SMM Morning Comment For SHFE Base Metals On August 19

SHANGHAI, August 19 (SMM) –

Copper

US Dollar Index Declined, Copper Prices Rose Overnight [SMM Copper Morning Comment]

Last Friday night, LME copper opened at $9,085/mt, briefly fluctuated at the beginning of the session, then dipped to $9,047/mt. It subsequently climbed throughout the session, reaching a high of $9,177.5/mt by the end and closing at $9,177.5/mt, up 0.43%. Trading volume reached 17,000 lots, and open interest was 285,000 lots. Last Friday night, the most-traded SHFE copper 2409 contract opened at 73,410 yuan/mt, dipped to 72,980 yuan/mt at the beginning, and then fluctuated upwards throughout the session, reaching a high of 73,850 yuan/mt by the end and closing at 73,790 yuan/mt, up 0.24%. Trading volume reached 44,000 lots, and open interest was 150,000 lots. Macro-wise, last Friday, the total number of housing starts in the US for July hit its lowest level since May 2020, causing the US dollar index to decline. Meanwhile, market expectations for a rate cut by the US Fed in September increased, which was bullish for copper prices. In terms of supply, although social inventories of copper cathode continued to decrease, the inflow of imported copper into the domestic trade market will provide some replenishment. On the demand side, the market holds a certain level of optimism for future demand. Facing rising copper prices, there has been some restocking activity, but the future trend of copper prices still needs to be monitored. Price-wise, attention should be paid to this week's Jackson Hole Economic Symposium, as copper prices are expected to have some upward potential.

Aluminum

Recently, the macroeconomic atmosphere has warmed up, and the operating rate of downstream aluminum has slightly increased [SMM Aluminum Morning Comment]

Last Friday night, the most-traded SHFE aluminum 2409 contract opened at 19,295 yuan/mt, with a high of 19,445 yuan/mt and a low of 19,395 yuan/mt, closing at 19,395 yuan/mt, up 105 yuan/mt, or 0.54%. On Friday, LME 3M aluminum opened at $2,358.5/mt, with a high of $2,374/mt and a low of $2,338.5/mt, closing at $2,368/mt, up $12/mt, or 0.509%.

Summary: Recently, US July real estate data performed poorly on the macro side, but consumer confidence and inflation data performed well, alleviating concerns about economic recession. Additionally, geopolitical tensions have risen again, providing support for the non-ferrous metals market. On the fundamentals side, domestic aluminum supply has basically peaked, with only sporadic resumption of production expected in places like Guizhou and Sichuan in the future. Downstream operating rates have slightly increased last week, thanks to improved orders for 3C and NEVs, with leading profile enterprises seeing a slight rise in operating rates. Meanwhile, under the traditional peak season and domestic economic stimulus policy, downstream consumption is expected to improve. Last week, aluminum social inventory continued to decline slightly, and the inventory turning point may appear in the second half of August, further weakening the supply-demand mismatch. Considering the recent strong performance of alumina, which provides solid cost support for aluminum, SMM expects that short-term aluminum prices may complete a bottoming out and show a rebound trend. Continued attention should be paid to aluminum consumption and changes in aluminum social inventory.

Lead

Last Friday night, LME lead first fell and then rose, while SHFE lead slightly increased [SMM Lead Morning Comment]

Last Friday night, LME lead opened at $2,034/mt. It ran weakly during the Asian session and continued to fluctuate downward after entering the European session. After dipping to $2,007/mt, it rebounded all the way and finally closed at $2,043/mt, up $7/mt, an increase of 0.34%.

Last Friday night, the most-traded SHFE lead 2409 contract opened at 17,700 yuan/mt. After initially declining to 17,510 yuan/mt, it rebounded all the way, reaching a high of 17,765 yuan/mt, and finally closed at 17,755 yuan/mt, up 75 yuan/mt, an increase of 0.42%.

Zinc

Supply Reduction Continues to Support Zinc Prices, SHFE Zinc Rises in Night Trading [SMM Morning Comment]

US Fed FOMC Member for This Year: It's Time to Consider Rate Cuts; Gaza Ceasefire Talks to Resume This Week, Iran May Temporarily Halt Retaliation Against Israel; Safety Concerns Arise at Two Major Nuclear Power Plants in Russia and Ukraine; CSRC: Strengthen Record Management and Supervision of Securities Evaluation Agencies; Three Ministries Propose New Regulations: Sponsorship and Audit Services Can Be Charged in Stages.

