SMM Morning Comment For SHFE Base Metals (August 25)

SHANGHAI, August 25 (SMM) -

Copper

Futures: Last Friday night, LME copper opened at $9,739/mt, dipped to a low of $9,708/mt in early trading, then fluctuated upward throughout the session, reaching a high of $9,813.5/mt near the close. After a slight pullback at the close, it rebounded to a high and finally settled at $9,809/mt, up 0.77%. Trading volume reached 17,000 lots, while open interest rose to 268,000 lots. On the same night, the most-traded SHFE copper 2509 contract opened and dipped to a low of 78,710 yuan/mt, surged to a high of 79,320 yuan/mt during the session, and finally settled at 79,110 yuan/mt after a pullback at the close, up 0.51%. Trading volume reached 21,000 lots, and open interest stood at 118,000 lots.

Prices: On the macro front, Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium last Friday reinforced market expectations for a September interest rate cut. However, his remarks were very cautious, acknowledging increasing risks to the labor market while warning that inflationary pressures persist, without committing to a rate cut. After the speech, the US dollar index posted its largest single-day decline since early August, supporting copper prices. On the fundamentals, supply side, imported copper arrivals are expected to increase WoW, while domestic copper arrivals are flat WoW, with overall supply steady to higher. Demand side, consumption is affected by the off-season, and with copper prices fluctuating rangebound at high levels, downstream users continue to make just-in-time procurement, with little willingness to actively restock. Under the supply-demand pattern, copper inventories are expected to rise this week. Price-wise, expectations for a US Fed interest rate cut in September are still being contested, and copper prices are expected to fluctuate rangebound.

Aluminum

Futures: During the night session on Friday, the most-traded SHFE aluminum 2510 contract opened at 20,625 yuan/mt, reached a highest price of 20,800 yuan/mt, a lowest price of 20,620 yuan/mt, and closed at 20,755 yuan/mt, up 0.41%. The trading volume was 6.6 lots, and the open interest was 244,000 lots. On Friday, LME aluminum opened at $2,593/mt, hit a high of $2,626/mt, a low of $2,581/mt, and closed at $2,622/mt.

Summary: Macro front, expectations for US Fed interest rate cuts and China's policies to boost domestic demand have created an overall favorable atmosphere, potentially improving aluminum consumption prospects. Fundamentally, supply side, with the commissioning of a small amount of replacement capacity, production increased slightly; cost side, domestic aluminum full cost was 16,718 yuan/mt, down 20 yuan/mt WoW, with industry profit remaining around 3,960 yuan/mt. Demand side remains the core focus for the market. Last week, when aluminum prices were around 20,500 yuan/mt, downstream enterprises' restocking volume increased, some companies began stockpiling for upcoming peak season orders, domestic aluminum downstream operating rates rebounded slightly, but as aluminum prices rebounded, terminal shipments declined again, and processing material enterprises' spot procurement volume significantly decreased. Overall, high aluminum prices have somewhat suppressed off-season consumption, but as the peak season approaches, expectations for order improvements have strengthened. Last week, aluminum ingot inventory pressure decreased, with inventory slightly dropping to 596,000 mt. In summary, short-term consumption only marginally improved, aluminum ingot inventory faces renewed buildup pressure, but current total inventory is not high, and some secondary aluminum enterprises in Anhui and Jiangxi provinces have received notices of termination of tax refund policies, posing a risk of declining capacity utilization rates for scrap utilization enterprises, providing some support for primary aluminum consumption. Aluminum prices, driven by macro tailwinds, are expected to gain more upside room, with prices likely to fluctuate at highs this week. Further increases will depend on the realization of peak season aluminum consumption.

Lead

On Friday, LME lead opened at $1,975/mt. During the Asian trading session, it fluctuated around the daily moving average. In the European trading session, it fluctuated upward, reaching a high of $1,998/mt before rebounding and touching $1,996.5/mt, then adjusted and finally closed at $1,992/mt, up $22/mt, with a 1.12% increase.

