SMM Morning Comment For SHFE Base Metals On August 1

SHANGHAI, August 1 (SMM) –

Copper

LME copper opened at $9,126/mt overnight, hitting a session low of $9,120/mt at the beginning of trading. It then fluctuated upwards, reaching an intraday high of $9,267/mt. By the end of the trading session, it slightly fluctuated around $9,210/mt and finally closed at $9,240/mt, up 2.31%. Trading volume reached 20,000 lots, and open interest reached 292,000 lots. Overnight, the most-traded SHFE 2409 copper contract opened at 74,690 yuan/mt, hitting a session low of 74,540 yuan/mt at the beginning of trading. It then moved higher, reaching an intraday high of 75,150 yuan/mt, and maintained slight fluctuations by the end of the trading session, finally closing at 74,970 yuan/mt, up 1.86%. Trading volume reached 55,000 lots, and open interest reached 180,000 lots. Macro side, the US Fed's FOMC meeting kept interest rates unchanged and adjusted the statement to align with recent rate cut expectations. Powell indicated that if the data meets requirements, a rate cut could happen as early as September. Additionally, the US July non-farm payrolls showed that the labor cost growth indicator cooled more than expected in Q2, supporting the trend of easing inflation pressures. Domestically, the National Development and Reform Commission emphasized accelerating the construction of a unified national market and making greater efforts to develop the private economy, with the market anticipating more economic stimulus policies. Fundamentals side, the spot market yesterday was heavily influenced by the end-of-month atmosphere. Recent spot market transactions were mainly concentrated on previous warrants and non-registered imported sources. With the copper price correction, the market may improve in August. Overall, with the Bank of Japan raising interest rates by 15 basis points and the US Fed opening the door for a rate cut in September, copper prices are expected to rise today.

Aluminum

Market: The most-traded SHFE 2409 aluminum contract opened at 19,295 yuan/mt overnight, reaching a high of 19,355 yuan/mt and a low of 19,205 yuan/mt, and closed at 19,310 yuan/mt, up 175 yuan/mt, or 0.91%. The previous trading day, LME aluminum opened at $2,234.5/mt, reached a high of $2,324.5/mt and a low of $2,229.5/mt, and closed at $2,315/mt, up $77/mt, or 3.44%.

Summary: The expectation of a US Fed rate cut together with escalating regional conflicts drove aluminum prices higher in the night session. However, on the fundamentals side, aluminum still shows a pattern of increasing supply and weak demand, with social inventories at a high level for the same period. In the short term, both macro and fundamental factors are mixed, and aluminum prices may experience wide fluctuations.

Lead

Overnight, LME lead opened at $2,038.5/mt. During the Asian session, it consolidated around the daily moving average. Entering the European session, amid a generally rising atmosphere for base metals due to the intensified decline of the dollar, LME lead strengthened all the way to a high of $2,100/mt, and finally closed at $2,099.5/mt, up $64/mt, an increase of 3.14%.

Overnight, the most-traded SHFE 2409 lead contract opened at 18,820 yuan/mt. After initially declining to a low of 18,760 yuan/mt, it rebounded and rose to a high of 18,970 yuan/mt, supported by the strength in LME lead. After consolidating, it finally closed at 18,950 yuan/mt, up 180 yuan/mt, an increase of 0.96%.

Zinc

Overnight, LME zinc opened at $2,645/mt. After the opening, LME zinc moved along the average daily line, initially dipping to $2,645/mt. During the night session, LME zinc quickly surged to a high of $2,719/mt, then fell back to near the average daily line, and finally closed higher at $2,698/mt, up $47.5/mt, an increase of 1.79%. Trading volume increased to 11,373 lots, and open interest rose by 425 lots to 221,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the 10-day moving average forming resistance above. LME zinc inventory decreased by 2,050 mt to 236,375 mt, a drop of 0.86%. The US non-farm payrolls data for July fell more than expected, indicating a slowdown in the US labour market. Together with US Fed officials hinting at a possible rate cut in September, this reinforced market expectations for a rate cut in September, leading to a weaker US dollar index and a rebound in LME zinc prices.

Overnight, the most-traded SHFE zinc 2409 contract opened at 22,850 yuan/mt. At the beginning of the session, SHFE zinc moved around the average daily line, reaching a high of 22,910 yuan/mt, then fell below the average daily line and fluctuated. Approaching the end of the trading session, SHFE zinc dipped to 22,755 yuan/mt and finally closed lower at 22,810 yuan/mt, down 30 yuan/mt, a decrease of 0.13%. Trading volume reduced to 72,697 lots, and open interest increased by 342 lots to 90,105 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the 20-day moving average forming resistance above. The macroeconomic optimism brought by domestic meetings has not yet faded, coupled with the pull from overseas futures prices, SHFE zinc maintained a high-level trend, with its center continuing to shift upwards.

Tin

In the night session yesterday, the most-traded SHFE tin contract closed at 251,640 yuan/mt, up 7,670 yuan/mt, an increase of 3.14%. The highest price was 252,700 yuan/mt, and the lowest was 248,510 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 premiums of 500-1,500 yuan/mt over SHFE 2409 tin contract, versus premiums of 400-1,500 yuan/mt for delivery brands and premiums of 700-1,100 yuan/mt for Yunxi brand. Tin prices continued to rise yesterday, and most downstream producers remained on the sidelines. Overall, the spot market transactions were relatively poor yesterday.

Nickel

On July 31, Jinchuan nickel was quoted at a premium of 1,600-2,000 yuan/mt, with an average of 1,800 yuan/mt, down 150 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 300 yuan/mt to a premium of 200 yuan/mt, with an average discount of 50 yuan/mt, up 100 yuan/mt from the previous trading day. In the morning, as the market rose sharply, spot premiums were generally lowered. Nickel briquette prices were 129,550-129,650 yuan/mt, an increase of 3,850 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 3,236 yuan/mt (nickel sulphate prices were 3,236 yuan/mt lower than nickel briquette prices).