SMM Morning Comment For SHFE Base Metals (September 19)

SHANGHAI, Sep 19 (SMM) –

Copper

US Fed Cut Rates by 50 Basis Points, Copper Prices Rose [SMM Copper Morning Comment]

LME copper opened at $9,424/mt overnight, initially fluctuating and reaching a high of $9,444/mt. It then dipped, maintaining a wide fluctuation throughout, hitting a low of $9,393.5/mt, and finally closed at $9,400/mt, up 0.22%. Trading volume reached 24,000 lots, and open interest was 270,000 lots. The most-traded SHFE copper 2410 contract opened at 74,810 yuan/mt overnight, initially hitting a low of 74,680 yuan/mt. It then rose, maintaining fluctuations throughout, reaching a high of 75,050 yuan/mt, and finally closed at 74,910 yuan/mt, up 0.63%. Trading volume was 32,000 lots, and open interest was 143,000 lots. On the macro side, at 2 a.m. Beijing time, the US Fed significantly cut rates by 50 basis points, lowering the federal funds rate from 5.25%-5.50% to 4.75%-5.00%, marking the first cut since March 2020. Currently, Fed officials believe that with inflation nearing the 2% target and rising unemployment, they need to lower rates to the 4.25%-4.50% range by the end of the year, higher than their June forecast. The dot plot predicts that policymakers expect to cut rates by 25 basis points at both the November and December meetings this year. Copper prices rose ahead of the rate decision as the market widely anticipated the cut. On the fundamentals side, domestic smelters have passively reduced production, increasing downstream concerns about future supply. The spot market remained stable on the last trading day before delivery, with premiums expected to rise slightly after delivery today. Overall, the significant 50 basis point rate cut by the US Fed is expected to boost copper prices.

Aluminum

Interest Rate Cut was Announced, Fundamentals Remain Strong, Short-term Aluminum Prices Expected to Fluctuate Upward [SMM Aluminum Morning Comment]

SMM, Sep 19: Overnight, the most-traded SHFE aluminum 2410 contract opened at 19,960 yuan/mt, reached a high of 19,975 yuan/mt, a low of 19,855 yuan/mt, and closed at 19,930 yuan/mt, up 40 yuan/mt, an increase of 0.2%. The previous trading day, LME aluminum opened at $2,509/mt, reached a high of $2,542/mt, a low of $2,485/mt, and closed at $2,522/mt, up $15.5/mt, an increase of 0.62%.

Summary: On the macro front, the US Fed initiated a rate cut cycle with a 50 basis point reduction. The dot plot indicates that the Fed will cut rates by another 50 basis points this year and 100 basis points next year. Governor Bowman voted for a 25 basis point cut. Powell stated that the pace of rate cuts could be fast, slow, or paused depending on circumstances, with employment and inflation risks balanced. He did not see signs of an increasing likelihood of recession in the economy and did not declare victory over inflation. On the fundamentals side, domestic aluminum is expected to remain stable in the short term, while overseas production cuts are occurring, and future supply is gradually peaking. On the demand side, the market is gradually entering the peak consumption season, with aluminum demand performing well and aluminum social inventory decreasing effectively. The fundamentals of supply and demand are turning towards strong support, and aluminum prices are expected to fluctuate upward mainly under the backdrop of strong fundamentals and macro uncertainties.

Lead

With Underperformance in the Spot Market, Domestic Lead Prices Fluctuated Downward [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,013.5/mt and fluctuated downward during the Asian session to a low of $1,977.5/mt. During the European session, influenced by rate cut news, the US dollar index weakened, and LME lead fluctuated upward to a high of $2,042.5/mt, finally closing at $2,032/mt, up 1.04%.

Overnight, the most-traded SHFE lead 2410 contract opened at 16,510 yuan/mt, initially reaching a high of 16,515 yuan/mt. After bulls reduced their positions, it fluctuated around 16,400 yuan/mt, closing at 16,385 yuan/mt, down 0.4%.

Macro-wise, the US Fed initiated a rate cut cycle with a 50 basis point reduction. The dot plot indicates another 50 basis point cut this year and a further 100 basis point cut next year. Bowman voted for a 25 basis point cut. Powell stated that rate cuts could be fast, slow, or paused depending on circumstances, with employment and inflation risks balanced. He saw no signs of rising recession risks and did not declare victory over inflation. Chinese Commerce Minister Wang Wentao stated that China would continue negotiations until the last moment in response to the EU's anti-subsidy investigation into Chinese electric vehicles.

