SMM Morning Comment For SHFE Base Metals (September 3)

SHANGHAI, Sep 3 (SMM) –

Copper

Delayed Inflow of Imported Copper, Market Awaits US Employment Data Guidance [SMM Copper Morning Comment]

LME copper opened at $9,180/mt overnight, initially declining to a low of $9,148.5/mt, then rebounding to a high of $9,217.5/mt by the end of the session, closing at $9,217.5/mt, down 0.37%. Trading volume reached 13,000 lots, and open interest was 280,000 lots. Overnight, the most-traded SHFE copper 2410 contract opened at 73,500 yuan/mt, fluctuated widely during the session, hitting a low of 73,400 yuan/mt, and then climbed to a high of 73,820 yuan/mt, finally closing at 73,810 yuan/mt, up 0.01%. Trading volume reached 28,000 lots, and open interest was 166,000 lots. On the macro side, as the market reduced expectations for a significant rate cut by the US Fed, it awaited the release of this week's employment data. The US dollar index hit a two-week high, putting pressure on copper prices. Although the PMI of Eurozone countries overall rebounded, it remained below the expansion threshold. Amid demand concerns, copper prices were weak overnight. On the fundamentals side, copper prices remained weak entering September. However, driven by the peak season, consumption showed some improvement, while arrivals decreased, leading to delays in the inflow of imported copper, which may become evident by the end of this week or early next week. As of Monday, September 2, SMM copper stocks in major regions fell sharply by 14,500 mt to 264,600 mt compared to last Thursday, continuing the drop trend. However, total stocks were still 167,900 mt higher YoY compared to 96,700 mt last year. In summary, with narrowed expectations for a Fed rate cut and the domestic Caixin Manufacturing PMI rising above the expansion threshold, the market is awaiting guidance from US inflation and employment data. Copper prices are expected to remain low before the data release.

Aluminum

Demand Improves as Peak Season Arrives, Inventory Turning Point May Have Appeared [SMM Aluminum Morning Comment]

SMM, Sep 3: Overnight, the most-traded SHFE aluminum 2410 contract opened at 19,505 yuan/mt, reaching a high of 19,580 yuan/mt and a low of 19,485 yuan/mt, and closed at 19,565 yuan/mt, up 15 yuan/mt, or 0.08%. On Monday, LME aluminum opened at $2,449.5/mt, hit a high of $2,456.5/mt and a low of $2,411/mt, and closed at $2,424/mt, down $22/mt, or 0.90%.

Summary: On the macro side, the US July PCE data met expectations, cooling rate cut expectations. On the fundamentals side, recent disturbances such as power rationing have not had a substantial impact on aluminum production, keeping the supply side relatively stable. On the demand side, the traditional peak season has arrived, consumption is gradually recovering, and the inventory turning point may have appeared. It is expected that aluminum prices will still have upside potential in the short term, with continued attention needed on macro changes and the sustainability of downstream aluminum consumption.

Lead

Lead Prices Continue Downward Trend, Awaiting Consumption Realization [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,044.5/mt. During the Asian session, it was dragged down by weak SHFE lead, showing a downside potential. Entering the European session, LME lead inventories declined again, leading to a rebound in LME lead, which reached a high of $2,070/mt. In the latter part of the trading session, the market was in a tug-of-war between bulls and bears, and LME lead finally closed at $2,062/mt, down 0.27%.

Overnight, SHFE lead warehouse warrant inventories increased. The most-traded SHFE lead 2410 contract opened lower at 17,090 yuan/mt. With lead consumption expectations still present, SHFE lead rebounded from its lows and rose back above 17,200 yuan/mt, finally closing at 17,240 yuan/mt, down 0.69%. Its open interest reached 56,460 lots, an increase of 419 lots from the previous trading day.

Macro aspects: The State Council issued opinions to promote high-quality development of service trade, supporting the development of cross-border trade financing and refinancing in RMB, expanding the cross-border use of RMB in the service trade sector, and fully implementing the negative list for cross-border service trade. China's Caixin Manufacturing PMI for August rebounded to 50.4, returning to expansion, with new orders recovering. Additionally, Volkswagen is considering closing its factory in Germany for the first time in history to further cut costs.

