SMM Morning Comment For SHFE Base Metals (Oct 23)

SHANGHAI, Oct 23 (SMM) –

Copper

US Dollar Index Hits Two-Month High, Copper Prices Expected to Face Resistance [SMM Copper Morning Comment]

LME copper opened at $9,630/mt overnight, fluctuated widely at the beginning and reached a high of $9,646.5/mt. It then fluctuated downward, hitting a low of $9,578.5/mt at the end of the session, before slightly rebounding to close at $9,619/mt, up 0.6%. Trading volume reached 15,000 lots, and open interest was 278,000 lots. The most-traded SHFE copper 2412 contract opened at 77,210 yuan/mt overnight, initially reaching a high of 77,280 yuan/mt before fluctuating downward to a low of 76,860 yuan/mt. It slightly rebounded at the end of the session to close at 77,030 yuan/mt, down 0.06%. Trading volume reached 22,000 lots, and open interest was 160,000 lots. Macro side, the NDRC will accelerate the research and revision of the expanded catalog of industries with foreign investment encouraged and formulate guidelines for optimizing and adjusting the layout of the state-owned economy. Nearly half of the incremental policies have been implemented, with more policies "on the way." Additionally, on the afternoon of October 22 local time, President Xi Jinping met with Russian President Vladimir Putin in Kazan, officially kicking off the BRICS summit. Furthermore, the US dollar index continued its upward trend, hitting a two-month high, which exerted some pressure on copper prices. Fundamentally, the arrival of goods increased, and copper cathode social inventory started to build up again. Meanwhile, high copper prices made it difficult for holders to stand firm on quotes, and consumption gradually cooled down after entering late October. Overall, the market expects more favorable policies, but in the short term, weak consumption is expected to suppress copper prices. Additionally, the US dollar index hit a two-month high and continued its upward trend, suggesting that copper prices are expected to face some resistance today.

Aluminum

Spot Market Supply Tight, Alumina Prices Remain High [SMM Aluminum Morning Meeting Summary Oct 23]

Overnight, the most-traded SHFE aluminum 2412 contract opened at 20,930 yuan/mt, reaching a high of 21,010 yuan/mt and a low of 20,875 yuan/mt, and closed at 20,915 yuan/mt, up 170 yuan/mt or 0.82% from the previous close. On Tuesday, LME aluminum opened at $2,591.5/mt, hit a high of $2,647.5/mt, a low of $2,588/mt, and closed at $2,637/mt, up $41.5/mt or 1.60%.

Summary: Macro front, domestic policies continue to boost the market, while the situation in the Middle East and between South and North Korea remains uncertain. Fundamentals side, the bauxite supply crisis has driven alumina prices to high levels, significantly increasing costs in the aluminum industry. Overall, the supply-demand mismatch in the aluminum market is not prominent, but the uncertainties on the macro front and cost side may support aluminum prices to fluctuate upward.

Lead

Short-term Lead Trading Anchors: Raw Material Supply? Consumption Expectations? [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,054/mt. During the day, with the backdrop of lead ingot inventory reduction, LME lead fluctuated upward. However, the US dollar index continued to strengthen, reaching a nearly two-month high of 104.16, which hindered LME lead's upward movement, causing it to fall back to around $2,055/mt. By the end of the session, LME lead recovered some of its gains, finally closing at $2,078/mt, up 1.39%.

Overnight, SHFE lead warehouse warrant inventory continued its slight downward trend. The most-traded SHFE lead 2411 contract opened higher at 16,810 yuan/mt, but market news on the fundamentals was mediocre, leading SHFE lead to move downwards after a higher opening. Especially in the latter part of the trading session, there was a stalemate between bulls and bears, with SHFE lead consolidating around 16,750 yuan/mt for a long time, eventually closing at 16,755 yuan/mt, down 0.18%. Its open interest reached 30,241 lots, a decrease of 1,212 lots from the previous trading day. Recently, the open interest of the SHFE lead 2411 contract has been gradually decreasing and shifting to the 2412 contract. Attention should be paid to the rollover of the most-traded contract.

Macro side, the IMF maintained its forecast for global economic growth this year at 3.2%, but lowered next year's global economic growth forecast to 3.2%, warning that risks such as war conflicts and trade protectionism are intensifying, with significant downside risks. The US election may lead to a repeat of the August sell-off in the market.

