SMM Morning Comment For SHFE Base Metals (August 19)

SHANGHAI, August 19 (SMM) -

Copper

Futures: LME copper opened at $9,737.5/mt overnight. Prices initially fluctuated downward to test $9,722/mt before fluctuating considerably and finally closing at the day's high of $9,752/mt, down 0.08%. Trading volume reached 11,000 lots with open interest at 267,000 lots. The most-traded SHFE copper 2509 contract opened at 78,840 yuan/mt overnight, initially testing 78,890 yuan/mt before fluctuating rangebound to 78,760 yuan/mt, then consolidating sideways to finally close at 78,840 yuan/mt, down 0.23%. Trading volume stood at 11,000 lots with open interest at 145,000 lots. Macro-wise, Ukraine sought $100 billion in arms purchases in exchange for security guarantees, Trump advanced plans for Russia-Ukraine leader talks and trilateral negotiations, Hamas accepted a new Gaza ceasefire proposal, while China's State Council focused on stimulating consumption and stabilizing the property market.

Prices: On the macro front, no new factors affected copper prices, and subsequent attention should focus on the actual progress of related events. Supply side, concentrated arrivals of imported copper drove inventory growth, with suppliers actively offloading goods ensuring ample imported supply. However, domestic copper cathode supply remained tight, while registered SX-EW copper began entering the market. Demand side, slight recovery signs emerged after late August. Inventory-wise, as of August 18, SMM's mainstream copper inventories nationwide increased by 8,100 mt WoW to 133,700 mt. Overall, with no fresh macro drivers and fundamentals showing looser supply, slightly recovering demand but accumulating inventories, copper prices were expected to face upward pressure today.

Aluminum

Futures: In the previous trading night session, the most-traded SHFE aluminum 2510 contract opened at 20,580 yuan/mt, reached a highest price of 20,605 yuan/mt, and a lowest price of 20,545 yuan/mt, closing at 20,600 yuan/mt, up 0.02% from the previous close. LME aluminum opened at $2,602.5/mt, hit a high of $2,607/mt, and a low of $2,580.5/mt, closing at $2,588.5/mt, down 0.56% from the previous close.

Summary: The State Council meeting emphasized the need to seize key focal points to strengthen the domestic economic cycle and continuously stimulate consumption potential. Effective measures should be taken to consolidate the stabilization and recovery of the real estate market, combining urban renewal with the renovation of urban villages and dilapidated houses to release improvement-oriented demand through multiple channels. From a fundamental perspective, there have been no significant changes in terms of supply, with the operating production of aluminum remaining stable with a slight increase. On the demand side, the September-October peak season is approaching, but currently, under the influence of the off-season, it is difficult for consumption from terminals to processed materials to exceed expectations. Industries such as home appliances and PV, which had strong support in the early stage, have seen a slowdown in growth, and some aluminum terminal export orders have also declined. The construction industry is still experiencing a super-seasonal decline. Amid the off-season atmosphere, aluminum prices are running high, while consumption recovery remains relatively weak. Against the backdrop of still sufficient supply, the inventory buildup trend will continue in the short term. Overall, the combination of macro tailwinds at home and abroad and potential risks in aluminum supply will keep aluminum prices holding up well, but under the off-season consumption, the pressure of inventory buildup remains significant. After the favorable sentiment is digested, the center of aluminum prices may face the risk of jumping initially and then pulling back, with the 21,000 yuan/mt level still under pressure. Subsequent attention should be paid to changes in inventory and capital sentiment.

Lead

Overnight, LME lead opened at $1,982.5/mt. After opening, the overall center of gravity for LME lead prices shifted downward, especially as the US dollar index rose during the session, causing LME lead prices to fall under pressure to $1,968/mt, reaching a near two-week low. During the night, LME lead gradually recovered from its losses, ultimately closing at $1,980.5/mt, down 0.03%.

