SMM Morning Comment For SHFE Base Metals (September 6)

SHANGHAI, Sep 6 (SMM) –

Copper

With Mixed US Employment Data, Domestic Positive News Supported Copper Prices [SMM Morning Comment]

LME copper opened at $9,015/mt overnight, initially dipping to $9,006/mt, then rising throughout the session to a high of $9,158/mt. It slightly retreated towards the end, closing at $9,100.5/mt, up 1.51%. Trading volume reached 23,000 lots, and open interest was 279,000 lots. The most-traded SHFE copper 2410 contract opened at 72,310 yuan/mt, initially dipping to 72,240 yuan/mt, then rising throughout the session to a high of 73,050 yuan/mt. It slightly retreated towards the end, closing at 72,610 yuan/mt, up 0.92%. Trading volume reached 64,000 lots, and open interest was 164,000 lots. Macro-wise, US employment data was mixed. August ADP employment increased by 99,000, below expectations and marking the smallest gain since January 2021. However, initial jobless claims for the week ending August 31 were lower than expected. The US dollar index weakened amid concerns, which supported copper prices. Domestically, according to news on September 5, the China-Africa Cooperation Forum - Beijing Action Plan (Summary) indicated that the Chinese government is willing to provide 360 billion yuan in funding over the next three years, offering new energy technology and products, and implementing 30 clean energy and green development projects, which may lead to an optimistic demand outlook. Additionally, the central bank indicated that there is still room for RRR cuts, providing further support for copper prices. On the fundamentals, the price spread between front-month and next-month contracts remained stable and evened out at times. Sellers increased their shipments, and there were recent arrivals of imported copper. With stable copper prices, overall consumption remained steady with slight growth. As of Thursday, September 5, SMM national copper stocks in major regions decreased by 8,900 mt to 255,700 mt, and by 23,400 mt compared to last Thursday, marking nine consecutive weeks of destocking, with the destocking speed accelerating to result in a new low in inventory since February. In summary, last night's data was mixed, with ongoing concerns about economic recession. However, domestic demand showed some improvement, and positive news was announced, providing some support for copper prices today.

Aluminum

Primary aluminum production slightly increased YoY, aluminum ingot inventory continues destocking [SMM Aluminum Morning Comment]

SMM, Sep 6: Overnight, the most-traded SHFE aluminum 2410 contract opened at 19,270 yuan/mt, with a high of 19,385 yuan/mt, a low of 19,250 yuan/mt, and closed at 19,300 yuan/mt, up 105 yuan/mt, an increase of 0.55%. On Thursday, LME aluminum opened at $2,392/mt, with a high of $2,410/mt, a low of $2,363/mt, and closed at $2,378/mt, down $21.5/mt, a decrease of 0.90%.

On the macro side, a US Fed rate cut in September is almost certain, and China continues to boost consumption. On the fundamentals side, supply remained stable MoM, with a slight increase YoY. The demand side is entering the traditional peak season, with consumption gradually recovering and aluminum ingot social inventory starting to destock. In the short term, aluminum prices are expected to still have upside potential, with attention needed on macro changes and the sustainability of downstream aluminum consumption.

Lead

Macro and Fundamentals Remained Weak, Future Lead Price Trends Depend on Costs [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,019.5/mt. Dragged by macro weakness and the news of Russia's OZ lead-zinc mine commissioned in advance, LME lead's trading focus further shifted downward, breaking the $2,000/mt mark, hitting a low of $1,988/mt, a new one-month low. By the end of the session, LME lead closed at $1,988/mt, down 1.36%.

Overnight, domestic lead ingot inventory accumulation intensified, and SHFE lead's overall trading focus shifted downward again. The most-traded SHFE lead 2410 contract opened at 17,000 yuan/mt. Initially, strong bearish forces pushed SHFE lead down to 16,895 yuan/mt. Later, as the tug-of-war between bulls and bears intensified, SHFE lead attempted but failed to reclaim the 17,000 yuan/mt mark, finally closing at 16,935 yuan/mt, down 0.94%. Its open interest was 52,754 lots, a decrease of 1,960 lots from the previous trading day.

Macro side, PBOC: There is still some room for RRR cuts, but further declines in deposit and loan interest rates face certain constraints. The US ISM services index expanded moderately for two consecutive months; the US ADP employment for August unexpectedly showed a gain of 99,000, the lowest in three and a half years; initial jobless claims in the US last week were 227,000, the lowest since early July; Challenger job cuts in the US for August were the highest for the month in 15 years, and year-to-date hiring was at a historical low. New evidence of a cooling labour market adds to economic concerns, supporting strong rate cut bets.

