SMM Morning Comment For SHFE Base Metals On February 1

SHANGHAI, February 1 (SMM) –
Copper
LME copper prices opened at $8630/mt and closed at $8621.5/mt last evening, down 0.31% with the high-end of $8704.5/mt and the low-end of $8591.5/mt. Trading volume was 29,000 lots and open interest stood at 284,000 lots. The most active SHFE 2403 copper contract prices opened at 69440 yuan/mt and closed at 69360 yuan/mt last evening, up 0.14%, with the high-end of 70000 yuan/mt and the low-end of 69310 yuan/mt. Trading volumes stood at 41,000 lots and open interest stood at 154,000 lots. On the macro front, U.S. ADP employment increased by 107,000 in January, which was less than the expected increase of 150,000. The U.S. index fell and copper prices surged higher. However, copper prices fell sharply later as Federal Reserve Chairman Jerome Powell said a rate cut in March was unlikely. In terms of fundamentals, from the supply side, imported copper continues to impact the domestic trade market, and the supply of copper is relatively abundant; in terms of consumption, basically all small factories were closed for CNY holiday, and only some large enterprises are still purchasing. Downstream purchasing interest was not strong, and demand is expected to continue to weaken before CNY. Due to the influence of macro sentiment, copper prices will move strongly in the near future.
Aluminum
The most-traded SHFE 2403 aluminum contract opened at 19,050 yuan/mt overnight, with its low and high at 19,010 yuan/mt and 19,185 yuan/mt before closing at 19,010 yuan/mt, unchanged from the previous trading day. LME aluminum opened at $2,271.0/mt on Wednesday, with its low and high at $2,261.0/mt and $2,297.0/mt respectively before closing at $2,285.0/mt, up 0.59%.
On the macro front, US Fed has kept interest rate unchanged for four consecutive months, hinting that it is open to interest rate cuts, but may not take swift action; 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$2,175.5/ton. LME lead stocks increased by more than 3,000 tons, dragging down LME lead to a low of US$2146.5/ton. The Federal Reserve did not adjust interest rates as scheduled, the US dollar fell sharply, and LME lead stopped falling and repaired some of its losses, finally closing at US$2,162/ton, a decrease of 0.73%.
Overnight, the most active SHFE 2403 lead contract opened at 16210 yuan/mt. Due to the weaker consumption, the prices lead dropped to a 3-week low of 16120 yuan/mt. The contract closed at 16190 yuan/mt, a decrease of 0.43%. Open interest stood at 62538 lots, a decrease of 1812 lots from the previous trading day.
Zinc
Bets on the Fed's interest rate cut in March decreased, macroeconomic sentiment is negative for zinc prices [SMM zinc morning comment]
Overnight, LME zinc opened at US$2,562.5/ton with the low-end of US$2,515/ton. It finally closed down at US$2,528/ton, down US$40/ton, or 1.56%. The trading volume increased to 10,439 lots, and the open interest increased by 1,858 lots to 217,000 lots. LME zinc inventories increased by 9,500 tons to 199,425 tons, an increase of 5%. ADP data showed that the United States increased 107,000 jobs in January, which was less than the expected increase of 150,000. The increase in December last year was revised downward to 158,000 people, the labor market is gradually cooling, and the macro sentiment was bearish. LME zinc is expected to run weakly in the short term.
Overnight, SHFE zinc prices opened as low as 21,200 yuan/ton, and it touched a high of 21,310 yuan/ton. As bulls took profit, SHFE zinc prices dropped to a low of 21,140 yuan/ton, and finally closed down at 21,145 yuan/ton, down 180 yuan/ton, or 0.84%. The trading volume decreased to 245,822 lots, and the open interest decreased by 1,604 lots to 79,968 lots. SHFE zinc prices are expected to be weak in the short term.
Tin
SHFE 2403 tin contract inched lower and then rebounded, before closing at 219,000 yuan/mt overnight, up 0.41%.
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 300-1,000 yuan/mt against SHFE 2403 tin contract, versus discounts of 200 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 300-800 yuan/mt for Yunxi brand, and discounts of 1000-1100 yuan/mt for imported brand tin ingots. Yesterday, tin prices swung on a soft note. Downstream companies barely showed any purchasing interest. Traders reported that inquiries and purchasing were poor.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 127000 yuan/mt, and closed at 126990 yuan/mt, down 200 yuan/mt. Trading volume fell by 32225 lots, and open interest increased by 590 lots. On the macro front, we need to pay attention to the interest rate meeting to be announced by the Federal Reserve on the evening of February 1. The current market expectation for this interest rate meeting is that interest rate will be kept unchanged. From a fundamental point of view, downstream stocking is about to end, so the transaction sentiment in the spot market has cooled down. With the arrival of some pure nickel, the supply of pure nickel has increased. Nickel price is expected to swing on a soft note.