SMM Morning Comment For SHFE Base Metals September 21

SHANGHAI, Sep 21 (SMM) –

Copper

LME copper prices opened at $8327.5/mt and closed at $8337.5/mt in overnight trading, a gain of 0.34%, with the low-end of $8318.5/mt and the high-end of $8384/mt. Trading volume was 14,000 lots, and open interest stood at 260,000 lots. The most active SHFE 2310 copper contract prices opened at 68890 yuan/mt and closed at 68920 yuan/mt last evening, up 0.23%, with the high-end of 69110 yuan/mt and the low-end of 68810 yuan/mt. Trading volumes stood at 15,000 lots and open interest stood at 127,000 lots. On the macro front, the Federal Reserve kept interest rates unchanged in the range of 5.25-5.5%. In terms of fundamentals, there were still inflows of imported copper. And the market expects warehouse receipts to gradually enter the spot market. The spot quotes in East China were still under pressure yesterday. However, as the copper prices shifted downward, downstream purchasing gradually increased. Inventories in South China declined yesterday, and stockholders raised prices, but downstream buyers purchased as required. Overall transactions were inactive. The decline in copper prices will stimulate downstream sentiment to prepare stocks in advance for the National Day holidays. It is expected that the upward space for copper prices will be limited in the near future.

Aluminum

Overnight, the most-traded SHFE 2310 aluminum contract opened at 19,405 yuan/mt, with its lowest and highest at 19,360 yuan/mt and 19,465 yuan/mt before closing at 19,415 yuan/mt, up 105 yuan/mt or 0.54% compared with the previous trading day. LME aluminum opened at $2,212/mt on Wednesday, then reached its high at $2,258.5/mt and finally closed at $2,254/mt, an increase of $38.5/mt or 1.74%.

On the macro front, the Fed kept its benchmark interest rate unchanged at a range of 5.25%-5.50%, in line with market expectations, but reflected the possibility of continuing to raise interest rates in the resolution. On a fundamental level, the growth rate of domestic aluminum supply is decelerating, the import window is open, and the market's overseas aluminum ingot supply is on the rise. In addition, due to no obvious improvement in the downstream operating rate during the peak season, aluminum ingots faced a minor inventory accumulation this week. Short-term low inventory and low warehouse receipts will support aluminum prices, though. SHFE aluminum contract is anticipated to oscillate at a high level. Follow-up attention should be paid to domestic aluminum inventories and downstream stockpiles before the National Day.

Lead

Overnight, LME lead prices opened at $2219/mt. Entering the European session, LME lead stocks increased by more than 2,000 tons, and LME lead fell to as low as $2,006/mt. The contract closed at $2,208.5/mt, a decrease of 0.52%.

The most active SHFE 2310 lead contract prices opened at 17350 yuan/mt last evening and finally closed at 17125 yuan/mt, down 0.9%. Open interest decreased 3341 lots to 80782 lots.

Zinc

Overnight, LME zinc prices opened at $2492.5/mt and closed up $53/mt or 2.13% at $2542/mt. The trading volume was 11218 lots, and open interest decreased 4823 lots to 221,000 lots. Last evening, the most active SHFE 2311 zinc contract prices opened at 21550 yuan/mt and closed at 21715 yuan/mt, up 315 yuan/mt or 1.47%. Trading volume stood at 58,000 lots, and open interest gained by 8698 lots to 106,000 lots. During the Asian Games, there will be restrictions on the production in the areas around Hangzhou. Zinc secondary consumer companies and terminal companies have plans to suspend production. Zhejiang’s local zinc ingot procurement enthusiasm was poor. At present, the support for zinc prices from the consumption side is limited.

Tin

SHFE tin fell to 220,170 yuan/mt overnight and closed down 0.29% at 221,230 yuan/mt.

Spot premiums and discounts barely changed yesterday. Small brand tin ingots were offered at discounts of 200 yuan/mt, premiums of 300-500 yuan/mt for delivery brands, and premiums of 1,000-1,200 yuan/mt for Yunxi brand, and discounts of 200-500 yuan/mt for imported tin brands. Trades in spot market were still muted. The minutes of the Federal Reserve meeting in the early morning showed that the probability of another interest rate hike in November is 29%, but the rate cut for the whole of next year is expected to be 40 basis points, down from 100 basis points. The Fed's attitude exceeded expectations and is still relatively hawkish.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 161,500 yuan/mt, and closed at 163,540 yuan/mt, up 1,870 yuan/mt. Trading volume rose by 45,057 lots, and open interest decreased by 9,432 lots. On the macro front, market participants should pay attention to the Fed’s interest rate decision on September 21, CST. The current market expectation is 5.50%, which is unchanged from the previous value. Market participants mostly believe that the Fed won’t raise interest rates this time, which will have a positive effect on commodities. In terms of fundamentals, as stockpiling activity came to an end, coupled with rising nickle prices and weakening downstream demand, yesterday’s spot market transaction activity declined. In summary, it is expected that nickel prices may continue to fluctuate downward in the future.