SMM Morning Comment For SHFE Base Metals On September 30

Published: Sep 30, 2024 10:00

Source: SMM

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Last Friday, LME copper opened at $10,012.5/mt.

SHANGHAI, September 30 (SMM) –

Copper

Last Friday night, LME copper opened at $10,012.5/mt, initially declined to a low of $9,946/mt, then rose again to a high of $10,049.5/mt during the session, fluctuated downward at the end, and finally closed at $9,973.5/mt, a drop of 1.15%. Trading volume reached 24,000 lots, and open interest was 295,000 lots. Last Friday night, the most-traded SHFE copper 2411 contract opened at 78,350 yuan/mt, initially rose to a high of 78,820 yuan/mt, then fluctuated downward, maintained wide fluctuations at the end, touching a low of 78,190 yuan/mt during the fluctuations, and finally closed at 78,280 yuan/mt, a drop of 0.41%. Trading volume was 53,000 lots, and open interest was 175,000 lots. Macro side, the US core PCE month-on-month rate for August slightly dropped back to 0.1%, below expectations, marking the lowest since May. After the data release, traders believed the likelihood of the US Fed cutting interest rates by 50 basis points in November was slightly higher than a 25 basis point cut. Meanwhile, another major policy was implemented domestically. On September 29, the People's Bank of China, together with the Financial Regulatory Administration, introduced four financial support policies for real estate, and the four major state-owned banks announced adjustments to existing personal housing loan rates, benefiting copper prices. Supply side, a large amount of imported copper is expected to arrive during the National Day holiday. Demand side, processing enterprises have mostly completed pre-holiday stocking, and with copper prices rising, new orders are significantly suppressed. Consumption weakens, which may lead to inventory accumulation after the holiday. In summary, the likelihood of a 50 basis point interest rate cut by the US Fed has increased, and domestic favorable real estate policies have been introduced again, which is expected to significantly drive copper prices.

Aluminum

Futures market: Last Friday night, the most-traded SHFE aluminum 2411 contract opened at 20,355 yuan/mt, with a high of 20,530 yuan/mt, a low of 20,330 yuan/mt, and closed at 20,480 yuan/mt, up 125 yuan/mt, an increase of 0.61%. LME aluminum on the previous trading day opened at $2,618/mt, with a high of $2,659/mt, a low of $2,514/mt, and closed at $2,633/mt, up $11.5/mt, an increase of 0.44%.

Summary: On the macro front, following the US Fed's interest rate cut, the domestic central bank has announced four major monetary policies, including cutting interest rate, lowering the reserve requirement ratio, and reducing the mortgage rate on existing home loans, indicating the government's recognition of the urgency to eliminate deflation risks and support economic growth, creating favorable macro environment. On the fundamentals, the domestic aluminum market supply has slightly increased. With the National Day holiday approaching, considering the downstream production schedule during the holiday, there is an expectation of a temporary weakening in domestic downstream consumption. After the holiday, domestic aluminum social inventory may slightly accumulate. However, in the medium and long term, considering the downstream production schedule, October consumption remains in the industry peak season, with demand primarily stable. Overall, given the short-term favorable macro atmosphere and stable fundamentals, the aluminum market is expected to hover at highs in the short term.

Lead

Last Friday night, LME lead opened at $2,135.5/mt. During the Asian session, it rose slightly to a high of $2,142.5/mt and then consolidated. In the European session, it was pressured by the daily moving average, fluctuating downward to a low of $2,107.5/mt, and finally closed at $2,111.5/mt, down $25.5/mt, a decrease of 1.19%.

Last Friday night, the most-traded SHFE lead 2411 contract opened at 16,855 yuan/mt. After opening, it fluctuated upward to a high of 16,990 yuan/mt, then fell under pressure to a low of 16,815 yuan/mt, and finally closed at 16,795 yuan/mt, down 70 yuan/mt, a decrease of 0.41%.

