SMM Morning Comment For SHFE Base Metals (September 2)

SHANGHAI, Sep 2 (SMM) –

Copper

US Dollar Index Rose, Oil Prices Were Under Pressure, Copper Prices Declined Last Friday Night [SMM Copper Morning Comment]

Last Friday night, LME copper opened at $9,337.5/mt, with the initial focus slightly rising to a high of $9,355/mt. It then fell throughout the session, hitting a low at $9,225/mt at the end of the session, and finally closed at $9,251.5/mt, a decline of 0.22%. Trading volume reached 17,000 lots, and open interest reached 283,000 lots. Last Friday night, the most-traded SHFE copper 2410 contract opened higher at 74,220 yuan/mt, with the initial focus declining and fluctuating widely. It fell throughout the session, hitting a low at 73,650 yuan/mt at the end of the session, and finally closed at 73,820 yuan/mt, a decline of 0.26%. Trading volume reached 42,000 lots, and open interest reached 166,000 lots. On the macro front, US July PCE data was basically in line with expectations, not supporting a significant 50 basis point rate cut by the US Fed, leading to a rise in the US dollar index. Additionally, according to six OPEC+ sources, OPEC+ may gradually increase oil production starting in October, and Libya is also expected to resume production as early as October. However, a survey showed that China's oil demand was weaker than expected, and global inventories remained high, putting pressure on oil prices. Under the pressure of the rising US dollar index and the decline in oil prices, copper prices fell last Friday night. On the fundamental side, entering the first trading day of September, there are expectations of a traditional peak season in terms of consumption. With the copper price correction, premiums are expected to continue to rise. Additionally, downstream restocking last weekend suggests that inventory is likely to continue to decline this week. Overall, with optimistic consumption expectations, copper prices are expected to have some support.

Aluminum

US PCE Data Cools September Rate Cut Expectations, Inventory Reduction Stalls, SHFE Aluminum Weakly Consolidates [SMM Aluminum Morning Comment]

SMM, Sep 2: Last Friday night, the most-traded SHFE aluminum 2410 contract opened at 19,825 yuan/mt, with a high of 19,840 yuan/mt, a low of 19,750 yuan/mt, and closed at 19,760 yuan/mt, down 90 yuan/mt, a decrease of 0.45%. Last Friday, LME aluminum opened at $2,460/mt, with a high of $2,498/mt, a low of $2,440.5/mt, and closed at $2,446/mt, down $25.5/mt, a decrease of 1.03%.

Summary: On the macro side, US July PCE data met expectations, cooling rate cut expectations. On the fundamentals side, recent power rationing and other disturbances have not had a substantial impact on aluminum production, with the supply side remaining relatively stable. The demand side is entering the traditional peak season, with consumption gradually recovering, and an inventory reduction turning point is expected. In the short term, aluminum prices are expected to still have upside potential, with continued attention needed on macro changes and the sustainability of downstream aluminum consumption.

Lead

With overseas destocking, LME lead recorded a 1.25% increase last Friday [SMM Lead Morning Comment]

Last Friday, LME lead opened at $2,040.5/mt. During the Asian session, LME lead market was sluggish, with prices fluctuating mostly between $2,040-2,050/mt. Entering the European session, LME lead inventory continued to decline, coupled with the strong performance of SHFE lead, LME lead gradually rose to $2,055-2,065/mt, and finally closed at $2067.5/mt, an increase of 1.25%. Last Friday, the most-traded SHFE lead 2410 contract opened at 17,345 yuan/mt. In the early session, supported by the favorable trade-in policy in electric bicycles, SHFE lead once surged to 17,600 yuan/mt. However, due to weak current lead consumption, lead prices fell back after the surge, and finally closed at 17,380 yuan/mt, an increase of 0.49%. Its open interest reached 53,370 lots, an increase of 739 lots compared to the previous trading day.

Zinc

US PCE Index Basically in Line with Expectations, LME Zinc Surges and Falls Back [SMM Zinc Morning Comment]

Last Friday, the US July PCE data was basically in line with expectations; OPEC+ may gradually increase oil production as planned starting in October; large-scale protests erupted in Israel calling for a ceasefire; Japan continues to face a "rice shortage" in many areas, with the government refusing to release reserve rice; the US again delayed the final decision on tariffs related to Chinese goods; NBS: manufacturing PMI dropped back slightly; PBOC: net bond purchases in August 2024 amounted to 100 billion yuan; offshore yuan against the dollar broke through the 7.08 mark.

