SMM Morning Comment For SHFE Base Metals (September 1)

SHANGHAI, September 1 (SMM) -

Copper

Futures: LME copper opened at $9,899/mt on Friday night, initially touched a low of $9,881/mt, then entered sideways movement with prices gradually moving upward, nearing a high of $9,924.5/mt before closing at $9,906/mt, up 0.68%. Trading volume reached 23,000 lots, and open interest stood at 268,000 lots. The most-traded SHFE copper contract 2510 opened at 79,670 yuan/mt on Friday night, initially fluctuated downward to a low of 79,460 yuan/mt, then gradually moved upward, nearing a high of 79,730 yuan/mt before closing at 79,680 yuan/mt, up 0.58%. Trading volume reached 23,000 lots, and open interest stood at 174,000 lots.

Prices: On the macro front, Russia and Ukraine continued to exchange fire in Donetsk, and Ukraine planned to launch new strikes inside Russia. Meanwhile, the Middle East situation also heated up, with the Houthis declaring readiness to confront Israel, the Israeli military continuing operations in Gaza, and Turkey announcing a complete cut in economic ties with Israel. In addition, the US Fed’s Daly again hinted at a possible interest rate cut in September. Although the US core PCE rose to 2.9% YoY in July, it met expectations, and traders continued to bet on a September rate cut, providing a boost to copper prices on the macro front. On the fundamentals side, imported supplies provided limited market replenishment, especially with tight availability of high-quality copper, resulting in an overall tight pattern. With the arrival of the traditional September-October peak season, downstream demand gradually recovered. Considering both macro and fundamental factors, copper prices are expected to find support today.

Aluminum

Futures: In the previous night session, the most-traded SHFE aluminum 2510 contract opened at 20,745 yuan/mt, with the highest price at 20,780 yuan/mt, the lowest at 20,680 yuan/mt, and closed at 20,725 yuan/mt, down 0.07% from the previous closing price. Trading volume was 52,000 lots, and open interest stood at 233,000 lots. The previous LME session opened at $2,607.5/mt, reached a high of $2,622/mt, a low of $2,606.5/mt, and closed at $2,619/mt.

Summary: Macro front, rising expectations for US Fed interest rate cuts and China's policies boosting domestic demand have created an overall bullish atmosphere, potentially improving aluminum consumption prospects, though the transmission of domestic supportive policies to actual consumption still requires time. Fundamentals, supply side, with the commissioning of a small amount of replacement capacity, operating capacity is steadily increasing with minor growth, and production is rising slightly; the proportion of liquid aluminum is expected to rebound in September. Cost side, the weekly total cost of the aluminum industry changed minimally, with high industry profits remaining. Demand side remains the core focus for the market going forward. As the September-October peak season approaches, signs of recovery in weekly operating rates downstream became more evident last week, with operating rates for aluminum extrusion and aluminum plate/sheet, strip and foil sectors showing some increase. Entering early September, current consumption only shows marginal improvement, and effective inventory destocking still requires time to materialize. However, total inventory is not high, and some secondary aluminum enterprises in provinces like Anhui and Jiangxi have received notices of terminated tax refund policies, posing a risk of declining capacity utilization rates for scrap utilization enterprises, which provides some support for primary aluminum consumption. During the traditional September peak season, aluminum prices are generally more likely to rise than fall, but upside pressure persists. For aluminum prices to effectively break through the significant resistance level of 21,000 yuan/mt, it will require the realization of expectations for the September-October peak season in aluminum consumption, validated by subsequent domestic aluminum ingot destocking inflection points and sustained strength in downstream operating performance.

Lead

Last Friday, LME lead opened at $1,986/mt, fluctuating around the daily moving average during Asian trading hours. Entering European trading hours, LME lead first declined then rebounded, hitting a low of $1,982.5/mt. As LME lead inventory continued to drop for several consecutive days, bears reduced positions, pushing LME lead to rebound and touch a high of $1,998/mt, finally closing at $1,997/mt, up 0.45%.

On Friday night, the most-traded SHFE lead 2510 contract opened at 16,875 yuan/mt, reaching an early high of 16,880 yuan/mt. Due to increased bearish positions, SHFE lead plunged to a low of 16,780 yuan/mt before rebounding slightly toward the close, finally settling at 16,870 yuan/mt, up 0.12%.

For primary lead, transportation restrictions in North China are expected to be lifted this week, likely increasing spot market supply. Spot transactions are anticipated to remain at discounts. For secondary lead, smelter maintenance impacts are rising, and coupled with losses, smelters' firm pricing sentiment persists. Some regions may still see price inversions (secondary lead higher than primary lead). On the demand side, lead-acid battery demand remains sluggish, with producers operating based on sales and purchasing raw materials only as needed, offering limited support to lead prices.

Zinc

Futures: Last Friday, LME zinc opened at $2,789/mt, initially fluctuating around the daily average line. During European trading hours, bulls increased positions, pushing the price center up to $2,810/mt. Entering the night session, LME zinc edged slightly higher, touching a high of $2,836/mt before closing at $2,814/mt, up $27/mt (0.97%). Trading volume rose to 13,170 lots, while open interest fell by 226 lots to 191,000. The most-traded SHFE zinc 2510 contract opened at 22,250 yuan/mt, briefly hitting 22,300 yuan/mt before retreating to fluctuate near 22,170 yuan/mt, ultimately closing at 22,175 yuan/mt, up 80 yuan/mt (0.36%). Trading volume decreased to 70,485 lots, while open interest increased by 890 lots to 117,000.

Zinc price outlook: Last Friday, LME zinc recorded a long upper-shadow bullish candlestick, supported by the 10/40 daily average moving averages. The LME zinc center rose last Friday amid a weaker US dollar, US interest rate cut expectations, and peak season demand anticipation. SHFE zinc recorded five consecutive bearish candles last Friday, capped by the 10-day moving average and supported by the lower Bollinger Band. Driven by the LME, SHFE zinc's center edged up slightly, but high production from domestic smelters and continuous social inventory buildup partially limited its gains.

Tin

On the international macro front last week, US President Trump threatened to impose hefty tariffs on countries implementing digital taxes and imposed export restrictions on highly protected US technologies and chips. Additionally, regarding US Fed policy, Cook officially sued Trump over the dismissal controversy, with Powell also named as a defendant, while Trump's Fed governor nominee Milan is expected to be confirmed before the September Fed decision. These factors caused market sentiment fluctuations and unstable US dollar movements. Domestically, the tin ore market showed tight overall supply and demand conditions. Supply side, tin ore supply tightened in major production areas like Yunnan, with some smelters maintaining maintenance shutdowns in September, providing some support to tin prices. Demand side, after the PV industry's installation rush ended, orders for PV tin bars declined in east China, while the electronics sector entered the off-season. Coupled with high tin prices, end-users exhibited strong wait-and-see sentiment, with orders meeting only essential needs. Other sectors like tinplate and chemicals maintained stable demand without exceeding expectations. In the spot market, as prices hovered at highs, most downstream and end-user enterprises adopted a wait-and-see approach with weak purchase intentions. Overall, tin prices are expected to maintain a fluctuating trend at highs this week. Investors are advised to monitor international policy changes and domestic supply-demand dynamics while exercising caution.