Fundamentals side, domestic lead ingot social inventory increased by over 10,000 mt, coupled with Russia's OZ lead-zinc mine commissioned in advance, further expanding the decline in lead prices. We also need to pay attention to the supply of scrap and the extent of losses in secondary lead smelting, including changes in lead ingot shipments from smelters and in production intentions of smelters.

Zinc

US ADP Employment Growth Slows, LME Zinc Fluctuates Downward [SMM Zinc Morning Comment]

SMM, Sep 6: Overnight, the US ADP employment growth hit a three-year low; OPEC+ postponed the start of capacity restoration for eight member countries by two months; Putin stated readiness for negotiations with Ukraine; the US Fed sought public comments on reforming discount window operations; Xi Jinping announced that China has elevated bilateral relations with all African countries to a strategic level; the PBOC indicated room for RRR cuts, though further reductions in deposit and loan interest rates face certain constraints; five departments, including the Ministry of Finance, announced zero tariffs on pharmaceuticals and medical devices in Hainan Free Trade Port; and Guotai Junan initiated a merger with Haitong Securities.

Overnight, LME zinc opened at $2,808/mt, initially fluctuating near the daily moving average, peaking at $2,811/mt. Subsequently, longs reduced positions, causing LME zinc to fluctuate downward, hitting a low of $2,721/mt during European trading hours. Later, LME zinc's focus shifted upward, fluctuating around $2,750/mt during the night session, ultimately closing down at $2,730.5/mt, a decrease of $72.5/mt or 2.59%. Trading volume increased to 13,296 lots, and open interest decreased by 852 lots to 222,000 lots. Overnight, LME zinc recorded a bearish candlestick, with LME inventory decreasing by 475 mt to 239,275 mt, a drop of 0.2%. The US ADP employment growth hit a three-year low, raising concerns about weak US economic growth. The market awaits Friday's non-farm payroll report, with expectations of a downward trend today.

Overnight, the most-traded SHFE zinc 2410 contract opened at 22,810 yuan/mt. Initially, longs reduced positions, causing SHFE zinc to plunge to a low of 22,590 yuan/mt. Subsequently, SHFE zinc's focus shifted upward, fluctuating around the daily moving average, ultimately closing up at 22,745 yuan/mt, an increase of 50 yuan/mt or 0.22%. Trading volume decreased to 138,000 lots, and open interest decreased by 1,678 lots to 101,000 lots. Overnight, SHFE zinc recorded a bearish candlestick. On the fundamentals side, the long-term ore supply tightness has eased, weakening the support for zinc prices from the supply side. The market awaits more macroeconomic guidance, with expectations of a downward fluctuation today.

Tin

The SHFE tin prices slightly rebounded during the night session, some downstream enterprises awaited better restocking opportunities [SMM Tin Morning Comment]

SMM, September 6: In the night session yesterday, the most-traded SHFE tin contract closed at 249,680 yuan/mt, up by 810 yuan/mt, an increase of 0.33%, with the highest at 251,180 yuan/mt and the lowest at 247,290 yuan/mt. During the early trading session yesterday, the domestic tin ingot brands' premiums and discounts offered by trading companies did not change much compared to recent days. Among them, small brand tin ingots were quoted at SHFE 2410 contract +0 to +500 yuan/mt, delivery brand prices at SHFE 2410 contract +400 to +800 yuan/mt, Yunnan Tin brand quoted at SHFE 2410 contract +800 yuan/mt, and imported tin brand spot prices at SHFE 2410 contract -400 yuan/mt. Yesterday, as tin prices continued to decline, most downstream enterprises restocked, while some awaited better restocking opportunities, making small purchases and adopting a wait-and-see attitude towards current prices. Some trading companies completed transactions of around one truck, while others completed 2-3 trucks. Overall, the spot market remained active yesterday.

Nickel

On September 5, Jinchuan nickel was quoted at a premium of 1,300-1,400 yuan/mt, with an average of 1,350 yuan/mt, up 200 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 350 yuan/mt to a premium of 100 yuan/mt, with an average discount of 125 yuan/mt, remaining flat compared to the previous trading day. On the morning of September 5, the futures market fluctuated downward, but spot premiums slightly increased compared to the previous working day, with a good trading atmosphere in the spot market and active downstream purchasing. The nickel briquette prices were 122,850-123,100 yuan/mt, down 825 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 5,297 yuan/mt (nickel sulphate prices were 5,297 yuan/mt higher than nickel briquette prices).