Fundamentals: The "trade-in" policy for electric bicycles and cars still requires a certain transmission period to benefit lead consumption. Currently, lead consumption is weak, market supply is relatively ample, and downstream enterprises have more purchasing options. Therefore, lead ingot inventory depletes slowly. Even with some smelters undergoing maintenance, social inventory of lead ingots continues to rise. In the short term, lead prices will continue to have downside potential, awaiting subsequent consumption realization.

Zinc

Macro Sentiment Turns Bearish, LME Zinc Focus Shifts Downward [SMM Zinc Morning Comment]

SMM, Sep 3: Overnight, Biden stated that Netanyahu has not done enough to reach a hostage agreement; Hamas hinted that if the Israeli army attempts a rescue, they will execute the hostages; an explosion occurred in Kabul, the capital of Afghanistan; the UN mediated the Libyan central bank crisis; a Saudi supertanker was attacked in the Red Sea; China's Caixin Manufacturing PMI for August returned to expansion territory; the central bank stated that the standing lending facility rate has played the role of the upper limit of the interest rate corridor; China State Shipbuilding Corporation plans to merge with China Shipbuilding Industry Corporation.

Overnight, LME zinc opened at $2,880.5/mt. At the beginning of the session, LME zinc briefly rose to a high of $2,890/mt, then shorts increased their positions, causing LME zinc to fluctuate downward during the night session, reaching a low near $2,820.5/mt. It then fluctuated and consolidated at $2,835/mt, finally closing down at $2,833.5/mt, a decrease of $66/mt or 2.28%. Trading volume decreased to 8,465 lots, and open interest increased by 18 lots to 220,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME inventory decreasing by 1,550 mt to 243,225 mt, a drop of 0.63%. The market reduced its expectations for the US Fed's rate cut in September, coupled with manufacturing data exacerbating concerns, causing LME zinc's focus to shift downward. Attention can be paid to tonight's US ISM Manufacturing PMI data.

Overnight, the most-traded SHFE zinc contract 2410 opened at 23,610 yuan/mt. At the beginning of the session, bulls increased their positions, causing SHFE zinc's focus to shift upward and fluctuate near the daily moving average, reaching a high of 23,755 yuan/mt. Later, bulls reduced their positions, causing SHFE zinc's focus to shift downward and fluctuate near 23,680 yuan/mt, reaching a low of 23,600 yuan/mt. It then fluctuated and consolidated along the daily moving average, finally closing up at 23,730 yuan/mt, an increase of 100 yuan/mt or 0.42%. Trading volume decreased to 54,811 lots, and open interest increased by 502 lots to 113,000 lots. Overnight, SHFE zinc recorded a bullish candlestick. China's Caixin Manufacturing PMI for August returned to expansion territory, and there are still certain expectations for the traditional "September-October peak season" consumption, with zinc prices mainly fluctuating and consolidating.

Tin

SHFE tin prices fluctuated rangebound during the night session; spot market transactions heated up yesterday [SMM Tin Morning Comment]

SMM, Sep 3: During the night session yesterday, the most-traded SHFE tin contract closed at 256,320 yuan/mt, down 3,900 yuan/mt, a decrease of 1.50%. The highest price was 257,380 yuan/mt, and the lowest was 254,640 yuan/mt. During the early session yesterday, trading companies' quotes for various domestic tin ingot brands' premiums and discounts did not change much compared to recent days. Small brand tin ingot quotes for the SHFE 2410 contract were +0 to +300 yuan/mt, delivery brand prices were +400 to +800 yuan/mt for the SHFE 2410 contract, Yunnan Tin brand quotes were +800 yuan/mt for the SHFE 2410 contract, and imported tin brand spot quotes were -400 yuan/mt for the SHFE 2409 contract. With tin prices dropping significantly yesterday, most downstream companies chose to make small replenishments based on orders. Most trading companies transacted 20-30 mt, while a few traded 3-6 trucks. Overall, the spot market transactions were quite active yesterday.

Nickel

On September 2, Jinchuan nickel was quoted at a premium of 800-1,000 yuan/mt, with an average of 900 yuan/mt, up 100 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 500-100 yuan/mt, with an average discount of 300 yuan/mt, up 100 yuan/mt from the previous trading day. The futures market saw a downward trend with increased positions, but the spot market premiums fluctuated slightly compared to the previous working day. The nickel briquette prices were 125,700-125,900 yuan/mt, down 3,900 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 2,245 yuan/mt (nickel sulphate prices were 2,245 yuan/mt higher than nickel briquette prices).