Last Friday, LME zinc opened at $2,782/mt, hovering around the daily moving average in the morning session, peaking at $2,789.5/mt at the beginning of the session. During the midday session, it fluctuated downward to a low of $2,741/mt, then rebounded to near the daily moving average, closing down at $2,770/mt, a decrease of $14/mt or 0.5%. Trading volume decreased to 7,190 lots, and open interest increased by 1,622 lots to 219,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with the 40-day moving average forming resistance above. LME inventory remained flat WoW at 260,600 mt. Last week, concerns about a US economic recession eased, boosting market sentiment, but new home construction data in the US fell short of expectations, and the real estate market showed no improvement, causing zinc prices to hover at highs.

Last Friday, the most-traded SHFE zinc 2410 contract opened at 23,095 yuan/mt. After the opening, SHFE zinc briefly fell around the daily moving average to a low of 23,045 yuan/mt. Subsequently, bulls increased their positions, causing SHFE zinc to fluctuate upward, peaking at 23,300 yuan/mt at the end of the session, and finally closing up at 23,280 yuan/mt, an increase of 35 yuan/mt or 0.15%. Trading volume decreased to 49,502 lots, and open interest increased by 2,451 lots to 91,642 lots. Last Friday, SHFE zinc recorded a bullish candlestick, with the 5-day moving average providing support below. Domestic consumption remained weak, but domestic and international TCs stayed low, and the tight supply situation at the mine end had not eased. In August, with smelter production cuts continuing, supply reduction continued to support SHFE zinc at high levels.

Tin

SMM Tin Morning Comment August 19

Last Friday's night session saw the most-traded SHFE tin futures contract close at 263,540 yuan/mt, up 950 yuan/mt, an increase of 0.36%, with a high of 264,580 yuan/mt and a low of 259,670 yuan/mt.

During last Friday's morning session, trading companies' quotes for various domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at a premium of 700-1,000 yuan/mt over the SHFE 2409 contract, delivery brands at a premium of 500-1,000 yuan/mt, Yunnan Tin at a premium of 1,000-1,200 yuan/mt, and imported tin brands at a premium of 200 yuan/mt over the SHFE 2409 contract. Last Friday, tin prices slightly declined, and downstream companies remained cautious with low purchasing intentions. Most trading companies had sporadic transactions, with a few trading companies transacting 10-20 mt. Overall, last Friday's spot market was relatively quiet.

Nickel

SMM Nickel Market Morning Comment (Aug 19)

Last week, nickel prices narrowly fluctuated near the cost support level, mainly influenced by macro sentiment and fundamentals. On the macro side, factors such as the US GDP data exceeding expectations and Japan's interest rate hike cooled market sentiment. However, low-profit and undervalued varieties saw marginal recovery after continuous declines. Last week, the US July CPI data showed a YoY increase of 2.9%, marking the fourth consecutive month of decline and the first time since March 2021 that it returned to the 2% range. The actual CPI and core CPI indices were slightly below expectations, further lowering the overall annual CPI rate from the expected 3.0% to 2.9%. Additionally, the initial jobless claims for the week ending August 10 in the US were 227,000, lower than expected and previous values, indicating a still strong job market. This provided positive signals for continued US economic growth and international economic recovery, raising expectations for a soft landing of the US economy in September, which could benefit commodity prices. From a fundamental perspective, due to the decline in nickel prices at the beginning of the month, the price difference between the domestic and overseas markets narrowed, leading to a sharp reduction in domestic nickel plate exports and more nickel plates circulating in the domestic market, resulting in increased domestic inventories. Despite this, overseas inventories continued to rise, mainly because deliverable electro-deposited nickel from Indonesia was registered as warrants in LME Asian warehouses, increasing futures inventories and putting pressure on nickel prices. On the demand side, the overall spot market transactions in August were relatively flat, mainly because downstream customers overstocked in advance during the nickel price decline, with some even stocking up for September, thereby preemptively consuming part of the Q3 demand for nickel plates. In summary, it is expected that the impact of supply surplus expectations on nickel prices in August will be weak. However, due to the intertwined effects of costs and macro news, the downside space is limited, and overall, prices will continue to fluctuate within a range.