SMM Morning Comment For SHFE Base Metals On February 19

Copper

LME copper opened at $8395/mt last Friday night, with its session high at $8499.5/mt before closing up 1.8% at $8472/mt. Trading volume was 23,000 lots and open interest stood at 294,000 lots. SHFE was closed due to the Spring Festival holiday. On the macro side, due to the large drop in copper inventory levels at LME registered warehouses, LME copper price rose. China's Spring Festival holiday is over and the market has begun to gradually resume normal trading. The expectation that demand will begin to recover has also boosted copper prices. In terms of fundamentals, the domestic inventory level during the Spring Festival in 2024 was weaker than in previous years, and social inventories are also at a low level compared with previous years, but this will not have a major impact on the supply of copper after the holiday. In terms of consumption, since processing companies have stocked up before the holiday, demand is expected to recover slowly after the holiday. In terms of price, driven by the gradual return to normal sentiment in the domestic market, copper prices are expected to recover slightly.

Aluminium

LME aluminum opened at $2,220/mt last Friday, with its high and low at $2,238/mt and $2,214/mt respectively before closing at $2,217.35/mt, down by $6.5/mt or 0.29%.

Summary: On the macro front, the US CPI and PPI data in January exceeded expectations during the CNY. The Fed's interest rate cut expectation has not yet been implemented. The US dollar index fluctuates at a high level. However, new social financing and RMB loans hit a record high, and the financial market was loose, boosting market confidence. In terms of fundamentals, upstream aluminium smelters continued to produce, pushing up aluminium ingot inventory accumulation after CNY. However, the accumulation of aluminium ingots during CNY was less than expected, with a significant year-on-year decrease and a historical low in the past six years. On the whole, overseas interest rate cuts have not been implemented, but favourable domestic macroeconomic policies boosted market confidence. Although the aluminium market entered a traditional inventory accumulation, the extent is not as large as in previous years. Downstream processing companies resumed production and demand gradually picked up, which may support aluminium prices after CNY.

Lead

LME lead price first declined and then rose during the CNY holiday. It opened at $2,052.5/ton on February 9. During the week, LME Singapore lead stocks increased by 4,500 tons, which sent LME lead price to $1,994.5/ton, setting a new low in the past six months. In the second half of the week, as the market's expectations for post-holiday consumption increased, LME lead rebounded. It touched a high of $2,073.5/ton last Friday and finally closed at $2,070/ton, an increase of 1.07%. During the traditional Spring Festival holiday from February 9 to February 18, 2024, the SHFE was closed.

Zinc

LME zinc moved upwards after opening at $2358/mt last Friday, reaching $2390/mt before closing at $2388/mt, up $23/mt or 0.97%, Trading volume rose to 9023 lots, and open interest rose 380 lots to 246,000 lots. LME zinc inventory increased by 5000 mt to 264825 mt. The SHFE zinc market was closed during the Spring Festival holiday. The market is optimistic about domestic economic development and the macro sentiment is bullish. However, downstream consumption is almost stagnant during the Spring Festival. The scale of smelter production reduction is small, stocks are increasing, and supply is relatively loose. Zinc prices may hover sideways, and we will continue to pay attention to changes in domestic inventories after the Spring Festival and the production resumption of downstream companies.

Tin

Before the CNY holiday, 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 yuan/mt against SHFE 2403 tin contract, versus premiums of 0-500 yuan/mt for delivery brands, premiums of 700-800 yuan/mt for Yunxi brand, and discounts of 600 yuan/mt for imported brand tin ingots.Affected by the news of physical tax in Myanmar's Wa State, tin prices maintained the upward trend before the CNY holiday (Feb 8). Traders took CNY holidays and rarely purchased.

Nickel

Nickel prices fluctuated downward before the CNY holiday. The decline in nickel prices is mainly due to the gradual digestion of the positive macro sentiments in the early stage. The approval of mining quotas for nickel miens in Indonesia under RKAB is slow but picked up a little. The short-term nickel ore supply crunch has been alleviated to some extent. The hawkish speech after the Federal Reserve meeting affected market mood. From a fundamental perspective, the global pure nickel inventory accumulation trend remains unchanged despite the fact that pure nickel production increased in January. LME nickel inventory exceeded 70,000 mt, with the main increase coming from warehouses in Asia. Most downstream producers stocked up before the CNY holiday, and some have purchased enough raw materials for use after the holiday. Procurement will gradually resume at the end of the month. Nickel price is expected to swing on a soft note.