European stocks are weak and the dollar is strong

Standard Bank issued the base metal daily report on July 27th, saying that aluminum has been the most interesting base metal in recent days, especially the dynamic changes in the Shanghai Futures Exchange (SHFE) aluminum futures contract. In recent days, Shanghai Aluminum’s open interest contracts have significantly increased. Overnight trading hours, aluminum futures contracts increased by 19%, or 88,494 contracts, bringing the total number of contracts to 549,578. Since the 25th, the SHFE aluminum futures open interest has surged by 35%. At the beginning of July, the figure was only 282,564, which is now equivalent to double in a few weeks. The increase in open interest is consistent with the strong price trend of aluminum futures, indicating that investors have increased a large number of new long positions.

Although China's aluminum production has been stronger than expected in recent months, SHFE stocks have continued to be under pressure, indicating that demand remains strong and destocking activity is evident. Given that high energy and alumina costs still put pressure on producer profits, a dramatic change in open interest may appear to be more speculative than driven by producer activity.

On the morning of the 27th, LME aluminum continued to rise, and the market had a good two-way interest. Aluminum's recent technical breakthrough has begun to encounter resistance. Affected by the slight strengthening of other base metals and the US dollar, aluminum prices have dropped back to US$2,650/tonne.

Elsewhere, copper and other base metals were under pressure, attributed to the weakness of European stock markets and the strength of the US dollar to suppress prices. In addition to aluminum, the turnover of base metals has been disappointing, and external factors continue to dominate the market, especially the continuing US debt ceiling negotiations. As pointed out on the 26th, the current strike of Chilean miners is providing support for prices, but it is not enough to push prices higher due to the general uncertainty in the wider global market. Before the US market opened, copper fell back to US$9,770/ton, driving lead and zinc lower.

Nickel remained stable, but its performance was normal. The price was sideways and the trading volume was light. However, during the period tin found a decent support level, the price once again touched 29,000 US dollars / ton, climbed above its 100-day moving average, for the first time since mid-May. The declining LME inventory over the past month or so seems to be a key support factor for tin, and current tin inventory has fallen back to early May levels.