Fundamentals side, in October, lead ingot showed a trend of both supply and demand increasing, and the supply-demand mismatch in the market was not prominent, so lead prices may continue to consolidate. Currently, there are still issues with tight raw material supply, such as strong cost support from battery scrap. At the same time, lead concentrate will be stockpiled for the winter period, and unexpected shutdowns at domestic and international lead-zinc mines are occurring, making it difficult for smelters to negotiate TCs. Additionally, the seasonal recovery in lead consumption is limited, making it difficult for lead ingots to be destocked in large quantities in the short term.

Zinc

Fundamental Disturbances Increase, LME Zinc Fluctuates at Highs [SMM Zinc Morning Comment Oct 23]

Overnight, the IMF projected global economic growth rates of 3.2% for this year and next, with downside risks becoming more significant; the US Fed's overnight reverse repo operations usage fell to its lowest since 2021; sources said Israel is considering a two-week ceasefire with Hamas; the Israeli military claimed that the successor to Hezbollah leader Nasrallah is dead; the National Development and Reform Commission stated that nearly half of the incremental policies have been implemented, with another batch "on the way"; the State Administration of Foreign Exchange noted that since late September, foreign investors' willingness to allocate RMB assets has further increased; a report from the Institute of Finance of the Chinese Academy of Social Sciences suggested issuing 2 trillion yuan of special government bonds to support the establishment of a stock market stabilization fund; several industry insiders mentioned that some banks have already suspended "high-interest high-return" auto finance businesses.

Overnight, LME zinc opened at $3,063/mt. After a brief consolidation around the daily moving average at the beginning of the session, increased long positions pushed LME zinc to climb stepwise, operating above the daily moving average. By the end of the session, the focus shifted upwards to around $3,135/mt, peaking at $3,143/mt, and finally closing up at $3,142.5/mt, an increase of $81/mt or 2.65%. Trading volume decreased to 9,268 lots, and open interest increased by 1,542 lots to 254,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the middle Bollinger Bands providing support below. Overnight, LME inventory decreased by 2,550 mt to 234,625 mt, a drop of 1.08%, continuing the reduction trend. Recently, a fire at the Century mine in Australia halted production, expected to affect around 10,000 mt in metal content, increasing supply-side disturbances and causing zinc prices to fluctuate at highs.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,120 yuan/mt. At the beginning of the session, SHFE zinc quickly peaked at 25,215 yuan/mt, then, with short positions entering and long positions closing, SHFE zinc's focus shifted downwards, hitting a low of 25,005 yuan/mt. By the end of the session, shorts exited, and SHFE zinc recorded a V-shaped reversal, finally closing up at 25,125 yuan/mt, an increase of 205 yuan/mt or 0.82%. Trading volume decreased by 39,966 lots, and open interest increased by 2,301 lots to 95,376 lots. Overnight, SHFE zinc recorded a small bullish candlestick, with various moving averages providing support below. A domestic northern mine halted production, coupled with the upcoming seasonal off-season, increasing disturbances on the mining end. The expected limited upward space for TC provides support for the bottom of zinc prices.

Tin

The SHFE tin prices surged at the end of the night session, recent imports of tin increased [SMM Tin Morning News Oct 23]

SMM, October 23: Yesterday, the most-traded SHFE tin contract closed at 253,530 yuan/mt, down 680 yuan/mt, a decrease of 0.27%, with the highest at 254,180 yuan/mt and the lowest at 251,720 yuan/mt. During the morning session yesterday, the quotations of various domestic tin ingot brands by trading companies showed little change 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 cargo was quoted at -700 yuan/mt against the SHFE 2411 contract. Yesterday, tin prices rebounded after hitting a low, and some downstream enterprises restocked as needed. Some trading companies traded 10-20 mt, while a few traded 1-2 trucks. Overall, the spot market remained active yesterday.

Nickel

On October 22, Jinchuan nickel was quoted at a premium of 1,600-1,700 yuan/mt, with an average of 1,650 yuan/mt, remaining unchanged from the previous trading day. Norilsk nickel was quoted at a discount of 300-100 yuan/mt, with an average of 200 yuan/mt, also unchanged from the previous trading day. On the morning of October 22, the futures market fluctuated downward, and the spot premium showed no significant change compared to the previous working day. Nickel briquette prices were 126,100-126,700 yuan/mt (out of stock), down 2,150 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 518 yuan/mt (nickel sulphate prices were 518 yuan/mt higher than nickel briquette prices).