SMM Morning Comment For SHFE Base Metals August 30

SHANGHAI, Aug 30 (SMM) –

Copper

LME copper prices opened at $8,428/mt on Tuesday, and hit a low of $8,363/mt, but rebounded to a high of $8,458/mt towards the closing session, and finally closed up 1.15% at $8,455/mt. Trading volumes were 14,000 lots, and open interest stood at 281,000 lots. The most-traded SHFE 2310 copper contract opened at 69,100 yuan/mt, and closed up 0.56% at 69,480 yuan/mt. Trading volume was 37,000 lots and open interest stood at 155,000 lots.

On the macro front, the Job Openings and Labor Turnover Survey (JOLTS) report released by the U.S. Department of Labor on Tuesday showed that the number of job vacancies in July was 8.827 million, a decline for the third consecutive month, unveiling easing of pressure on the labor market. The market's bets on the Fed's suspension of interest rate hikes in September increased, and they also expected that interest rate hikes in November are unlikely to unfold. Therefore, the U.S. dollar index plunged. In terms of fundamentals, premiums and discounts in East China remained stable yesterday, and copper cathode futures prices stood high, blunting buying appetites of downstream buyers. However, at the end of the month, traders were more enthusiastic about purchasing goods at low premiums. Inventory in South China declined for 9 consecutive days. There was little change in shipments and arrivals of domestic coppers. As inventory fell to a low level, spot premiums and discounts fell yesterday, and some downstream buyers who had rigid demand were forced to accept high premiums. In terms of consumption, given high copper price, downstream buyers were in a wait-and-see mood. Therefore, copper market activity appeared lukewarm. In terms of price, tightening monetary policy in the United States may witness a turning point, and copper prices will run strongly.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,660 yuan/mt, with the lowest and highest prices at 18,650 yuan/mt and 18,725 yuan/mt before closing at 18,700 yuan/mt, up 50 yuan/mt or 0.27% from the previous trading day. LME aluminium opened at $2,152/mt on Tuesday with its high and low at $2,179.5/mt and $2,152/mt respectively before closing at $2,169/mt, an increase of $18.5/mt or 0.86% from the previous trading day.

On the macro side, although there are still many uncertainties in overseas markets, the positive impact of current domestic favorable policies persists. In the fundemantals, with the upcoming arrival of the traditional peak season in September, market sentiment improved. And aluminum ingots inventory remained low, giving support to aluminum prices. Domestic aluminum market maintained a state of simultaneous increase in supply and demand. The proportion of molten aluminum output remained high while aluminum ingot production was limited. The influx of imported aluminum ingots after the import window opened and the release of Southwest capacity may impede destocking progress, but inventory accumulation amount won’t be large. Overall, the imbalance between supply and demand is not prominent. Aluminum prices may fluctuate upward this week. In the follows-up, market participators still need to pay attention to changes in domestic aluminum inventories and downstream recovery.

Lead

LME lead opened at $2,159/mt on Tuesday, and declined to a low of $2,132/mt, weighed down by falling SHFE lead, but shot up to a high of $2,194.5/mt at night session on weakening US dollar index, and finally closed up 1.13% at $2,184.5/mt.

Overnight, SHFE 2310 lead contract opened at 16,185 yuan/mt, and rebounded to 16,300 yuan/mt with muted demand and cost factor against warrant inventory reduction, and finally closed up 0.55% at 16,310 yuan/mt. Open interest rose 922 lots to 104,000 lots.

Zinc

Overnight, the US June FHFA House Price Index recorded a monthly rate of 0.3%; the US June S&P/CS 20-City Home Price Index recorded a year-on-year rate of -1.17%; the US July JOLTs Job Openings recorded 8.827 million, well below the market expectation of 9.4-9.5 million. The US August Conference Board Consumer Confidence Index recorded 106.1. The Ministry of Finance stated that in the January-July period, the operating revenue of state-owned enterprises increased by 4.3% YoY, and their total profits increased by 3.9%YoY. Overnight, LME zinc opened at $2,400/mt, reaching a high of $2,449/mt and ha low of $2,393.5/mt before closing at $2,446.5/mt, with a trading volume of 10,945 lots and an open interest of 203,000 lots. LME zinc recorded eight consecutive days of gains, with support provided by the 5-day moving average. Overnight, LME zinc inventories decreased by 325 mt to 149,025 mt, a decrease of 0.22%. LME zinc inventories declined, and the US July JOLTs Job Openings recorded 8.827 million, causing the US dollar index to weaken. Overnight, SHFE zinc opened at 20,790 yuan/mt. The bears increased their positions, causing the center of gravity of SHFE zinc to slightly sink and hit a low of 20,725 yuan/mt. Later, the bulls entered the market and SHFE zinc fluctuated higher to around 20,950 yuan/mt, reaching a high of 20,975 yuan /mt, and finally closed at 20,935 yuan/mt, up 190 yuan/mt, or 0.92%, with a trading volume of 76,844 lots and an open interest of 110,000 lots. It is necessary to continue to pay attention to zinc price trend after macro impact wanes.

Tin

Overnight, SHFE 2309 tin contract price quickly pulled up after the low opening. Then it rebounded and maintained a sideways trend, and finally closed at 213,730 yuan/mt, up 0.91%.

Spot premiums and discounts changed little on August 28 morning. Small brand tin ingots were offered at discounts of 200 yuan/mt, and premiums of 100-600 yuan/mt for delivery brands, among which some enterprises with less inventory shipping at the premium of 700 yuan/mt, premiums of 800-1,300 yuan/mt for Yunxi brand, and discounts of 300 yuan/mt for imported brands. Even as tin prices fell back yesterday, transactions barely increased as downstream enterprises have restocked earlier.

Nickel

SHFE 2309 nickel contract opened at 170,300 yuan/mt at the night session on August 29, and closed at 167,600 yuan/mt, down 2,400 yuan/mt. Trading volume dropped by 53,651 lots, and open interest increased by 3,974 lots.

From a macro perspective, Federal Reserve Chairman Jerome Powell said in his speech yesterday night that the Fed was ready to raise interest rates further under appropriate circumstances. The above-mentioned situation was good for the US dollar and bad for commodities, which will suppress the prices of commodities and put pressure on the non-ferrous metals sector. In the fundamentals, spot market transactions were depressed. Some upstream companies were eager to ship at lower premiums, but the downstream inventory was still at a high level due to previous purchases, causing downstream demand lack of support. So, nickel prices are expected to fluctuate in the future.