China: SHFE base metal inventory moves north w-o-w

The market is witnessing a positive trend as indicated by the weekly inventory data from the Shanghai Futures Exchange (SHFE). With the exception of aluminium and lead, all other commodities have experienced an upswing in warehouse inventory, accompanied by a rise in futures.

The upward trajectory in the index is consistent with the official data released by the National Bureau of Statistics (NBS) on Thursday, which shows that China's manufacturing PMI stood at 49.7 in August 2023, marking a 0.4 index point increase from the previous month. However, it decreased by 0.4 from 50.1 in August 2022.

According to Caixin's report, both supply and demand in the manufacturing sector expanded during August. Jin Zhuanglong, the head of China's Ministry of Industry and Information Technology (MIIT), emphasized the importance of implementing measures to support enterprises in the manufacturing sector during discussions with some of China's largest manufacturers.

On Wednesday, two of China's largest cities took steps to relax mortgage restrictions, while the country's leading banks expressed growing concerns about the escalating turmoil in the property sector. These developments come as Beijing intensifies its efforts to stabilize the struggling economy.

Guangzhou, ranked as China's fifth-largest city, and the technological hub of Shenzhen jointly announced the relaxation of mortgage restrictions. This adjustment will enable prospective homebuyers to access preferential loans for their first-home purchases, irrespective of their prior credit history.

Commodity-wise inventories

Aluminium

In SHFE warehouses, aluminium inventories decreased marginally by 9% w-o-w. Total inventories were assessed at 89,604 t, down from 98,114 t last week. SHFE aluminium futures increased by 1.8% w-o-w to RMB 18,871/t ($2,544/t). The domestic aluminium market is currently experiencing a hike in demand after production resumption in Yunnan province. Furthermore, there is a noticeable recovery in demand from the downstream sectors.

Copper

Copper stocks in SHFE warehouses increased sharply to 46,591 t this week from 40,585 t last week. Similarly, copper futures inched up by 0.8% w-o-w to RMB 69,265/t ($9,430/t). Downstream processing companies have been cautious in their purchasing decisions, primarily due to concerns about soaring prices.

Nickel

Nickel stocks continued the uptrend this week to 3,800 t from last week's 3,351 t. Nickel prices moved down by 1.4% w-o-w to RMB 165,937/t ($23,096/t) compared to RMB 168,352/t ($22,453/t) last week. In terms of the fundamentals, there was a lacklustre performance in spot market transactions, and downstream demand remained subdued.

Zinc

Zinc inventories in major SHFE warehouses remained largely stable w-o-w, only a slight hike of 0.3% was noticed. Currently, the inventory stands at 43,181 t compared to 43,054 t last week. Meanwhile, future prices are up by 2.9% w-o-w to RMB 20,880/t ($2,783/t).

Lead

Lead inventories remained fell slightly, reaching 51,761 t against last week's 53,600 t. Lead future prices slightly up by 1% w-o-w to RMB 16,478/t ($2,238/t).