Overnight, the most-traded SHFE lead 2509 contract opened at 16,790 yuan/mt. Domestic secondary lead production cuts coexisted with weak consumption. After opening, SHFE lead prices saw continuous battles between bulls and bears, with SHFE lead prices oscillating mostly between 16,770-16,820 yuan/mt until finally closing at 16,795 yuan/mt, up 0.03%. Its open interest reached 49,020 lots, a decrease of 476 lots from the previous trading day.

It is understood that after the completion of delivery for the SHFE lead 2508 contract last week, lead ingot cargoes re-entered the circulation market post-delivery this week. Some downstream enterprises made purchases as needed from nearby sources. Social warehouses for lead ingots shifted from premium to discount. However, the traditional peak season for the lead-acid battery market has not yet materialized. Downstream enterprises are basically making just-in-time procurement. On the supply side, some lead smelters are still in production cuts or suspensions, with the secondary lead sector being the majority. Regional supply differences still exist. The overall market is in a state of weak supply and demand, raising doubts about whether the subsequent social inventory of lead ingots can continue to decline. The short-term lead price trend is expected to continue consolidating.

Zinc

Futures: Overnight, LME zinc opened at $2,799/mt. At the start of the session, LME zinc briefly rose to a high of $2,805.5/mt. Subsequently, with an increase in short positions, LME zinc fluctuated downward, reaching a low of $2,773/mt during European trading hours, and finally closed down at $2,784/mt, a decrease of $12.5/mt or 0.45%. Trading volume dropped to 8,911 lots, while open interest increased by 3,010 lots to 194,000 lots. Overnight, the most-traded SHFE zinc 2510 contract opened at 22,320 yuan/mt. At the beginning of the session, it briefly rose to 22,345 yuan/mt. With an increase in short positions and insufficient upward momentum, the center pulled back, reaching a low of 22,245 yuan/mt towards the end of the session, and finally closed down at 22,255 yuan/mt, a decrease of 105 yuan/mt or 0.47%. Trading volume fell to 39,000 lots, while open interest increased by 4,103 lots to 10.1 lots.

Social Inventory: On August 18, LME zinc inventory decreased by 475 mt to 75,850 mt, a decline of 0.62%. According to SMM, as of Monday (August 18), the total zinc ingot inventory in seven locations was 135,400 mt, an increase of 16,300 mt from August 11 and 6,200 mt from August 14, indicating an increase in domestic inventory.

Zinc Price Forecast: Overnight, LME zinc recorded a small bearish candlestick. Expectations for an interest rate cut fluctuated on the macro level, and the US dollar index rose, putting pressure on non-ferrous metals. The market is concerned about the zinc demand outlook, leading to a decline in LME zinc. Overnight, SHFE zinc also recorded a small bearish candlestick. Domestic inventory continued to increase, and the surplus situation of zinc remains unchanged. Currently, consumption still shows weakness, and with the macro sentiment fluctuating, the center of SHFE zinc has shifted downward. More macro guidance is awaited, and it is expected that SHFE zinc will mainly consolidate today.

Tin

Futures: The most-traded SHFE tin 2509 contract fluctuated at lows after a low opening in the night session, closing at 266,300 yuan/mt, down 0.18% from the previous trading day.

Fundamentals: (1) Supply-side disruptions: Overall ore supply is tightening in major production areas such as Yunnan, and some smelters may maintain production cuts or undergo maintenance in August (bullish ★) (2) Demand side: PV industry: Orders for PV solder bars in east China have declined following the installation rush, leading to a decrease in operating rates among some producers; Electronics industry: End-users in south China are entering the off-season, coupled with high tin prices, resulting in a strong wait-and-see sentiment, with orders only meeting just-in-time procurement needs; Other sectors: Demand for tinplate, chemicals, and other applications remains stable, without any unexpected growth.

Spot market: Trading was mediocre yesterday, with some traders reporting around 20 mt of transactions, mostly just-in-time procurement by downstream enterprises, along with some post-pricing orders. Overall, the purchasing sentiment among downstream and end-user enterprises was poor.