On Friday night, the most-traded SHFE lead contract opened at 16,790 yuan/mt. It initially dipped to 16,755 yuan/mt, then fluctuated upward, reaching a high of 16,895 yuan/mt, adjusted, and finally closed at 16,830 yuan/mt, up 70 yuan/mt, with a 0.42% increase.

In late August, the spot market had relatively loose supply, with primary lead maintaining discount quotations. Secondary lead prices inverted compared to primary lead, and downstream enterprises preferred purchasing primary lead. In September, more maintenance plans were scheduled for primary lead smelters, and additional maintenance plans were also announced for secondary lead smelters, indicating an expected tightening of lead ingot supply. The tight supply of lead concentrates in late August did not ease, and some primary lead smelters lowered lead concentrate TCs again to ensure raw material supply and stable production. Subsequent attention should still be paid to whether the SCO summit and parade activities have any impact on the production and transportation of enterprises along the lead industry chain.

Zinc

Last Friday, LME zinc opened at $2,774.5/mt. At the beginning of the session, LME zinc fluctuated rangebound along the daily average, hitting a low of $2,763.5/mt. During the European trading hours, bulls increased their positions, causing LME zinc to briefly rise. Subsequently, LME zinc pulled back below the daily average. However, during the night session, LME zinc rose to a high of $2,821.5/mt, and then slightly declined towards the end, closing at $2,805.5/mt, up by $38.5/mt, or 1.39%. Trading volume decreased to 62,909 lots, while open interest increased by 1,465 lots to 193,000 lots. Last Friday, the most-traded SHFE zinc 2510 contract opened at 22,220 yuan/mt. At the start of the session, SHFE zinc hit a low of 22,200 yuan/mt. It then attempted to rise, but bears increased their positions, causing SHFE zinc to drop back slightly. Afterward, as bears reduced their positions, SHFE zinc quickly rose to a high of 22,465 yuan/mt. Towards the end of the session, bulls reduced their positions, leading to a slight pullback in SHFE zinc, which closed at 22,400 yuan/mt, up by 125 yuan/mt, or 0.56%. Trading volume decreased to 75,325 lots, while open interest fell by 2,847 lots to 105,000 lots.

Zinc price forecast: Last Friday, LME zinc recorded a large bullish candlestick, with the upper Bollinger Band providing resistance and the 60-day moving average offering support below. The US dollar index plummeted due to Powell's speech at the Jackson Hole conference, which boosted market expectations for an interest rate cut in September, while overseas inventories continued to decrease, supporting LME zinc's upward trend. Last Friday, SHFE zinc also recorded a large bullish candlestick, with the middle Bollinger Band providing resistance above and the 60-day moving average offering support below. Currently, the spot zinc supply in various domestic markets is relatively abundant, but overall end-use consumption remains weak, exerting some pressure on zinc prices. However, the reduction of overseas inventory to below 70,000 mt provides some support to SHFE zinc, and it is expected that zinc prices will mainly fluctuate in the short term.

Tin

Last week, the domestic and overseas tin markets as a whole showed a fluctuating trend, mainly influenced by macro factors and the fundamentals of supply and demand. On the macro front, the US government is in talks with Intel to take a stake in the company, which could boost its domestic manufacturing and potentially impact the global chip supply chain. Additionally, US Fed officials indicated that a significant interest rate cut next month does not seem appropriate, leading to a cooling of market expectations for a rate cut. The domestic tin ore market overall exhibited a pattern of weak supply and demand. On the supply side, tin ore supplies from major production areas such as Yunnan have tightened, with some smelters planning to halt production for maintenance or cut production in August, providing some support to the supply end. On the demand side, after the installation rush in the PV sector ended, orders for PV ribbons in east China declined, while electronic end-users in south China entered the off-season. Coupled with high tin prices, there was a strong wait-and-see sentiment among end-users, with orders only meeting essential needs. Demand in other sectors such as tinplate and chemicals remained stable without any unexpected growth. Spot market transactions were sluggish, with downstream solder companies being cautious about procurement. Traders attempted to refuse to budge on prices, but the acceptance of higher prices was low, resulting in poor overall market transactions. It is expected that SHFE tin prices will maintain a fluctuating trend. Investors need to closely follow the dynamics of domestic and overseas markets and policy changes, and operate prudently.