SMM Morning Comment For SHFE Base Metals On June 26

SHANGHAI, June 26 (SMM) –

Copper

Overnight, LME copper opened at $9,656/mt, initially reaching a high of $9,656/mt before declining throughout the session. Approaching the end of the trading session, it hit a low of $9,536/mt and finally closed at $9,536/mt, down by 1.12%, with a trading volume of 19,000 lots and open interest of 327,000 lots. Overnight, the most-traded SHFE copper 2408 contract opened at 78,320 yuan/mt, reached a high of 78,400 yuan/mt during the session, then fluctuated downward, hitting a low of 78,000 yuan/mt near the end of the trading session, and finally closed at 78,010 yuan/mt, down by 1.03%, with a trading volume of 48,000 lots and open interest of 174,000 lots. On the macro front, US Fed Governor Bowman stated that there would be no rate cuts in 2024, pushing the timeline for rate cuts to 2025, and expressed willingness to hike rates if inflation progress stalls. A series of hawkish remarks from the US Fed led to a rise in the US dollar index, putting pressure on copper prices. On the fundamentals, copper prices fell at the beginning of the week, but downstream did not show strong restocking sentiment, remaining mostly in a wait-and-see mode, with average trading in the spot market. According to SMM, as of Monday, June 24, copper stocks in major regions nationwide decreased by 11,800 mt to 386,600 mt compared to last Friday, 298,900 mt higher YoY. In terms of prices, influenced by macro sentiment, copper prices are expected to face upward pressure.

Aluminum

Market: Overnight, the most-traded SHFE aluminum contract 2408 opened at 20,255 yuan/mt, reached a high of 20,345 yuan/mt, a low of 20,250 yuan/mt, and closed at 20,255 yuan/mt, down 105 yuan/mt, a decrease of 0.52%. The previous trading day, LME aluminum opened at $2,500/mt, reached a high of $2,513/mt, a low of $2,491/mt, and closed at $2,497/mt, down $6/mt, a decrease of 0.24%.

Summary: On the macro front, the US Fed's hawkish stance is clear, with the possibility of delaying rate cuts until next year and potential interest rate hikes depending on inflation data. Domestically, the policy of replacing old with new continues to gain momentum, with new real estate policies being introduced across various regions to further stimulate domestic consumption. On the fundamentals, domestic aluminum production capacity remains high. The rebound in aluminium billet conversion margins boosted the aluminum liquid alloying ratio, and the reduction in ingot production is noted. However, due to the continuous increase in aluminum supply and the low conversion margins for primary processed products like aluminum billets, aluminum ingot inventory is trending towards accumulation, with destocking facing resistance. According to the SMM survey, new orders in industries such as photovoltaics and automobiles are not ideal, and the operating rate of aluminum processing enterprises is expected to remain low in the short term. Against a weak macroeconomic backdrop, together with the weakening trend in downstream consumption expectations, market sentiment remains cautious. SMM expects aluminum prices to exhibit a wide range of fluctuations in the short term.

Lead

Overnight, LME lead opened at $2,175/mt. During the Asian session, it narrowly fluctuated as both bulls and bears were in a wait-and-see mode. Entering the European session, as expectations for US Fed rate cuts diminished, the US dollar index strengthened, putting pressure on LME lead, which fell to a low of $2,156.5/mt. At the end of the session, the US dollar weakened slightly, and LME lead rose to a high of $2,219/mt, finally closing at $2,212/mt, up by 2.27%.

Overnight, the most-traded SHFE lead 2408 contract opened higher at 18,995 yuan/mt, briefly touched a low of 18,925 yuan/mt at the beginning of the session, reaching a high of 19,215 yuan/mt. After a pullback, it narrowly fluctuated and finally closed at 19,185 yuan/mt, up by 1.72%.

Zinc

Overnight, LME zinc opened at $2,851.5/mt. Initially, it narrowly fluctuated around the daily average line, hitting a low of $2,838.5/mt. During the European session, bulls increased their positions, pushing LME zinc up to a high of $2,883.5/mt. Subsequently, bears targeted the high, bringing LME zinc back down near the daily average line, finally closing up at $2,862/mt, up by $15.5/mt or 0.54%, with a trading volume of 6,979 lots and open interest down by 822 lots to 230,000 lots. Overnight, LME zinc stocks decreased by 200 mt to 240,200 mt, down by 0.08%, continuing the trend of destocking. Despite the hawkish remarks from the US Fed weakening the macro sentiment, the continued destocking of LME stocks provided support for prices, leading to mainly fluctuating LME zinc prices.

Overnight, the most-traded SHFE zinc 2408 contract opened at 23,745 yuan/mt, hitting a low of 23,655 yuan/mt and a high of 23,790 yuan/mt, finally closing up at 23,760 yuan/mt, up by 60 yuan/mt or 0.25%, with a trading volume of 65,938 lots and open interest up by 244 lots to 88,009 lots. Overnight, SHFE zinc turned from bearish to bullish, with the 10-day moving average providing support below. In July, SMM domestic zinc concentrate TC was further reduced by 500 yuan to 2,200 yuan/mt in metal content, with tight supply of ore still unresolved. However, as consumption is in the off-season, zinc prices are mainly expected to adjust weakly.

Tin

Last night, the most-traded SHFE tin contract closed at 267,300 yuan/mt, down 5,670 yuan/mt, a decrease of 2.08%. The highest price was 272,460 yuan/mt, and the lowest was 267,090 yuan/mt.

Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 0-100 yuan/mt over SHFE 2407 tin contract, versus premiums of 0-500 yuan/mt for delivery brands and premiums of 600-800 yuan/mt for Yunxi brand. Tin prices fluctuated wildly yesterday, and downstream companies were on the sidelines. Overall, the spot market remained sluggish yesterday.

Nickel

On June 25, Jinchuan nickel was at a premium of 1,900-2,200 yuan/mt, with an average of 2,050 yuan/mt, down 450 yuan/mt from the previous trading day. Russian nickel was at a discount of 200 yuan/mt to a premium of 100 yuan/mt, with an average discount of 50 yuan/mt, flat compared to the previous trading day. In the morning, the market fluctuated at recent lows. Electro-deposited nickel continued to experience shortages in the spot market, and premiums and discounts for various brands remained firm. Nickel briquette prices were 132,700-132,900 yuan/mt, up 750 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 981 yuan/mt (nickel sulphate prices were 981 yuan/mt higher than nickel briquette prices).