SMM Morning Comment For SHFE Base Metals August 15

SHANGHAI, Aug 15 (SMM) –

Copper

LME copper prices closed at $8,292/mt last evening, down 0.04%. Trading volume was 17,000 lots and open interest stood at 281,000 lots. The most active SHFE 2309 copper contract prices finished at 68,170 yuan/mt last evening, up 0.28%. Trading volume was 22,000 lots and open interest stood at 165,000 lots. On the macro front, Kaplan, the former chairman of the Federal Reserve Bank of Dallas, said that the ratio of US government debt to GDP, deficit expectations and fiscal spending have already had an impact on the bond market. The market is more waiting for new catalysts to judge the downside space of copper prices. On the fundamentals, as of Monday August 14, SMM copper inventory across major Chinese markets decreased 9,900 mt from last Friday to 82,600 mt, up 12,300 mt YoY. Inventories in both east China and south China declined due to the small amount of goods arriving over the weekend, and downstream companies actively replenishing when copper prices were low. In addition, there were no large amounts of shipments arrivals of imported copper. In terms of consumption, the enthusiasm for downstream procurement was not strong, and the demand is expected to remain weak. Copper prices will have limited downside room in the near term.

Aluminum

Overnight, the most-traded SHFE 2309 aluminium contract opened at 18,210 yuan/mt, with the lowest and highest prices at 18,165 yuan/mt and 18,345 yuan/mt before closing at 18,290 yuan/mt, down 15 yuan/mt or 0.08% from the previous trading day. LME aluminium opened at $2,180/mt on Monday with its high and low at $2,180/mt and $2,143.5/mt respectively before closing at $2146.5/mt, a decrease of $29/mt or 1.33% from the previous trading day.

On the macro side, the positive signs emerge this week. The Federal Reserve is expected to raise interest rates, while China is focusing on expanding domestic consumption, and economic stimulus policies continue to be implemented. In terms of fundamentals, domestic aluminum ingots social inventory declined to nearly 500,000 mt, but with the resumption of production in Yunnan, the aluminum ingots inventory pressure is expected to increase. Entering the middle of August, the downstream operating rate, especially the aluminum extrusion, plate and strip plants, has improved, but whether the consumer side can support the further decline in aluminum stocks is unpredictable. In the short term, low inventories will still support aluminum prices, while positive macro sentiment and signs of recovery in consumption will provide confidence to the market. But expectations of increased supply still put upward pressure on aluminum prices. SMM predicted that the short-term aluminum prices will remain volatile, and follow-up attention should be paid to consumption and inventory.

Lead

LME lead prices inched down and finally closed at $2103.5/mt in overnight trading, down $25.5/mt, or 1.2%. The contract fell for three consecutive days.

The most active SHFE lead contract prices closed Monday’s night session at 15,870 yuan/mt, down 30 yuan/mt or 0.19%. Open interest decreased by 2,781 lots to 93,170 lots.

Zinc

LME zinc prices closed down $47/mt or 1.96% at $2,351/mt yesterday evening. The trading volume increased to 9,767 lots, and open interest increased 501 lots to 209,000 lots. LME zinc inventories increased by 375 mt to 92,175 mt, an increase of 0.41%. Overnight, the Fed's hawkish remarks bolstered the US dollar and that put pressure on LME zinc prices.

The most active SHFE 2309 zinc contract prices lost 140 yuan/mt or 0.68% to settle at 20,305 yuan/mt in overnight trading. Trading volumes decreased to 56,948 lots and open interest fell 667 lots to 91747 lots. Domestic macro sentiment has not yet improved, and a series of poor data has made the market worried about the economic outlook. At the same time, domestic smelters still maintain a relatively high output of 550,000 mt, while SMM social inventory has dropped by 0.07 million mt again, indicating that consumption is still showing resilience. It is not recommended to increase short positions excessively.

Tin

Overnight, SHFE 2309 tin contract price shook and fell sharply at the opening. After reaching a low price of around 211,170 yuan/mt, it recovered slightly but then maintain low volatility and finally closed at 211,660 yuan/mt, down 2.81%.

Spot discounts of small brands narrowed a little. Small brand tin ingots were offered at discounts of 300 yuan/mt, and premiums of 500 yuan/mt for delivery brand, premiums of 700-1,200 yuan/mt for Yunxi brand, and discounts of 600-900 yuan/mt for imported brand. Due to the sharp drop in SHFE tin prices yesterday, the purchase sentiment of downstream enterprises was high and the shipment was large. Some traders are now seeking opportunities to restock as their inventories have declined to almost zero, driven by dip buying last week.

Nickel

SHFE 2309 nickel contract opened at 163,000 yuan/mt at the night session on August 14, and closed at 164,710 yuan/mt, down 570 yuan/mt. Trading volume rose by 28,537 lots, and open interest increased by 3,723 lots.

The Indonesian nickel mine investigation may reduce the nickel ore supply, making the SHFE nickel prices rise since last Friday. On the fundamentals, due to price volatility and a slowdown of downstream purchases, yesterday’s nickel spot market transaction was not as good as last week. Overall, it is expected that the subsequent nickel price will shock downward.