SMM Morning Comment For SHFE Base Metals December 29

SHANGHAI, December 29 (SMM) –
Copper
LME copper prices opened at $8637/mt and closed at $8615/mt in overnight trading, a drop of 0.93%, with the low-end of $8633/mt and the high-end of $8655.5/mt. Trading volume was 15,000 lots and open interest stood at 284,000 lots. The most active SHFE 2402 copper contract prices opened at 68970 yuan/mt and finished at 69030 yuan/mt last evening, down 0.68%, with the low-end of 68930 yuan/mt and the high-end of 69150 yuan/mt. Trading volume was 23,000 lots, and open interest stood at 150,000 lots. On the macro front, the number of initial jobless claims in the United States in the week to December 23 was 218,000, exceeding the expected 210,000, indicating that the labor market continues to cool down. Although it is conducive to increasing market confidence in the Federal Reserve's interest rate cut next year, due to many investment Investors closed their remaining currency positions, the U.S. index rebounded, and copper prices came under pressure. In terms of fundamentals, from the supply side, the current supply of tradable goods in Shanghai is relatively tight, while sellers in other regions are also clearing inventory at the end of the year. Arriving shipments of imported copper were delayed. Copper supply was tight this week. In terms of consumption, copper prices soared, and rising premiums and discounts have led to a decline in downstream purchasing enthusiasm. In the last week of the year, many companies are conducting year-end settlements, and purchased as required. Consumption is expected to continue to be weak. Copper prices will unlikely fall further due to support.
Aluminum
The most-traded SHFE 2402 aluminum contract opened at 19,445 yuan/mt overnight, with its low and high at 19,375 yuan/mt and 19,500 yuan/mt before closing at 19,475 yuan/mt, down 75 yuan/mt or 0.38%. LME aluminum opened at $2,393.5/mt yesterday, with its high and low at $2,394.5/mt and $2,353.5/mt respectively before closing at $2,367/mt, a decrease of $28/mt or 1.17%.
On the macro front, the annual rate of the U.S. core PCE price index in November was lower than expected, and the inflation index cooled down more than expected. In the third quarter, the U.S. real GDP was revised downward, and consumption fell short of expectations, which further strengthened the view that the Federal Reserve will turn to interest rate cut. The U.S. dollar index continued to fall, providing some support for aluminum prices. Domestic macro environment remained positive. After major state-owned banks lowered deposit rates, joint-stock banks have also lowered deposit rates. China's main goals this year are expected to be achieved. In terms of fundamentals, Qinghai Province has implemented power load management due to earthquake relief, which could potentially affect the aluminum supply. Demand tends to weaken. As the traditional off-season has arrived, and companies are beginning to increase their cash flow at the end of the year, the willingness to restock has declined. It is expected that the destocking of aluminum social inventory will slow down, but the inventory will still remain low. SMM predicts that the domestic social inventory of aluminum ingots will remain low in the near future, and the aluminum prices will remain firm in the short term due to upstream influences.
Lead
LME lead opened at $2085/mt and rose during the Asian trading hours yesterday, rising to $2097/mt during the European trading hours. It finally dropped and closed at $2084/mt, down $3/mt or 0.14%.
The most-traded SHFE 2402 lead contract opened at 15870 yuan/mt and fell 25 yuan/mt or 0.16% to close at 15850 yuan/mt last evening, briefly hitting the lowest point at 15820 yuan/mt and the highest point at 15885 yuan/mt.
Zinc
Overnight, LME zinc opened at $2642/mt and closed down $15/mt or 0.57% at $2627/mt. The trading volume was 6888 lots, and open interest increased 2533 lots to 197,000 lots. The imported zinc concentrate TCs fell by US$10/dmt month-on-month to US$80/dmt. Cost support for smelters has been strengthened. Poor economic data has affected investors' expectations for interest rate cuts and a mild recession in the next year, and the bullish sentiment still exists.
Overnight, the most-traded SHFE 2402 zinc contract opened at 21450 yuan/mt and fell slightly to close at 21520 yuan/mt, down 30 yuan/mt or 0.14%. Trading volume stood at 28,000 lots, and open interest gained by 495 lots to 89,000 lots. TCs continued to decline, and the cost-side support for smelters has increased. However, the weak performance of the domestic consumer market has little support for zinc prices. From a fundamental point of view, the upside space for SHFE zinc is limited.
Tin
SHFE 2402 tin contract moved sideways last night, and closed at 212490 yuan/mt, down 0.98%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands did not change much. Small brand tin ingots were offered at discounts of 200-600 yuan/mt compared to SHFE 2402 tin contract, versus premiums of 200-800 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 500-2000 yuan/mt imported brand tin ingots. Tin prices fell slightly in early trading yesterday, with traders reporting that downstream companies purchased a small amount of goods for immediate needs.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 129650 yuan/mt, and closed at 129510 yuan/mt,down 40 yuan/mt. Trading volume rose 31781 lots, and open interest increased by 1659 lots. From a macro perspective, impact of shipping crisis has faded. Previously, market expected the first interest rate cut by the US Fed in Q1 2024. From a fundamentals perspective, LME nickel inventory yesterday was 4,218 mt, half of which comes from Rotterdam, and the rest mainly from Singapore, Kaohsiung and Busan in Asia. In addition, the Dubai warehouse has also added 190 mt of nickel inventory. According to SMM statistics, LME inventory as of yesterday has rose by 15,684 mt compared to the beginning of the month. To sum up, the positive macro sentiment has been digested, and the fundamentals pressure on nickel prices is still high. It is expected that nickel prices may continue to decline in the future.