SMM Morning Comment For SHFE Base Metals (Oct 18)

SHANGHAI, Oct 18 (SMM) –

Copper

"Terrifying Data" Exceeded Expectations, US Fed's Rate Cut Likely to be Reduced [SMM Copper Morning Comment]

LME copper opened at $9,491/mt overnight, initially fluctuating upward to a high of $9,542/mt, then declining to a low of $9,477.5/mt near the close, and finally rebounding slightly to close at $9,506.5/mt, down 0.88%. Trading volume reached 21,000 lots, and open interest was 278,000 lots. The most-traded SHFE copper 2411 contract opened at 76,300 yuan/mt overnight, initially fluctuating rangebound to a high of 76,530 yuan/mt, then declining to a low of 76,110 yuan/mt near the close, and finally rebounding slightly to close at 76,410 yuan/mt, down 0.4%. Trading volume reached 22,000 lots, and open interest was 137,000 lots. Macro side, US September retail sales month-on-month recorded 0.4%, slightly above expectations; initial jobless claims for the week ending October 12 recorded 241,000, below the expected 260,000. The data reinforced expectations that the US Fed will cut interest rates at a slower pace over the next year and a half, pushing the US dollar index higher and putting pressure on copper prices. Additionally, the market is awaiting China's Q3 economic output data to be released today, which may provide insights into demand prospects. Fundamentally, recent market spot transactions have been dominated by imported non-registered sources. Although copper prices rebounded during the day, downstream purchasing interest remained average, with bargain down purchasing prices. Some traders had to lower prices to ensure transactions, but overall, both traders and downstream activity levels were low, and market trading was sluggish. According to SMM data, as of Thursday, October 17, SMM copper inventories in major regions across China increased by 9,000 mt to 229,000 mt compared to Tuesday, and by 64,000 mt compared to pre-holiday levels, marking the largest inventory buildup in recent years over the two weeks post-holiday. Price side, downstream demand is still slowly recovering, and it will take some time to digest copper inventories. Copper prices are expected to fluctuate downward today.

Aluminum

US September retail sales exceed expectations, potentially reducing the extent of US Fed interest rate cuts. Aluminum ingot maintains destocking pace [SMM Aluminum Morning Meeting Summary Oct 18]

Overnight, the most-traded SHFE aluminum 2412 contract opened at 20,565 yuan/mt, reaching a high of 20,635 yuan/mt and a low of 20,550 yuan/mt, closing at 20,565 yuan/mt, up 35 yuan/mt or 0.17% from the previous close. On Thursday, LME aluminum opened at $2,581.5/mt, hitting a high of $2,598/mt and a low of $2,543/mt, closing at $2,557.5/mt, down $30/mt or 1.16%.

Summary: Macro front, the overnight US dollar index rose by 0.25%. Data on Thursday showed that US retail sales in September grew by 0.4%, slightly above expectations. The number of initial jobless claims in the US last week was recorded at 241,000, lower than the market expectation of 260,000, enhancing market expectations that the US Fed will cut interest rates at a slower pace over the next year. Domestically, five departments held a press conference on Thursday, introducing a series of policies to continue stabilizing the real estate market. Fundamentals side, the growth rate of domestic aluminum supply slowed, alumina prices surged rapidly, and aluminum industry costs increased significantly. Demand side, downstream operating rates in October remained stable overall, with continued attention needed on end-use demand changes in construction and power sectors. Overall, the supply-demand mismatch in the aluminum market is not prominent, and a short-term fluctuating trend is expected to continue. Continuous attention should be paid to domestic consumption conditions and changes in international macro sentiment.

Lead

Supply increase exceeds demand and macro factors pressure base metals; short-term lead price trend is weak [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,090/mt, fluctuated upward after the opening, peaked at $2,102.5/mt during the European session, but weakened due to market concerns over downstream consumption and a stronger US dollar index. It dipped to $2,065/mt at the end of the session and closed at $2,068.5/mt, down 0.79%.

Overnight, the most-traded SHFE lead 2411 contract opened at 16,595 yuan/mt, briefly touched a high of 16,675 yuan/mt at the beginning of the session, then fluctuated downward due to long position reductions, hitting a low of 16,555 yuan/mt, and finally closed at 16,570 yuan/mt, down 0.9%.

Macro side, the European Central Bank cut interest rates by 25 basis points again, lowering the deposit facility rate from 3.5% to 3.25%. US retail sales in September slightly exceeded expectations, reinforcing the expectation of a 25 basis point interest rate cut by the US Fed. Several major Chinese banks started to lower deposit rates again from today, with some major banks reducing the listed rate for term deposits by 25 basis points. Ding Xuexiang, member of the Standing Committee of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, emphasized during his research in Henan and Jiangsu: intensifying efforts to implement existing policies and a package of incremental policies to strive to achieve the annual economic and social development goals.