Last Friday, LME zinc opened at $2,880/mt, briefly fell to $2,876.5/mt at the beginning of the session, then rose as shorts reduced positions, reaching a high of $2,929.5/mt during European trading hours. However, due to insufficient upward momentum, LME zinc fell back, fluctuating around $2,890/mt during the night session, and finally closed up at $2,899.5/mt, an increase of $14/mt or 0.49%. Trading volume decreased to 8,944 lots, and open interest decreased by 3,270 lots to 220,000 lots. Last Friday, LME zinc recorded a bullish candlestick, with the 10-day moving average providing support below and the 5-day moving average forming resistance above. LME zinc inventory decreased by 1,550 mt to 244,775 mt, a drop of 0.63%. The US July PCE data was basically in line with expectations, indicating strong US economic data, slightly cooling rate cut expectations, and causing LME zinc to shift lower.

Last Friday, the most-traded SHFE zinc 2410 contract opened at 24,045 yuan/mt, fluctuated near the daily moving average at the beginning of the session, then rose quickly as shorts reduced positions, reaching a high of 24,065 yuan/mt. Later, as shorts reduced positions again, SHFE zinc shifted lower, fluctuating around 23,900 yuan/mt, and briefly fell to 23,890 yuan/mt, finally closing down at 23,935 yuan/mt, a decrease of 115 yuan/mt or 0.48%. Trading volume decreased to 84,593 lots, and open interest decreased by 1,431 lots to 117,000 lots. Last Friday, the most-traded SHFE zinc contract recorded a bearish candlestick, with the MACD bullish candlestick narrowing. Domestic manufacturing PMI dropped back slightly, and the supply-demand pattern remained weak, but concerns about supply-side production cuts still supported zinc prices, which mainly fluctuated and consolidated.

Tin

The SHFE tin prices slightly declined during the night session, and the spot market transactions were relatively mediocre [SMM Tin Morning Comment]

SMM, September 2: Last Friday, the most-traded SHFE tin contract closed at 261,460 yuan/mt during the night session, down 1,460 yuan/mt, a decrease of 0.56%. The highest price was 264,300 yuan/mt, and the lowest was 260,620 yuan/mt. During the early trading session last Friday, the domestic tin ingot brands' premiums and discounts quoted by trading companies did not change much compared to recent days. Among them, the small brand tin ingot was quoted on par against the SHFE 2409 contract, the delivery brand price was at zero to a premium of 700 yuan/mt against the SHFE 2409 contract, and the Yunnan Tin brand was quoted at a premium of 700-900 yuan/mt against the SHFE 2409 contract. The imported tin brand spot price was quoted at zero against the SHFE 2409 contract. Last week, tin prices slightly rebounded, and some downstream enterprises chose to wait and see as the weekend approached, while some downstream enterprises made small replenishments. Some trading companies had sporadic transactions, and a few trading companies had transactions of around 30 mt. Overall, the spot market transactions were relatively subdued last Friday.

Nickel

Last week, nickel prices generally showed upside potential. By the close of trading on Friday, the most-traded contract price had fallen to 131,510 yuan/mt, up 0.6% WoW. The recent trend in nickel prices has been mainly influenced by expectations of macro interest rate cuts. Reviewing August, at the beginning of the month, nickel prices fell due to pressure from recession concerns triggered by disappointing US employment data. By mid-August, with improvements in US economic data, market confidence in the US Fed achieving a soft landing increased, turning optimistic about a rate cut in September. Data released last Thursday showed that the US Q2 economic growth was better than expected, cooling expectations of a 50 basis point rate cut by the Fed in September, and investors began gradually building positions in preparation for the upcoming rate cut cycle. From a fundamental perspective, the tight supply situation of nickel ore has not eased, and downstream smelting raw material inventories remain low. If there is no progress in subsequent nickel ore replenishment approvals, ore prices may still have upward potential. In the midstream smelting sector, intermediate product production was below expectations, coupled with tight nickel ore supply, keeping the price of 1.2% nickel ore for hydrometallurgy high, leading to increased production costs. Additionally, the decline in the grade and recovery rate of high-grade nickel matte has increased costs, and the impact of Indonesian pyrometallurgical ore has kept the high-grade nickel matte percentage payable at a high level. Overall, prices in the industrial chain are disturbed to varying degrees by information from the Indonesian ore end. Returning to refined nickel, the accelerated commissioning of electro-deposited nickel has led to a significant increase in global refined nickel inventories. Last week, LME inventories increased by 1,000 mt, and domestic social inventories increased by over 2,000 mt. This indicates that in the face of a large supply of refined nickel, demand remains weak. However, since electro-deposited nickel and refined nickel products are the main references for pricing in the industrial chain, and MHP and high-grade nickel matte pricing is linked to LME prices, nickel prices have strong support within the industrial chain. In summary, under the backdrop of interest rate cuts, the combined influence of favourable macro front sentiment and industrial chain cost pressures is expected to maintain a fluctuating trend with upside potential for nickel prices.