Macro side, China's economic stimulus policies were intensively introduced, along with RRR cuts and interest rate cuts by the PBoC, leading to sustained positive sentiment. In the lead market, further attention is needed on the transmission of policies such as the trade-in of electric vehicles and actual market consumption changes. Due to the National Day holiday, there was only one trading day for SHFE lead this week, and downstream restocking has ended, with spot transactions likely limited to nearby purchases for rigid demand. According to the SMM survey, during the National Day holiday, many downstream enterprises plan to take a break, while lead smelters will mostly maintain normal production. The risk of inventory accumulation in the lead market is high after the holiday, with few pre-sales during the holiday. Post-holiday market changes are more closely watched. After the release of favorable macro sentiment, lead prices may return to fundamentals.

Zinc

Last Friday, LME zinc opened at $3,090/mt. Initially, it fluctuated widely along the daily moving average. Later, with increased short positions, it dipped to $3,067/mt during European trading hours and then continued to fluctuate widely along the daily moving average. With increased long positions, it peaked at $3,111/mt during the night session, then fluctuated downward, and finally closed down at $3,075/mt, a decrease of $19/mt, or 0.61%. Trading volume decreased to 12,027 lots, and open interest increased by 7,525 lots to 248,000 lots. Last Friday, LME zinc recorded a bearish candlestick. LME inventory decreased by 1,800 mt to 253,250 mt, a drop of 0.71%. Due to the US core PCE MoM rate in August hitting its lowest since May, market sentiment weakened, and capital took profits and exited, causing LME zinc to shift downward. LME zinc is expected to fluctuate today.

Last Friday, the most-traded SHFE zinc 2411 contract opened at 24,910 yuan/mt. Initially, with increased long positions, it fluctuated upward, peaking at 25,115 yuan/mt. Later, with increased short positions, it shifted downward to 24,990 yuan/mt for consolidation, finally closing down at 24,985 yuan/mt, a decrease of 5 yuan/mt, or 0.02%. Trading volume decreased to 79,747 lots, and open interest increased by 363 lots to 117,000 lots. Last Friday, SHFE zinc recorded a bullish candlestick. On the macro front, a series of favorable domestic policies still supported SHFE zinc, but actual consumption effects needed time to transmit. SHFE zinc faces upward pressure, and it is expected to fluctuate today.

Tin

Last Friday, the most-traded SHFE tin contract closed at 263,110 yuan/mt in the night session, up 5,960 yuan/mt, an increase of 2.32%.

During last Friday's morning session, trading companies' quotes for 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 the SHFE 2410 contract, delivery brand prices at premiums of 200-700 yuan/mt, and Yunnan Tin brand at premiums of 600-900 yuan/mt. Imported tin brands were quoted at discounts of 400-200 yuan/mt against the SHFE 2410 contract. Last Friday morning, tin prices fluctuated at low levels, prompting some downstream and end-users to actively restock. Some trading companies completed transactions of about one truckload, while others completed 2-3 truckloads. Overall, last Friday's spot market remained active.

Nickel

Last week, nickel prices continued to fluctuate upward, with macro boosting factors still present. Macro side, there were reports that the domestic government is considering injecting 1 trillion yuan into large state-owned banks, possibly through the issuance of special government bonds. This news is seen as a potential policy boost for the real estate industry, influencing nickel prices to fluctuate upward. Fundamentally, in late September, the anticipated progress on Indonesia's domestic trade laterite nickel ore RKAB quota approval has not materialized, maintaining cost support on the fundamentals. If the RKAB quota is fulfilled next month and exceeds expectations in volume, it may lead the futures market to trade on this marginal supply easing sentiment. On the other hand, although nickel sulphate prices in the new energy sector have rebounded slightly, the main reason does not align with the potential improvement in downstream demand, leaning more towards some companies' necessity for restocking. The market does not hold an optimistic outlook on demand expectations. In the short term, despite some positive policy sentiment, the fundamentals continue to weaken. In this context, SHFE nickel is expected to operate in the range of 125,000-130,000 yuan/mt this week.

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Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM's internal database model. They are for reference only and do not constitute decision-making recommendations.

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