SMM Morning Comment For SHFE Base Metals January 31

SHANGHAI, January 31 (SMM) –
Copper
LME copper prices opened at $8581.5/mt overnight before reaching a low of $8544.5/mt and a high of $8650/mt, and closed at $8642/mt, a rise of 0.75%. Trading volumes were 22,000 lots and open interest stood at 280,000 lots. The most active SHFE 2403 copper contract prices opened at 69110 yuan/mt and finished at 69370 yuan/mt overnight, up 0.49%, with the low-end of 68960 yuan/mt and the high-end of 69430 yuan/mt. Trading volume was 31,000 lots and open interest stood at 153,000 lots. On the macro front, the IMF raised its global economic growth forecast to 3.1% in 2024 and 2.9% in October 2023, which boosted market sentiment. In addition, the Houthi armed commander said that the group is ready for a "long-term confrontation" with the United States and Britain, and the tense situation pulled commodities higher. In terms of fundamentals, from the supply side, imported copper began to flow into the domestic trade market, which had an impact on spot premiums and discounts, and supply continued to be ample at the end of the year. From the consumer side, many companies have closed for CNY holidays at the end of the month, and some companies that have not closed are bearish on the market outlook. The market's overall purchasing willingness was not strong, and it is expected that demand will be difficult to pick up before the CNY. The copper prices will remain at high levels.
Aluminum
The most-traded SHFE 2403 aluminium contract opened at 18,990 yuan/mt overnight, with its low and high at 18,970 yuan/mt and 19,055 yuan/mt before closing at 19,040 yuan/mt, up 90 yuan/mt or 0.47%. LME aluminum opened at $2,254.5/mt on Tuesday, with its low and high at $2,247.5/mt and $2,277.5/mt respectively before closing at $2,271.5/mt, up 0.91%.
On the macro front, US macro data demonstrated the resilience of the economy, and expectations for interest rate cuts once again cooled; In China, the macroeconomic environment was positive. The implementation of real estate “white list” and relaxation of purchase restrictions in Guangzhou, Suzhou and Shanghai greatly boosted domestic market sentiment. In terms of fundamentals, as CNY is drawing near, aluminium downstream industries slashed or halted their production, weakening demand and pushing up the inventory of aluminium ingot, but industry inventories remained at low levels driven by a high aluminum liquid ratio and downstream stockpiling before the CNY holiday. SMM predicts that the total domestic inventory accumulation during the 2024 CNY holidays may be lower than levels for the same period of previous years. In the short term, amid low inventory and no obvious imbalance between supply and demand, aluminium prices may fluctuate along with macro sentiment before CNY holidays.
Lead
Overnight, LME lead opened at US$2,172/ton. Economic data before the Fed's interest rate meeting were mixed. The contract finally closed. at US$2,178/ton, an increase of 0.28%.
The most active SHFE 2403 lead contract prices opened at 16255 yuan/mt last evening and finally closed at 16270 yuan/mt, up 0.12%. Open interest decreased 160 lots to 66441 lots.
Zinc
Overnight, LME zinc prices opened at US$2,570/ton, rising to US$2,570.5/ton before plummeting to a low of US$2,548/ton. During the night trading period, it reached a high of US$2,573.5/ton, and finally closed up at US$2,559/ton, up US$9/ton, or 0.35%. Trading volume reduced to 6,175 lots, and open interest decreased by 1,434 lots to 215,000 lots. LME zinc inventories fell by 1,000 tons to 189,925 tons, a decrease of 0.52%. The U.S. JOLTs job vacancy data in December was higher than the expected 8.75 million, rising to 9.026 million, a three-month high. The swap market has reduced the probability of the Federal Reserve cutting interest rates in March to about 40%. The macro sentiment is bearish, and LME zinc prices is under pressure. LME zinc prices is expected to run weakly and fluctuate.
Overnight, the most active SHFE 2403 zinc contract opened at a low of 21,280 yuan/ton, and reached a high of 21,370 yuan/ton. It finally closed up at 21,350 yuan/ton, an increase of 20 yuan/ton, or a decrease of 0.09%. The trading volume was reduced to 28,694 lots, and the position was reduced by 792 lots to 82,622.
Tin
SHFE 2403 tin contract inched lower overnight and swung on a soft note before closing at 218,070 yuan/mt, down 0.86%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 200-800 yuan/mt against SHFE 2403 tin contract, versus discounts of 300 yuan/mt to premiums of 200 yuan/mt for delivery brands, premiums of 300-500 yuan/mt for Yunxi brand, and discounts of 1000-1300 yuan/mt for imported brand tin ingots. Tin prices fell back yesterday, improving downstream willingness to purchase.
Nickel
On January 30, the most active SHFE nickel contract prices opened at 129800 yuan/mt and closed at 127190 yuan/mt, a drop of 2090 yuan/mt from the closing price of the previous trading day. The trading volume decreased by 17777 lots, and the open interest increased by 3839 lots. This shows that the bears were not very sure that the market outlook will continue to fall. The annualised core PCE price index in the United States in December was 2.9%, a decrease from both the previous value and the forecast value. The core PCE price index is a key indicator of private consumption inflation in the United States. The decline reflects the current inflation in the United States cooled down. From a fundamental point of view, downstream stocking came to an end. The transaction sentiment in the spot market has cooled down. That, combined with the arrivals of pure nickel, increased the supply of pure nickel. In summary, it is expected that the nickel price may fluctuate rangebound in the near term.