SMM Morning Comment For SHFE Base Metals August 1

SHANGHAI, August 1(SMM) –

Copper

LME copper opened at $8,688.5/mt on Monday and fell to $8,659/mt, but then rose to $8,846/mt before closing up 1.86% at $8,836/mt. Trading volume was 25,000 lots, and open interest was 280,000 lots. SHFE 2309 copper contract opened at 70,200 yuan/mt overnight, with its session low and high at 70,050 yuan/mt and 70,420 yuan/mt before closing up 1.54% at 70,360 yuan/mt. Trading volume was 60,000 lots, and open interest was 207,000 lots. On the macro front, U.S. banks reported tighter credit standards and weaker demand for loans in the second quarter, as a Federal Reserve survey showed that rising interest rates are having an impact on the economy. In terms of fundamentals, as of Monday July 31, copper stocks in mainstream areas of China increased by 400 mt from last Friday to 99,600 mt, and 30,200 mt higher than the same period last year. In terms of consumption, high copper prices have suppressed consumption, which is expected to be difficult to alleviate in the short term. The market is increasingly expecting the Fed to end its tightening policy. Copper prices are expected to remain high in the near future.

Aluminum

SHANGHAI, Aug 1 (SMM) –Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,490 yuan/mt, with its low and high at 18,460 yuan/mt and 18,620 yuan/mt before closing at 18,600 yuan/mt, up 240 yuan/mt or 1.31%. LME aluminium opened at $2,225/mt on Monday, with its high and low at $2,289/mt and $2,223.5/mt respectively before closing at $2,287/mt, an increase of $60/mt or 2.69%.

On the macro front, there are increasing expectations that the policy tightening of major overseas central banks are coming to an end. China continued to issue notices on measures to restore and expand consumption, boosting market sentiment. In terms of fundamentals, the resumption of aluminium production in Yunnan is accelerating. It is expected that some large aluminium enterprises in the region will be able to produce at full capacity by the end of August, and the total domestic operating capacity will hit a new high. However, the current resumption of production is mainly liquid aluminium, posing little risk of imminent oversupply of aluminium ingots. Due to the increase in arrivals over the past weekend, SMM statistics showed that the aluminium ingot inventory accumulated slightly on July 31, while the aluminium billet stocks continued to fall. On the demand side, consumption related to real estate and automobiles has gradually picked up under favorable policies, and downstream operating rates have improved. However, some downstream sectors are still in the off-season. The impact of follow-up policies still needs further observation. In the short term, aluminium prices will remain volatile, and attention will be paid to consumption and inventory in the future.

Lead

On Monday, LME lead opened at $2,156/mt and hit a session high of $2,166/mt at the beginning and then fell to $2,142 /mt, finally closed at $2,164/mt, up 0.42%. Its open interest increased by 1,686 lots to 121,000 lots compared with the previous trading day, and its trading volume decreased by 85 lots to 3,863 lots.

Overnight, the most-traded SHFE lead 2309 contract opened at 15,945 yuan/mt, and initially rose to a high of 15,960 yuan/mt, and then fell to the lowest of 15,925 yuan/mt, finally closed at 15,945 yuan/mt, down 0.16%. Its open interest increased by 1,510 lots to 107,000 lots compared with the previous trading day, and its trading volume decreased by 29,804 lots to 20,134 lots.

On the macro level, we should pay attention to China Caixin manufacturing PMI data for July and the Final Markit manufacturing PMI for July of the United States on August 1. In terms of spot fundamentals, last week, SMM data showed the operating rate of primary lead smelters in the three provinces was 56.16%, a decrease of 0.25 percentage points from the previous week. The operating rate of SMM licensed secondary lead enterprises in the four provinces was 43.88%, which is basically the same as that of the previous week. The weekly operating rate of lead-acid battery enterprises in the five provinces was 65.52%, a decrease of 0.38 percentage points from the previous week. This week, some smelters will be shut down for maintenance, and some will resume production, so the supply of lead ingots will not be much different from last week. The lead price fluctuates at a high level, and the production cost of lead-acid battery enterprises is relatively high. In the market where the expectation of consumption recovery has not yet been fulfilled, it is expected that the price of lead ingots will still fluctuate within a narrow range.

Zinc

China's manufacturing PMI was 49.3% in July, an increase of 0.3 percentage points from the previous month. China’s non-manufacturing business activity index and the composite PMI output index were 51.5% and 51.1% respectively in July, both in the expansion territory for seven consecutive months. China’s National Development and Reform Commission issued a notice on measures to restore and expand consumption. China’s State Council held a meeting, proposing to roll out policy measures that are conducive to the stable and healthy development of the real estate market according to different needs. The monthly CPI rate in the euro zone recorded -0.1% in July, the largest drop since January 2023. Inflation in the euro zone fell further in July, which may push the European Central Bank not to raise interest rates at least at its next meeting. LME zinc price movement was volatile on Monday, with its opening price at $2,506.5/mt, low and high at $2,487/mt and $2,578/mt before closing up 3.29% at $2,575/mt. Trading volume rose to 12,572 lots, and open interest rose 3,855 lots to 202,000 lots. LME zinc found support at the 5-day moving average. LME zinc inventory increased by 525 mt to 99,675 mt. Inflation in the euro zone fell further in July, thus the market showed an optimistic atmosphere, boosting LME zinc price. Overnight, the most-traded SHFE 2309 zinc contract opened at 21,090 yuan/mt, with its low and high at 21,035 yuan/mt and 21,245 yuan/mt before closing at 21,190 yuan/mt, up 1.85%. Trading volume fell to 105,000 lots, and open interest decreased by 272 lots to 118,000 lots. Economic stimulus policies in China shored up SHFE zinc.

Tin

Overnight, SHFE 2309 tin contract price rose slightly after the opening. After reaching a high price of around 235,000 yuan/mt, it quickly dived to the lowest price 232,580 yuan/mt and stabilized. Then it plunged again in late trading and closed at 233,080 yuan/mt, down 0.38%.

Nickel

SHFE 2308 nickel contract opened at 172,740 yuan/mt at the night session on July 31, and closed at 174,700 yuan/mt, up 2,790 yuan/mt. Trading volume fell by 20,397 lots, and open interest decreased by 10,363 lots.

On the macro level, SHFE nickel fluctuated upwards yesterday due to the impact of multiple policies at the Politburo meeting. In terms of fundamentals, the continuous decline in spot premiums mainly resulted from the successive arrivals of overseas nickel plates. However, according to SMM research, because of the upward fluctuation of nickel prices, even if the spot premiums have been lowered, the absolute price is still high, and the downstream purchase willingness is low while some downstream factories still have nickel plate inventory, causing weak spot market transactions. Overall, it is expected that nickel prices may fluctuate wildly in the future.