SMM Morning Comment For SHFE Base Metals (September 13)

SHANGHAI, Sep 13 (SMM) –

Copper

US Dollar Index Declined, Copper Prices Rose Overnight [SMM Copper Morning Comment]

LME copper opened at $9,247.5/mt overnight, quickly reached a high of $9,260/mt in early trading, then fell to an intraday low of $9,172.5/mt, and finally fluctuated rangebound to close at $9,207.5/mt, up 0.76%. Trading volume was 19,000 lots, and open interest was 272,000 lots. The most-traded SHFE copper 2410 contract opened at 74,030 yuan/mt overnight, hit 74,130 yuan/mt in early trading, then fluctuated downward to an intraday low of 73,720 yuan/mt before rebounding, and finally closed at 74,010 yuan/mt, up 0.8%. Trading volume was 31,000 lots, and open interest was 151,000 lots. Macro aspect, the latest U.S. PPI data was mixed. The U.S. PPI and core PPI month-on-month rates were 0.2% and 0.3% respectively, both exceeding expectations but with previous values revised lower. Initial jobless claims in the U.S. rose moderately to 230,000 last week. Interest rate futures indicate a 39% probability that the US Fed will cut rates by 50 basis points next week. The US dollar index declined, benefiting copper prices. Additionally, Hurricane Francine disrupted U.S. oil production, boosting international oil prices and subsequently leading to higher copper prices. Fundamentally, as copper prices rose yesterday, downstream buyers were largely cautious, primarily restocking as needed, which led to a decrease in demand. However, according to SMM statistics, inventories significantly decreased during the week. As of Thursday, September 12, copper stocks in major regions across China fell by 14,000 mt WoW to 217,000 mt, marking a decrease of 39,000 mt compared to last Thursday. This represents the 10th consecutive week of destocking, with the destocking speed accelerating. The inventory set a new post-Chinese New Year low. Stocks declined in all regions compared to Monday and stood 116,000 mt higher than 100,000 mt in the same period last year. Price-wise, copper prices are expected to fluctuate upward today.

Aluminum

The European Central Bank's Second Rate Cut This Year; Increased Pace of Aluminum Ingot Inventory Reduction [SMM Aluminum Morning Meeting Summary]

SMM, Sep 13: Overnight, the most-traded SHFE aluminum 2410 contract opened at 19,750 yuan/mt, with the highest at 19,785 yuan/mt, the lowest at 19,710 yuan/mt, and closed at 19,745 yuan/mt, an increase of 20 yuan/mt, up by 0.10%. On Thursday, LME aluminum opened at $2,377.5/mt, reached a high of $2,427.5/mt, a low of $2,374.5/mt, and closed at $2,414/mt, up $34.5/mt, an increase of 1.45%.

Summary: On the macro front, a US Fed rate cut in September is almost certain, the European Central Bank has cut rates again, and China continues to expand its consumption market, driving demand. On the fundamentals side, there has been a reduction in overseas supply, coupled with the arrival of the peak consumption season, leading to a revival in demand and continuous inventory reduction. In the short term, positive factors from both the macro and fundamentals side converge, which may cause aluminum prices to fluctuate upward. However, it is still necessary to observe the sustainability of the consumption recovery and changes in supply capacity in the future.

Lead

Lead Prices Rebounded, Downstream Panic Eased, Spot Market Trading Gradually Became Active [SMM Lead Morning Comment]

Overnight, LME lead opened at $1,995/mt. It consolidated around the daily moving average during the Asian session before rising slightly. Entering the European session, it fluctuated around $2,030/mt, touched a high of $2,037/mt, and finally closed at $2,033.5/mt, up $44/mt or 2.21%.

Overnight, the most-traded SHFE lead 2410 contract opened at 16,790 yuan/mt. After initially touching a low of 16,735 yuan/mt, it rose to consolidate around 16,800 yuan/mt and finally closed at 16,810 yuan/mt, up 160 yuan/mt or 0.96%.

Macro-wise, market expectations for a US Fed rate cut persist, and the US dollar index retreated, which boosted non-ferrous metals overall, leading to a significant rise in LME lead. On the domestic fundamentals side, during the previous lead price decline, losses expanded for secondary lead smelters. In some regions, the ex-factory price of secondary refined lead once rose to a premium of 50-200 yuan/mt over the SMM 1# lead average price, resulting in a price inversion with primary lead. As lead prices stabilized and rebounded, downstream companies' rigid demand shifted back to primary lead, mainly to deplete smelters' in-plant inventory. After the futures lead strengthened, warehouse warrant transactions turned sluggish. As the Mid-Autumn Festival approaches, some downstream companies plan to take a 1-2 day holiday, leading to a short-term lack of consumption. SMM survey indicates that most downstream battery companies have not built up inventory before the Mid-Autumn Festival, with primary stocking actions likely concentrated before the National Day. Future attention should focus on the actual production recovery of secondary refined lead and the operating conditions of downstream companies during the holidays. In the short term, lead ingot inventory may still accumulate.