Fundamentally, due to the delivery of the SHFE lead 2410 contract this week, social inventory of lead ingots increased significantly. Additionally, both primary and secondary lead smelters increased production this week (resuming production after maintenance and new capacity coming online), leading to a temporary increase in lead ingot supply. During this period, although some smelters underwent unexpected maintenance and there were environmental inspections in Anhui, the ample supply of lead ingots remained unchanged. Currently, both supply and demand in the lead market have increased, but as the supply increase exceeds demand and macro factors pressure base metals, the short-term lead price trend is weak.

Zinc

SHFE zinc rose during the night session, focus on today's domestic economic data release [SMM Zinc Morning Comment Oct 18]

The European Central Bank cut interest rates by 25 basis points again; US September retail sales growth slightly exceeded expectations; Israel claimed to have killed Hamas leader Sinwar; Hezbollah: confrontation with Israel has entered a new escalation phase; several major banks in China will lower deposit rates starting today; Vice Premier of the State Council: strengthen and improve the implementation of existing policies and a package of incremental policies; five departments: increase the credit scale of "white list" projects to 4 trillion yuan by the end of the year; Shanghai: the minimum down payment ratio for the second improved housing is adjusted to 25%.

Overnight, LME zinc opened at $3,045/mt, initially fluctuated along the daily moving average, reached a high of $3,093/mt, then quickly fell to a low of $2,978/mt. Subsequently, LME zinc rebounded from the low and rose above the daily moving average, finally closing down at $3,044/mt, down $18/mt, a decrease of 0.59%. Trading volume decreased to 11,044 lots, and open interest decreased by 2,230 lots to 252,000 lots. Overnight, LME zinc recorded a bearish doji, with the 40-day moving average providing support. LME zinc inventory increased by 1,275 mt to 241,800 mt, an increase of 0.53%. US September retail sales data growth slightly exceeded expectations, reinforcing market expectations for a 25 basis point interest rate cut by the US Fed, and market sentiment recovered somewhat, leading to a rebound in LME zinc during the session.

Overnight, the most-traded SHFE zinc 2411 contract opened at 24,630 yuan/mt, initially dipped to 24,625 yuan/mt, then rose all the way to a high of 25,075 yuan/mt. Near the end of the session, SHFE zinc maintained a fluctuating trend, finally closing up at 24,950 yuan/mt, up 405 yuan/mt, an increase of 1.65%. Trading volume decreased to 96,774 lots, and open interest decreased by 242 lots to 96,305 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 5-day moving average forming resistance. Driven by the overseas market trend and supported by weak supply, SHFE zinc rose all the way, recovering part of the previous losses. Focus on today's release of a series of economic data from China.

Tin

SHFE tin prices fell to a weekly low [SMM Tin Morning News Oct 18]

SMM，October 18: Yesterday, the closing price of the most-traded SHFE tin contract was 256,440 yuan/mt, down 6,540 yuan/mt, a decrease of 2.49%. The highest price was 257,880 yuan/mt, and the lowest was 255,390 yuan/mt. During yesterday's morning session, the premiums and discounts quoted by trading companies for various domestic tin ingot brands did not change much compared to recent days. Among them, small brand tin ingots were quoted at premiums of +0~+200 yuan/mt against the SHFE 2411 contract, delivery brand prices were quoted at premiums of +200~+600 yuan/mt against the SHFE 2411 contract, Yunnan tin brand quotations against the SHFE 2411 contract were +600~+800 yuan/mt, and imported tin brand spot quotations were -700 yuan/mt against the SHFE 2411 contract. Yesterday, tin prices fell back at the end of the session, with most downstream companies waiting for market sentiment to further ferment. Some trading companies made scattered transactions, and a few trading companies traded 20-30 mt. Overall, the spot market transactions were mediocre yesterday.

Nickel

On October 17, Jinchuan nickel was quoted at a premium of 1,400-1,500 yuan/mt, with an average of 1,450 yuan/mt, remaining flat compared to the previous trading day. Norilsk nickel was quoted at a discount of 400-200 yuan/mt, with an average of 300 yuan/mt, down 25 yuan/mt compared to the previous trading day. On the morning of October 17, the futures market fluctuated, and there was no significant change in spot premiums compared to the previous working day. Nickel briquette prices were 132,850-133,450 yuan/mt (out of stock), up 565 yuan/mt compared to the previous trading day. The price spread between nickel briquette and nickel sulphate was about 4,945 yuan/mt (nickel sulphate prices were 4,945 yuan/mt lower than nickel briquette prices).