On the spot fundamentals, primary lead smelters that resumed production after maintenance are operating steadily, while secondary lead performance is poor. Some smelters that resumed production halted again after a few days due to market conditions. End-user consumption in the lead-acid battery market remains weak, and large enterprises are not highly motivated to produce, continuing to schedule production based on sales. After lead prices weakened, downstream enterprises became cautious and hesitant to purchase, with a strong wait-and-see sentiment. Overall market transactions are sluggish, and short-term lead prices are likely to continue fluctuating downward.

Zinc

US Fed's Rate Cut Exceeds Expectations, LME Zinc Shifts Lower [SMM Zinc Morning Comment]

SMM, Sep 19: Overnight, the US Fed initiated a rate cut cycle with a 50 basis point reduction. The dot plot suggests another 50 basis point cut this year and a further 100 basis point cut next year. Powell stated that the pace of rate cuts could be fast, slow, or paused depending on the situation, and there are no signs of an increased likelihood of recession in the economy. Hezbollah's walkie-talkies exploded in multiple locations, and Iran stated it would hold accountable those responsible for the attack on its ambassador in Lebanon. Hezbollah claimed to have attacked an Israeli military post. US new home starts increased at the fastest pace since April. The State Council of China discussed measures to promote venture capital development and support the listing of eligible scientific and technological enterprises at home and abroad. The Ministry of Foreign Affairs of China decided to take countermeasures against nine US military-industrial enterprises. During the 2024 Mid-Autumn Festival holiday, domestic trips reached 107 million, with total domestic tourist spending amounting to 51.047 billion yuan.

Overnight, LME zinc opened at $2,925/mt. Initially, LME zinc briefly consolidated around the daily moving average before bears increased positions, pushing LME zinc down rapidly to a low of $2,865/mt. It then consolidated around $2,880/mt. During European trading hours, LME zinc rebounded as shorts closed positions, lifting the price to around $2,925/mt, with a high of $2,934.5/mt. Near the night session, increased short positions caused LME zinc to shift lower, fluctuating around $2,890/mt at the close. It ultimately closed down at $2,884/mt, a decrease of $40/mt or 1.37%. Trading volume increased to 15,408 lots, and open interest rose by 307 lots to 242,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the daily K-line shifting lower. LME zinc inventory increased again by 4,750 mt to 251,850 mt, an increase of 1.92%.

Overnight, the most-traded SHFE zinc 2411 contract opened at 23,825 yuan/mt. Initially, bulls increased positions, pushing SHFE zinc above the daily moving average to a high of 23,890 yuan/mt. Subsequently, increased short positions caused SHFE zinc to shift lower to a low of 23,720 yuan/mt. It then slightly rebounded at the close, ending up at 23,840 yuan/mt, an increase of 100 yuan/mt or 0.42%. Trading volume decreased to 38,656 lots, and open interest increased by 4,721 lots to 89,397 lots. Overnight, SHFE zinc recorded a small bullish candlestick, with various moving averages providing support below. The US Fed's 50 basis point rate cut raised market concerns about the balance between a soft landing and recession, causing the dollar to first weaken and then strengthen. On the fundamentals side, consumption improved MoM, long-term supply pressure increased, and the upside space for zinc prices continued to be compressed.

Tin

SHFE tin prices fluctuated rangebound during the night session, with the spot market being relatively muted [SMM Tin Morning Comment]

SMM, September 19: In the night session yesterday, the most-traded SHFE tin contract closed at 255,960 yuan/mt, up 520 yuan/mt, an increase of 0.20%, with a high of 257,090 yuan/mt and a low of 255,040 yuan/mt. During the morning session yesterday, trading companies' quotes for various domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at premiums of 0-500 yuan/mt against SHFE 2410 contract, delivery brand prices were quoted at premiums of 200-700 yuan/mt against SHFE 2410 contract, Yunnan Tin brand was quoted at premiums of 200-800 yuan/mt against SHFE 2410 contract, and imported tin brands' spot prices were quoted at discounts of 700-200 yuan/mt against SHFE 2410 contract. Tin prices fluctuated rangebound during the morning session yesterday, with most downstream enterprises waiting for the interest rate meeting results and adopting a wait-and-see attitude, while some downstream enterprises restocked as needed in small quantities. Most trading companies saw scattered transactions. Overall, the spot market transactions were relatively quiet yesterday.

Nickel

On September 18, Jinchuan nickel was quoted at a premium of 1,700-2,000 yuan/mt, with an average of 1,850 yuan/mt, up 150 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 250-100 yuan/mt, with an average of 175 yuan/mt, up 125 yuan/mt from the previous trading day. On the morning of September 18, the futures market fluctuated, and spot premiums slightly narrowed compared to the previous working day. Nickel briquette prices were 121,550-122,250 yuan/mt, down 175 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,906.82 yuan/mt (nickel sulphate prices were 4,906.82 yuan/mt higher than nickel briquette prices).