Zinc

Domestic Zinc Ingot Stock Continues to Deplete; SHFE Zinc Surges Higher [SMM Morning Comment]

SMM, Sep 13: Gold Continues to Reach New All-Time Highs; US PPI and core PPI MoM both exceeded expectations but previous values were revised down; US initial jobless claims moderately rose to 230,000 last week; The ECB cut rates for the second time this year and lowered GDP growth projections for the next three years while inflation expectations remained unchanged; Around 42% of crude oil production facilities and 53% of natural gas production facilities in the Gulf of Mexico are currently shut down; Both Ukraine and Russia reported that Moscow has begun a counteroffensive in the Kursk region; The US public debt interest payments exceeded $1 trillion for the first time in FY 2024; President Xi Jinping emphasized that all regions and departments should focus on economic tasks in late Q3 and Q4 to achieve the annual economic and social development objectives; Minister of Commerce Wang Wentao will travel to Europe for consultations on the EU's anti-subsidy investigation into Chinese electric vehicles.

Overnight, LME zinc opened at $2786/mt, fluctuated upward after the opening, dipped to $2782/mt initially, and then soared to $2870/mt at the close, ultimately closing up at $2865/mt, a rise of $68/mt, or 2.43%. Trading volume decreased to 13,347 lots, while open interest increased by 410 lots to 236,000 lots. LME zinc recorded a bullish candlestick overnight, with support from the middle Bollinger Band; LME zinc stocks decreased by 300 mt to 232,425 mt, a drop of 0.13%. Market expectations of a US Fed rate cut remained strong, easing concerns over economic slowdown and driving zinc prices higher, with LME zinc continuing to rise.

Overnight, the most-traded SHFE zinc 2410 contract opened at 23,645 yuan/mt, dipped to 23,585 yuan/mt after the opening, and then surged to 23,800 yuan/mt at the close, finally closing up at 23,800 yuan/mt, a rise of 230 yuan/mt, or 0.98%. Trading volume decreased to 54,876 lots, while open interest increased by 189 lots to 81,240 lots. Overnight, the SHFE zinc also recorded a bullish candlestick, with support from the 40-day moving average. SMM reported that the social inventory of zinc ingots fell by 4,200 mt to 113,400 mt WoW on Thursday, indicating ongoing stock depletion. Additionally, the rise in ferrous metals prices supported a slight resumption in galvanizing production this week, coupled with macroeconomic optimism, driving SHFE zinc higher as well.

Tin

SHFE Tin Prices Consolidated at High Levels During Night Session, Spot Market Reacted Weakly [SMM Tin Morning Comment]

SMM, September 13: During the night session yesterday, the most-traded SHFE tin contract closed at 256,530 yuan/mt, up 2,660 yuan/mt, an increase of 1.05%. The highest price was 256,970 yuan/mt, and the lowest was 254,510 yuan/mt. During the morning session yesterday, the quotes for various domestic tin ingot brands by trading companies saw little change compared to recent days. The small-brand tin ingots were quoted at premiums of 0-500 yuan/mt against the SHFE 2410 contract, delivery brands were quoted at premiums of 200-700 yuan/mt against the SHFE 2410 contract, and Yunnan Tin brand was quoted at premiums of 200-800 yuan/mt against the SHFE 2410 contract. Imported tin brands in the spot market were quoted at discounts of 200-300 yuan/mt against the SHFE 2410 contract. Tin prices fluctuated upward during the morning session yesterday, with a few downstream enterprises placing low-price orders yesterday, while most used previous inventory for production. Most trading companies saw sporadic transactions. Overall, the spot market transactions were weak yesterday.

Nickel

On September 12, Jinchuan nickel was quoted at a premium of 1,800-2,000 yuan/mt, with an average of 1,900 yuan/mt, down 150 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 300 yuan/mt to a premium of 100 yuan/mt, with an average discount of 100 yuan/mt, unchanged from the previous trading day. On the morning of September 12, the futures market had a slight pullback, but spot premiums overall slightly narrowed compared to the previous working day. Nickel briquette prices were 121,900-122,200 yuan/mt, up 2,700 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,927 yuan/mt (nickel sulphate prices were 4,927 yuan/mt higher than nickel briquette prices).