SMM Morning Comment For SHFE Base Metals January 11

SHANGHAI, January 11 (SMM) –
Copper
LME copper prices opened at $8341/mt and closed at $8391/mt in overnight trading, a rise of 0.74%, with the low-end of $8320/mt and the high-end of $8399/mt. Trading volume was 25,000 lots, and open interest stood at 280,000 lots. The most active SHFE 2402 copper contract prices opened at 68010 yuan/mt and closed at 67920 yuan/mt last evening, down 0.01%, with the high-end of 68110 yuan/mt and the low-end of 67670 yuan/mt. Trading volumes stood at 17,000 lots and open interest stood at 121,000 lots. On the macro front, Fed official Williams said that policy restrictions should be relaxed only when it is convinced that the inflation rate is continuing to move toward 2%, dampening market expectations of interest rate cuts and putting pressure on copper prices. We need to pay attention to the US CPI data released today, as expectations for interest rate cuts may become clearer. In terms of fundamentals, from the supply side, a large amount of imported copper flows into domestic trade market, consumption recovery is limited, and the overall supply is relatively ample. However, there is room for arbitrage between Shanghai and Guangdong, and supply may goods flow into Guangdong, which may change the supply pattern. In terms of consumption, copper prices also dropped to new lows as premiums fell. Downstream consumption has picked up to a certain extent. If copper prices and premiums remain stable, active consumption is expected to be sustainable. In terms of price, the Federal Reserve's reappearance of "hawkish" speech dampened expectations of interest rate cuts, and copper prices are expected to be under certain pressure.
Aluminum
Overnight, the most-traded SHFE 2403 aluminium contract opened at 19,050 yuan/mt, with high and low at 19,050 yuan/mt and 18,975 yuan/mt before closing at 19,005 yuan/mt, up 5 yuan/mt or 0.03%. LME aluminium opened at $2,243.5/mt on Wednesday, with high and low at $2,258.5/mt and $2,230.5/mt respectively before closing at $2,235/mt, a drop of $7/mt or 0.31%.
From a macro perspective, the U.S. dollar dropped 0.16% overnight, and the market awaited inflation data due to be released this week for clues on when the Federal Reserve may cut interest rates. In terms of fundamentals, as the disturbance in the alumina supply faded, the domestic aluminium production entered a period of stable operation, with no significant fluctuations in the short term; as for demand, aluminium downstream operating rates continued to be weak, and the amount of aluminium ingot produced was expected to increase MoM. However, domestic aluminium ingot inventories continued to remain low, supporting aluminium prices. Short-term aluminium prices will remain volatile, and we need to pay close attention to the pace of the Federal Reserve's interest rate cuts, domestic consumption and inventory changes.
Lead
Overnight, LME lead prices opened at US$2,056/ton, reaching a maximum of US$2,091.5/ton, and finally closed at US$2,083/ton, an increase of 1.21%.
SHFE 2402 lead contract prices opened at 16415 yuan/mt last evening and finally closed at 16385 yuan/mt, up 0.64%. Open interest decreased 2900 lots to 34547 lots. In addition, the open interest of SHFE 2403 contract rose rapidly to 48,900 lots.
Zinc
Overnight, LME zinc prices opened at US$2,510.5/ton. During the European trading session, prices rose to an intraday high of US$2,538/ton before falling to a bottom of US$2,485/ton. It finally closed down at US$2,506/ton, down US$4/ton, or 0.16%. Trading volume rose to 8983 lots, and open interest added by 3627 lots to 209,000 lots. LME zinc inventory dropped by 1575 mt or 0.73% to 215225 mt. The chairman of the Federal Reserve stated that the interest rate cut plan will be slowed down this year. The market's expectations for the Fed's interest rate cut were once again exploited.
SHFE 2402 zinc opened at 21145 yuan/mt overnight and fell to a low of 21025 yuan/mt. Overnight, the most-traded SHFE 2402 zinc contract opened at 21290 yuan/mt and touched a low of 21110 yuan/mt before closing at 21075 yuan/mt, down 55 yuan/mt or 0.26%. Trading volume decreased 29508 lots, and open interest decreased by 306 lots to 66412 lots. The import window reopened and supply tightness eased.
Tin
SHFE 2402 tin contract rose overnight and closed at 206190 yuan/mt, up 0.90%.
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 100-500 yuan/mt against SHFE 2402 tin contract, versus premiums of 100-600 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 900-1200 yuan/mt imported brand tin ingots. Tin prices remained relatively low in early trading yesterday. Trading companies reported a slight decline in the purchasing enthusiasm of downstream companies.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 125110 yuan/mt, and closed at 124920 yuan/mt, down 830 yuan/mt. Trading volume fell by 37275 lots, and open interest decreased by 1847 lots. From a macro perspective, we still need to pay attention to the U.S. non-seasonally adjusted CPI annual rate for December and the U.S. interest rate meeting on February 1. This will be the first interest rate meeting in 2024. From a fundamental perspective, pure nickel warrants were destocked slightly yesterday, with decline mainly contributed by Kaohsiung. Nickel price is expected to inch lower.