Base Metals Broadly Fall, Lithium Carbonate, Platinum and Palladium Down Over 2%, SHFE Copper, Zinc, and Tin Among Top Decliners, SHFE Silver Leads Losses [SMM Midday Review]

SMM News on August 19:

Metal markets:

As of the midday close, base metals in the domestic market were nearly all down. SHFE copper fell 1%, SHFE aluminum fell 0.94%. SHFE lead rose 0.19%. SHFE zinc fell 1.44%. SHFE tin fell 1.35%. SHFE nickel fell 0.58%.

Additionally, the most-traded cast aluminum futures contract fell 0.48%, the most-traded alumina contract fell 0.26%. The most-traded lithium carbonate contract fell 2.42%. The most-traded silicon metal contract rose 0.29%. The most-traded polysilicon futures contract fell 1.4%.

Ferrous metals all rose. Iron ore rose 0.85%, rebar rose 0.27%, hot-rolled coil rose 0.4%. Stainless steel edged up. In coking coal and coke: the most-traded coking coal contract rose 2.18%, the most-traded coke contract rose 2.17%.

Overseas base metals, as of 11:42 AM, LME metals showed mixed performance. LME copper rose 0.15%, LME aluminum and LME zinc both rose 0.03%. LME lead fell 0.05%. LME tin fell 0.41%. LME nickel fell 0.3%.

Precious metals, as of 11:42 AM, COMEX gold fell 0.23%, COMEX silver fell 1.35%. On the domestic precious metals front: SHFE gold fell 1.02%, the most-traded SHFE silver contract fell 4.04%.

Additionally, as of the midday close, the most-traded platinum futures contract fell 2.44%, and the most-traded palladium futures contract fell 2.82%.

As of the midday close, the most-traded European container shipping futures contract fell 2.17% to 1,717 points.

As of 11:42 AM on August 19, selected futures midday quotes:

Spot and Fundamentals

Silver: Global bond yields collectively rose, with US Treasury yields hitting multi-year highs, putting precious metals under pressure and triggering a pullback. The spot market saw discount widening, with transactions concentrated at slight discounts, while demand remained cautious...

Macro front

China:

[Shanghai: Focusing on innovation in key areas such as computing power to form an AI pioneer industry cluster with Zhangjiang Core Park as the demonstration leader] The Shanghai Municipal Science and Technology Commission issued the "Shanghai Zhangjiang High-Tech Industrial Development Zone Development 15th Five-Year Plan". It proposes to focus on innovation in key areas such as computing power, large models, corpora data, scientific intelligence, and applications, to form an AI pioneer industry cluster with Zhangjiang Core Park, Xuhui Park, Caohejing Park, etc. as demonstration leaders. It aims to enhance intelligent computing capabilities, break through disruptive chip architectures such as optical computing and brain-inspired computing, build an autonomous computing power system integrating supercomputing and intelligent computing with cloud-edge-device collaboration, and construct the Pujiang Public Computing Service Platform. Efforts will be made to advance next-generation large models, develop large models including brain-inspired computing, build Modu Space and Zhangjiang AI Innovation Town, and support the adaptation of multimodal large models to domestic computing power and ecosystem integration. (Jin10 Data APP)

[The PBOC’s reverse repo operations resulted in a net withdrawal of 142.3 billion yuan on the day.] The PBOC did not conduct reverse repo operations today, while it conducted 327.4 billion yuan in overnight reverse repos. As 469.7 billion yuan in overnight reverse repos matured today, a net withdrawal of 142.3 billion yuan was realized on the day.

US dollar:

As of 11:42, the US dollar index fell 0.06% to 99.59. According to the CME FedWatch Tool, the probability that the Fed will keep interest rates unchanged in September is 65%, while the probability of a cumulative 25-basis-point rate hike is 35%. For October, the probabilities are unchanged (51.4%), a cumulative 25bp hike (41.3%), and a cumulative 50bp hike (7.4%).

Bond traders are once again adjusting their strategies. After a series of data indicated that the Fed is almost certain not to hike rates for the remainder of this year, options market bets are trying to hedge against the risk of the Fed pivoting to rate cuts in 2027. This dovish positioning contrasts with the recent trend in the US Treasury market: long-term bond yields have climbed to multi-year highs, as a Fed on hold would keep inflation above target for a longer period. Meanwhile, options traders, whose positions are closely tied to the Fed’s policy path, are shifting their focus to signs of US economic weakness, which they believe could trigger a market reversal. This shift began to emerge last week, when data showed that inflation and consumer demand slowed in July, cooling market expectations for a rate hike at the Fed’s September meeting. Option market participants then began to adjust their positions, reducing the magnitude of future rate hikes priced into the swaps market. Some options are even considering hedging against the risk of possible rate cuts by mid-next year.

The Bank of America’s August Global Fund Manager Survey showed that a majority expected Fed Chairman Warsh to adopt a neutral stance at the Fed’s annual Jackson Hole symposium later this month. Among respondents, 31% expected him to deliver ‘hawkish’ remarks, while only 7% expected ‘dovish’ remarks. (Jin10 Data APP)

On the data front:

The UK July CPI month-on-month rate, the UK July retail price index month-on-month rate, the Eurozone June seasonally adjusted current account, the Eurozone July final CPI year-on-year rate, and the Eurozone July final CPI month-on-month rate, among others, are scheduled for release today. Additionally, watch: European Central Bank President Lagarde attends the "Global Economic Outlook" discussion at the World Economic Forum International Business Council (IBC) meeting; Kuaishou holds its earnings call.

Crude Oil:

As of 11:42, oil prices in both markets rose, with US oil up 0.79% and Brent oil up 0.68%. Crude oil prices rose, as the US and Iran reached an impasse over control of the Strait of Hormuz.

On the 18th local time, Iranian Majlis Speaker Qalibaf stated that the Strait of Hormuz will not open until the US lifts the freeze on Iranian assets, removes oil sanctions, ceases military threats and operations on all fronts, and meets other conditions of the memorandum of understanding. Qalibaf noted that the opportunities brought by the memorandum of understanding in lifting blockades and ceasefires could help enhance Iran's economic resilience and rebuild its defense capabilities. He also emphasized that Iran is prepared to deliver heavier blows in response to any transgressions by hostile forces. (Jin10 Data APP)

Additionally, Venezuelan Oil Minister Paula Henao stated on Tuesday local time that oil-related contracts were signed with US oilfield services giant Schlumberger (SLB) and independent producer Hunt Oil Company, respectively, to attract investment and boost crude oil production. This signing came as Caracas and Washington pushed to accelerate investment in Venezuela's vast but underdeveloped oil reserves. Politico previously reported that multiple US independent oil producers are expected to sign production contracts with Venezuela's state-run PDVSA in the coming days. Henao said that Venezuela signed a hydrocarbon production participation agreement related to the development and production increase of two oil fields, but did not disclose specific details on expected investment amounts or additional production volumes. She said that the Venezuelan government also signed a framework agreement with SLB to provide comprehensive reservoir research services nationwide in Venezuela. (Jin10 Data APP)

Spot Market Overview:

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