Base Metal Fundamental Outlook
Advisory Bazaar Info Services
🔶 Copper
On the macro front, US August core CPI rose more than expected, reviving expectations of a possible Fed rate hike in September. Meanwhile, Iran’s planned meeting with Gulf countries and the ceasefire along the western coast of the Red Sea have provided some signals of easing tensions in the Middle East.
The US Dollar Index rose briefly before retreating sharply, while copper prices continued to consolidate at elevated levels.
On the fundamental side, arrivals of domestic and imported copper cargoes increased, resulting in some improvement in spot availability. However, the overall supply situation remains relatively tight. Downstream buying on price dips has picked up slightly, although demand remains largely driven by immediate requirements.
Outlook: Copper prices are expected to remain in high-level consolidation today.
🔶 Aluminium
Expectations of higher US interest rates and a stronger US dollar continue to weigh on non-ferrous metals. Hawkish comments from Fed Chairman Warsh at the Jackson Hole symposium, along with stronger-than-expected August nonfarm payrolls, pushed the probability of a 25-basis-point Fed rate hike in September to around 60%.
US Treasury yields surged, while the US Dollar Index reached a 13-month high, putting pressure on the non-ferrous metals sector. However, uncertainty remains over the opening of safe commercial shipping routes through the Strait of Hormuz.
On the fundamental side, continued destocking in China, combined with recovering peak-season demand, is providing relatively strong downside support.
Outlook: Aluminium prices are expected to continue consolidating at elevated levels in the short term.
🔶 Lead
Last Friday, SHFE and LME lead weakened in tandem. Both LME and SHFE lead fell below their respective Bollinger middle bands, while bears actively increased positions, putting further pressure on prices. SHFE lead retreated towards the 16,000 yuan/mt level during the night session.
Fundamentally, domestic primary lead availability remains tight. Supply in Jiangsu, Zhejiang and Shanghai declined, with some suppliers selling out and suspending quotations. Both primary and secondary smelters continued to hold prices firm, while spot discounts narrowed.
Continued destocking of LME lead inventories is also providing underlying support to prices.
Outlook: Spot lead prices may come under slight pressure alongside futures and could remain subdued at elevated levels, fluctuating around 16,000 yuan/mt.
Key factors to watch: Whether SHFE lead can reclaim the 16,000 yuan/mt level and the Bollinger middle band, movements in the US dollar and LME non-ferrous sentiment amid changing rate expectations, and the sustainability of firm spot prices and actual transactions.
🔶 Zinc
LME zinc formed a bullish candlestick last Friday, although the 10-day moving average remains an overhead resistance level. US CPI data came in above expectations, increasing the probability of a Fed rate hike in September and supporting the US dollar.
However, zinc ingot exports have yet to be reflected in LME warehouse inventories. Persistently low LME inventories continue to provide some support to zinc prices.
SHFE zinc formed a bearish candlestick last Friday, with the 40-day moving average providing support below. During the night session, bulls reduced some positions. Nevertheless, low treatment charges (TCs) and continued inventory destocking are providing fundamental support to zinc ingot prices.
Outlook: SHFE zinc is expected to open lower and maintain a range-bound and volatile trend in the short term.
🔶 Tin
China’s tin social inventories shifted to destocking on September 11, while LME tin inventories fell to a fresh stage low. On the same day, China’s Ministry of Natural Resources announced that the country ranks first globally in reserves of 14 minerals, including rare earths, tungsten and tin.
Despite these supportive inventory developments, SHFE tin plunged 3.64% during the daytime session on September 11 and declined another 1.51% during the night session. The decline was mainly driven by expectations of a US Fed rate hike and stagflation concerns amid elevated oil prices. Downstream solder and electronics manufacturers have also become more cautious in procurement.
On the ore supply side, Myanmar’s Wa State exported 4,569 mt of tin concentrate in physical content to China in July, equivalent to around 1,077 mt of metal and down 27% month-on-month. Meanwhile, Indonesia’s Timah saw its August exports to China recover to the expected range.
Outlook: Tin prices may remain volatile and under pressure in the near term. However, declining inventories in China and at LME warehouses could provide fundamental support.