SMM Morning Comment For SHFE Base Metals August 16

SHANGHAI, Aug 16 (SMM) –

Copper

LME copper prices closed with a drop of 1.37% at $8,178/mt last evening. Trading volume stood at 26,000 lots. Open interest stood at 278,000 lots. SHFE 2309 copper contract prices finished at 67,820 yuan/mt last evening, down 0.66%. Trading volume was 48,000 lots, and open interest stood at 163,000 lots. On the macro front, last night's data showed that U.S. retail sales rose more than expected in July. After the release of strong U.S. data, the Fed may keep high interest rates for a longer period of time. The U.S. index rose, weighing on copper prices. In terms of fundamentals, the market activity was quiet. Only some deliverables in east China were sought-after, and the overall transaction sentiment was weak; inventories in south China fell for three days in a row due to limited arriving shipments. Downstream buying interest was weak. Sellers in south China deliver their cargoes directly to warehouses. In terms of consumption, some companies are expected to maintain more cautious purchases in the short term. Copper prices will harly rise amid the strong US economic data.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,405 yuan/mt, with the lowest and highest prices at 18, 390 yuan/mt and 18,535 yuan/mt before closing at 18,465 yuan/mt, up 100 yuan/mt or 0.54% from the previous trading day. LME aluminium opened at $2,147/mt on Tuesday with its high and low at $2,171.5/mt and $2,136.5/mt respectively before closing at $2,141.5/mt, a decrease of $4.5/mt or 0.21% from the previous trading day.

On the macro side, as fears of a renewed interest rate hike resurfaced in the middle of the week, the positive macro sentiment came to an abrupt end. Recently, traders need to pay close attention to the multiple impacts of the Federal Reserve’s interest rate hike expectations and exchange rate fluctuations on the non-ferrous metal market. In terms of fundamentals, domestic aluminum ingots social inventory declined to nearly 500,000 mt, but with the resumption of production in Yunnan, the aluminum ingots inventory pressure is expected to increase. Entering the middle of August, the downstream operating rate, especially the aluminum extrusion, plate and strip plants, has improved, but whether the consumer side can support the further decline in aluminum stocks is unpredictable. In the short term, low inventories will still support aluminum prices, while positive macro sentiment and signs of recovery in consumption will provide confidence to the market. But expectations of increased supply still put upward pressure on aluminum prices. SMM predicted that the short-term aluminum prices will remain volatile, and follow-up attention should be paid to consumption and inventory.

Lead

LME lead prices closed at $2,119/mt last evening, up $15.5/mt or 0.74%, snapping a three-day losing streak.

The most active SHFE lead contract prices finally closed at 16,030 yuan/mt last evening, up 130 yuan/mt or 0.82%. Open interest increased 847 lots to 92,810 lots.

Zinc

LME zinc prices closed at $2,308/mt last evening, down $43/mt or 1.83%. Trading volume increased to 13,060 lots, and open interest decreased by 3644 lots to 205,000 lots. LME zinc prices fell for four consecutive days in a row. LME zinc inventory increased sharply by 14,725 mt to 106,900 mt, an increase of 15.98%. Overnight, the U.S. July retail sales data exceeded expectations, increasing inflation expectations.

The most active SHFE 2309 zinc contract prices lost 240 yuan/mt or 1.18% to settle at 23100 yuan/mt in overnight trading. Trading volumes decreased to 81036 lots and open interest increased 2479 lots to 88585 lots. The domestic economic data is weak, but downstream enterprises have increased inventory replenishment due to the fall in zinc prices. Spot transactions have improved, and social inventory has been slightly removed from storage, indicating that consumption is still relatively resilient. SHFE zinc underperformed LME zinc.

Tin

Overnight, SHFE 2309 tin contract price rose rapidly after the low opening. After reaching a high price of around 213,810 yuan/mt, it turned gradually down and finally closed at 211,500 yuan/mt, down 0.59%.

Spot premiums and discounts changed little on August 15 morning. Small brand tin ingots were offered at discounts of 400 yuan/mt, and premiums of 100-500 yuan/mt for delivery brands, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt, premiums of 900-1,200 yuan/mt for Yunxi brand, and discounts of 700 yuan/mt for imported brand. Tin price rally and adequate stocks on hand after previous stocking caused trading activity to cool down.

Nickel

SHFE 2309 nickel contract opened at 16,3050 yuan/mt at the night session on August 15, and closed at 164,980 yuan/mt, up 270 yuan/mt. Trading volume dropped by 7,419 lots, and open interest decreased by 8,246 lots.

On the macro side, the Indonesian nickel mine investigation may reduce the nickel mine supply, making the SHFE nickel prices rise since last Friday. On the fundamentals, coupled with price volatility and a slowdown of downstream withholding, yesterday’s nickel spot market turnover was not as good as last week. Overall, it is expected that the subsequent nickel price will shock downward.