SMM Morning Comment For SHFE Base Metals August 24

SHANGHAI, Aug 24 (SMM) –

Copper

LME copper prices opened at $8387/mt overnight before reaching a low of $8382/mt and a high of $8465.5/mt, and closed at $8458.5/mt, a rise of 1.11%. Trading volumes were 17,000 lots and open interest stood at 278,000 lots. The most active SHFE 2309 copper contract opened at 69020 yuan/mt last evening, and finished at 69460 yuan/mt, up 0.58%. Trading volume was 21,000 lots and open interest stood at 131,000 lots. On the macro front, last night's data showed that U.S. business activity came to a near standstill in August, the slowest growth since February, as the demand for new business in the huge service industry shrank, and the U.S. index fell back, which is positive for copper prices. In terms of fundamentals, due to the rise in copper prices yesterday, only some standard-quality copper that can be used for delivery in east China was traded, and most of the downstream was in a wait-and-see state. The premiums and discounts in south China fell significantly yesterday, but the overall transaction was not active. In terms of consumption, affected by the rise in copper prices, downstream processing companies have seen a significant drop in orders, and their purchasing enthusiasm has also declined. If copper prices remain above 69,000 yuan/mt, demand is expected to decline further. In terms of prices, the market is worried about the US economic situation and is waiting for the Jackson Hole symposium to provide guidance on interest rates. Copper prices are expected to run strongly.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,730 yuan/mt, with the lowest and highest prices at 18,650 yuan/mt and 18,735 yuan/mt before closing at 18,685 yuan/mt, down 40 yuan/mt or 0.21% from the previous trading day. LME aluminium opened at $2,179/mt on Wednesday with its high and low at $2,192.5/mt and $2,171.5/mt respectively before closing at $2,175/mt, a decrease of $6/mt or 0.28% from the previous trading day.

On the macro side, US business activities came to a near standstill in August and growth hit slowest pace since February. And demand for new business in huge services sector shrank. Market participants will focus on Fed Chairman Jerome Powell’s speech at Jackson Hole Conference on Friday for more clues on the path of interest rates. In terms of fundamentals, the amount of domestic ingots is still relatively small. It is difficult for the market to witness a large number of concentrated arrivals of ingots in the short term. Domestic aluminum ingots social inventory is about to fall below 500,000 mt but with the resumption of production in Yunnan, supplies may be gradually restored. In mid-August, the downstream inventory restocking was active, which strengthened confidence over the extended destocking of aluminum products and boosted spot premiums. In the short term, low inventories will still support aluminum prices. However, the uncertain macro sentiment and the expected supply increase will put pressure on the upward trend of 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 opened at $2152/mt overnight and closed at $2190/mt, a rise of 1.79%. Open interest increased by 430 lots from the previous trading day to 124,000 lots, and trading volumes grew 767 lots to 7103 lots. The most traded SHFE 2309 lead contract opened at 16435 yuan/mt and closed at 16480 yuan/m, up 0.86%, after briefly hitting the highest point at 16565 yuan/mt. Open interest increased by 5571 lots from the previous trading day to 11.7 lots, and trading volumes fell 56289 lots to 53446 lots.

Zinc

Overnight, LME zinc opened at $2336/mt and closed up $38/mt or 1.63% at $2373.5/mt. The trading volume was 6538 lots, and open interest decreased 1667 lots to 203,000 lots. LME zinc prices rose for five consecutive days. The PMI in the euro zone exceeded expectations in August and recorded 43.7, which was still below the line of prosperity but improved slightly. The market expected a slight improvement. At the same time, the weakening of the US PMI data deepened the market’s expectations that the pace of subsequent interest rate hikes will stop or turn into interest rate cuts. The U.S. dollar index weakened, and short sellers left the market, driving LME zinc to rise.

Last evening, the most active SHFE 2310 zinc contract prices opened at 20250 yuan/mt and closed at 20425 yuan/mt, up 220 yuan/mt or 1.09%. Trading volume stood at 73,000 lots, and open interest gained by 442 lots to 103,000 lots. Overnight, SHFE zinc rose for four days in a row. Under the influence of macro sentiment, the strong influx of long funds drives the market growth, but it is still necessary to pay close attention to the subsequent changes in overseas consumption.

Tin

Overnight, SHFE 2309 tin contract price moved sideways after the opening, and then began to rise again before falling slightly, and finally closed at 218,390 yuan/mt, down 0.26%.

Spot premiums and discounts changed little on August 23 morning. Small brand tin ingots were offered at premiums of 300 yuan/mt, delivery brands were offered at premiums of 100-600 yuan/mt, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt. Yunxi brand was offered at premiums of 800-1,200 yuan/mt, and discounts of 400-700 yuan/mt for imported brands. The purchasing sentiment of downstream enterprises remained sluggish yesterday. Most traders reported no transactions or few shipments. Most upstream enterprises mainly quoted low prices for attracting orders, but downstream still didn’t show obvious purchasing intentions.

Nickel

SHFE 2309 nickel contract opened at 169,950 yuan/mt at the night session on August 23, and closed at 169,080 yuan/mt, down 260 yuan/mt. Trading volume dropped by 34,884 lots, and open interest decreased by 15,121 lots.

From a macro perspective, Indonesian nickel ore quota policy makes nickel price rise strongly. On Monday, the People’s Bank of China announced that the one-year LPR ushered in the second decline this year, down 10 basis points from the previous period to 3.45 %, providing positive macro sentiment supports for nickel prices’ upward fluctuation. In the fundamentals, yesterday’s spot market transactions remained depressed. The upstream was eager to ship to reduce the premium, but the downstream demand was weak due to accumulated inventory from last round of purchases and high SHFE price. Overall, nickel price it is expected to be volatile.