitical conflict risks, copper prices are expected to remain weak and volatile.

Aluminum

Market: Last Friday night, the most-traded SHFE 2409 aluminum contract opened at 19,170 yuan/mt. Bears built positions, pushing the price to a high of 19,225 yuan/mt, with the lowest point at 19,085 yuan/mt. It closed at 19,125 yuan/mt, up 45 yuan/mt, an increase of 0.24%. LME aluminum opened at $2,280/mt last Friday, reaching a high of $2,329.5/mt and a low of $2,280/mt. It closed at $2,295/mt, up $11/mt, an increase of 0.48%.

Summary: On the macro front, the Chinese government continues to boost the domestic economy, while the US Fed's interest rate cuts remain uncertain. In the short term, there are still many uncertainties on the macro side. Fundamentally, the domestic operating capacity of aluminum is gradually stabilizing, and the supply is gradually peaking. After entering August, downstream consumption of aluminum showed signs of stabilizing and recovering, and the market is waiting for the turning point in the social inventory of aluminum ingots. In the short term, both bullish and bearish factors are converging on the macro and fundamental sides, and aluminum prices may bottom out.

Lead

Last Friday, LME lead opened at $1,979.5/mt. With US economic data better than expected, market concerns about a recession eased, and LME lead showed a fluctuating upward trend. Meanwhile, LME lead inventories continued to decline, and LME lead gradually reached the $2,000/mt mark, peaking at $2,047.5/mt during the session. By the close, LME lead settled at $2,039.5/mt, up 2.9%.

Last Friday, the most-traded SHFE lead 2409 contract opened at 17,980 yuan/mt. With the accumulation of lead ingots and the expectation of reduced secondary lead production coexisting, the market saw intensified long-short deadlock, and SHFE lead showed a high-level consolidation state. During the session, SHFE lead attempted to break through the 18,000 yuan/mt mark but failed, peaking at 17,995 yuan/mt and finally closing at 17,900 yuan/mt, up 1.24%. Its open interest reached 81,811 lots, an increase of 1,461 lots from the previous trading day.

Zinc

SMM, Aug 12: Last Friday, US Fed Governor Bowman hinted at caution regarding rate cuts; Israeli intelligence assessed that Iran would attack soon; Ukrainian forces advanced into Russian territory, raising concerns about the safety of nuclear power plants; Nasdaq plans to eliminate suspicious companies with stock prices below $1/share; the central bank announced a gradual increase in government bond transactions in open market operations; the central bank issued a significant document supporting the sustainable development of the housing rental industry; China's CPI in July rose 0.5% YoY and 0.5% MoM; the National Development and Reform Commission actively supports the development of key areas in service consumption.

Last Friday, LME zinc opened at $2,645.5/mt, briefly dipped below $2,648/mt at the beginning of the session, then longs increased their positions, and LME zinc fluctuated upwards, reaching a high of $2,776.5/mt during the night session, and finally closed up at $2,740.5/mt, up $97.5/mt, or 3.69%. Trading volume increased to 15,014 lots, and open interest increased by 1,317 lots to 223,000 lots. Last Friday, LME zinc recorded a large bullish candlestick, with LME inventory decreasing by 2,100 mt to 239,925 mt, a drop of 0.87%. Better-than-expected US employment data boosted the market, and macro sentiment was bullish, leading to a rebound in LME zinc. It is expected that LME zinc will fluctuate today.

Last Friday, the most-traded SHFE zinc 2409 contract opened at 22,845 yuan/mt. At the beginning of the session, shorts exited the market, and SHFE zinc's focus shifted upwards, fluctuating near the average daily line, reaching a high of 22,960 yuan/mt during the session, and finally closed up at 22,890 yuan/mt, up 285 yuan/mt, or 1.26%. Trading volume decreased to 100,000 lots, and open interest decreased by 815 lots to 74,441 lots. Last Friday, SHFE zinc recorded a bullish candlestick, with macro sentiment being bullish, and domestic inventory continued to decrease, strengthening positive sentiment. It is expected that SHFE zinc will fluctuate and consolidate today.

Tin

Last Friday night, SHFE 2409 tin contract fell to 256,050 yuan/mt, up 2,560 yuan/mt, an increase of 1.01%, with a high of 259,600 yuan/mt and a low of 255,250 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 1,000-1,500 yuan/mt over SHFE 2409 tin contract, versus premiums of 800-1,500 yuan/mt for delivery brands, premiums of 1,000-1,700 yuan/mt for Yunxi brand. Last Friday, tin prices moved rangebound, with downstream companies cautious due to high prices, resulting in limited purchasing. Overall, the spot market was relatively moderate last Friday.

Nickel

Last week, nickel prices saw a significant rebound on Friday. By the close on Friday, the most-traded SHFE nickel contract recorded 130,900 yuan/mt. Last week, nickel prices were mainly affected by macro sentiment, with fundamentals somewhat limiting the price increase. On the macro side, the early-week decline in nickel prices was influenced by the US July unemployment rate and non-farm payrolls data. The data showed an unemployment rate of 4.3% and an increase of 114,000 in non-farm payrolls, sparking market concerns about a recession and causing a sharp drop in overall market prices. However, by Thursday, data from the US Department of Labor indicated that initial jobless claims for the week were 233,000, lower than the expected 240,000 and the previous value of 249,000. This data suggested an improvement in the job market, alleviating recession fears and driving a rebound in commodity and the US dollar index. Fundamentally, SMM data showed that national refined nickel production in July was about 28,900 mt, up 8.2% WoW and 33.87% YoY. Both domestic and overseas inventories accumulated. The domestic market saw inventory increases due to rising stocks and the arrival of overseas nickel plates; overseas inventory grew mainly as domestic and Indonesian electro-deposited nickel entered LME Asian warehouses as futures inventory. Inventory pressure limited the upward space for nickel prices. Demand side, spot market transactions were sluggish last week, mainly because downstream customers had overstocked during the previous nickel price decline, with some extreme cases stocking up until September, thus preemptively exhausting Q3 demand. Therefore, nickel prices had limited support from the demand side. Overall, nickel prices are expected to fluctuate upward this week under the influence of macro sentiment, but supply pressure from fundamentals will limit the upward space for nickel prices.