SMM Morning Comment For SHFE Base Metals On September 20

SHANGHAI, September 20 (SMM) –

Copper

LME copper opened at $9,543.5/mt overnight. After a slight initial fluctuation, it peaked at $9,572.5/mt and then declined to a low of $9,477/mt. It later rebounded slightly and closed at $9,539/mt, up 1.48%. The trading volume was 28,000 lots, and open interest was 271,000 lots. The most-traded SHFE copper 2410 contract opened at 75,910 yuan/mt, peaked at 76,000 yuan/mt initially, then declined to a low of 75,430 yuan/mt, and finally consolidated to close at 75,660 yuan/mt, up 1.03%. The trading volume was 36,000 lots, and open interest was 136,000 lots. Macro-wise, following the long-anticipated US Fed rate cut, the US dollar index declined. Additionally, data released by the US Department of Labor on Thursday showed that initial jobless claims unexpectedly recorded 219,000 last week, the lowest since the week of May 18, 2024, reducing recession expectations and boosting copper prices. On the fundamentals, after the most-traded contract shifted to 2410, downstream restocking enthusiasm was high, with overall demand relatively strong. However, supply was tight in some regions, causing downstream concerns about future arrivals. As of Thursday, September 19, SMM copper inventory in major regions stood at 192,600 mt, down 24,300 mt WoW, marking the 11th consecutive week of destocking, with destocking accelerating. The inventory hit a new post-Chinese New Year low. Overall, copper prices are expected to fluctuate at highs today.

Aluminum

Futures market: The most-traded SHFE aluminum 2411 contract opened at 20,105 yuan/mt overnight, reaching a high of 20,135 yuan/mt and a low of 20,040 yuan/mt, and closed at 20,080 yuan/mt, up 120 yuan/mt or 0.6%. Yesterday, LME aluminum opened at $2,521.5/mt, hit a high of $2,569/mt and a low of $2,506/mt, and closed at $2,540/mt, up $18/mt or 0.71%.

Summary: On the macro front, the US Fed's rate cut was implemented as expected, with the cut slightly exceeding market expectations, causing overseas metals to jump initially and then pull back. Domestically, the market is widely focused on the new round of LPR adjustments, with macro sentiment improving and benefiting the metals market. Fundamentals side, domestic aluminum market supply slightly increased, supported by the September-October peak season, with downstream consumption remaining positive. Aluminum social inventory entered a destocking cycle, showing good performance in the supply-demand balance for aluminum in September and October. Additionally, disruptions in the alumina supply and tight spot supply continued to support alumina prices to fluctuate upward, providing some drive from the cost side for aluminum. Overall, with the short-term favourable macro atmosphere and solid fundamentals, the aluminum market is expected to fluctuate upward in the short term.

Lead

Overnight, LME lead opened at $2,032.5/mt, briefly touched a low of $2,022/mt during the Asian session, and then rebounded. Due to a weaker US dollar index, shorts reduced their positions during the European session, causing LME lead to fluctuate upward, reaching a high of $2,090.5/mt, and finally closing at $2,082.5/mt, up 2.49%.

Overnight, the most-traded SHFE lead 2410 contract opened at 16,610 yuan/mt, briefly touched a low of 16,560 yuan/mt at the beginning of the session, and then rebounded, boosted by LME lead, reaching a high of 16,705 yuan/mt. It then fluctuated around 16,660 yuan/mt and closed at 16,675 yuan/mt, up 1.65%.

Macro-wise, the initial jobless claims in the US for the week ending September 14 recorded 219,000, the lowest since the week ending May 18, 2024. The offshore yuan rose to around 7.06 against the US dollar.

On the spot fundamentals, the first working day after the Mid-Autumn Festival saw the delivery of the SHFE lead 2409 contract. Due to the delivery factors of holders, the arrival of lead ingots in social warehouses increased during the holiday, pushing the overall inventory level to a one-month high. Meanwhile, during the Mid-Autumn Festival, many lead smelters continued production as usual, while downstream enterprises generally took 1-2 days off, leading to a temporary lack of lead consumption and a continuous rise in lead ingot inventory. Additionally, the recent simultaneous decline in supply and demand for lead ingots resulted in a sluggish spot market. For the future trend of lead prices, attention should be paid to the extent of downstream stocking before the National Day holiday.

Zinc

Overnight, LME zinc opened at $2,880/mt. At the beginning of the session, short positions increased, pushing LME zinc down to $2,848/mt. Subsequently, long positions entered at the lows, driving LME zinc to fluctuate upward, with the focus shifting to around $2,930/mt during European trading hours. During this period, it reached a high of $2,945/mt. Entering the night session, LME zinc briefly fell but was supported by the daily moving average. By the end of the session, the focus returned to around $2,930/mt, and it finally closed at $2,939.5/mt, an increase of $55.5/mt or 1.92%. Trading volume decreased to 11,574 lots, and open interest increased by 978 lots to 243,000 lots. Overnight, LME zinc recorded a large bullish candlestick, with the 10/20-day moving averages providing support. Overnight, LME inventory increased by 4,950 mt to 256,800 mt, an increase of 1.97%. LME inventory continued to rise. The US Fed's rate cut overnight led to a broad rise in non-ferrous metals, with LME zinc fluctuating at highs.

Overnight, the most-traded SHFE zinc 2411 contract opened at 24,100 yuan/mt. At the beginning of the session, short positions increased, pushing SHFE zinc down along the daily moving average, with the focus shifting to 23,890 yuan/mt. Subsequently, long positions entered and short positions closed, pushing SHFE zinc back to the daily moving average. It finally closed at 23,925 yuan/mt, an increase of 150 yuan/mt or 0.63%. Trading volume decreased to 45,221 lots, and open interest increased by 648 lots to 95,752 lots. Overnight, SHFE zinc recorded a bearish candlestick with no upper shadow, with various moving averages providing support. Overnight, driven by the overseas market, SHFE zinc fluctuated at highs. Coupled with positive domestic policy expectations, market sentiment improved. However, the current price has reached a resistance level, and further upward movement requires additional stimulus.

Tin

In the night session yesterday, the most-traded SHFE tin contract closed at 259,080 yuan/mt, up 2,930 yuan/mt, an increase of 1.14%. The highest price was 260,280 yuan/mt, and the lowest was 257,900 yuan/mt.

During the morning session yesterday, trading companies' quotes for various domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at premiums of 0-500 yuan/mt against SHFE 2410 contract, delivery brand tin ingots were quoted at premiums of 200-700 yuan/mt against SHFE 2410 contract, and Yunnan Tin brand was quoted at premiums of 200-800 yuan/mt against SHFE 2410 contract. Imported tin brands were quoted at discounts of 700-200 yuan/mt against SHFE 2410 contract. The sharp rise in tin prices during the morning session yesterday dampened the purchasing enthusiasm of downstream and end-user companies, with only a few downstream companies restocking as needed. Most trading companies saw scattered transactions. Overall, the spot market transactions were relatively sluggish yesterday.

Nickel

On September 19, Jinchuan nickel was quoted at a premium of 1,800-2,000 yuan/mt, with an average of 1,900 yuan/mt, up 50 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 200-100 yuan/mt, with an average of 150 yuan/mt, up 25 yuan/mt compared to the previous trading day. On the morning of September 18, the futures market fluctuated upward, and the spot premium narrowed overall compared to the previous working day. The price of nickel briquette was 121,850-122,950 yuan/mt, up 375 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,509 yuan/mt (nickel sulphate prices were 4,509 yuan/mt higher than nickel briquette prices).