SMM Morning Comment For SHFE Base Metals (Oct 25)

SHANGHAI, Oct 25 (SMM) –

Copper

The US dollar index fell back from a two-month high, and copper prices closed higher overnight [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,589.5/mt, initially reaching a high of $9,601/mt. It then fluctuated downward, hitting a low of $9,496/mt during the session. By the end of the session, it rose again, closing at $9,563/mt, up 0.63%. Trading volume reached 18,000 lots, and open interest was 275,000 lots. Overnight, the most-traded SHFE copper 2412 contract opened at 76,700 yuan/mt, initially reaching a high of 76,800 yuan/mt. It then fluctuated downward, hitting a low of 76,130 yuan/mt during the session. By the end of the session, it rose again, closing at 76,590 yuan/mt, up 0.08%. Trading volume reached 49,000 lots, and open interest was 152,000 lots. Macro side, the initial jobless claims in the US for the week ending October 19 recorded 227,000, the lowest since the week ending September 28, 2024. Currently, traders tend to believe that the European Central Bank will cut interest rates by 50 basis points in December. However, ECB Governing Council member Wunsch stated that there is no need to discuss a 50 basis point rate cut at this stage. Amid concerns over demand, oil prices fell, dragging copper prices down temporarily. However, as the US dollar index fell back from its high, copper prices eventually closed higher. Additionally, the National Development and Reform Commission stated that it would further open major national scientific research infrastructure to private enterprises. Fundamentally, arrivals decreased, and market trading continued to weaken, with holders generally pessimistic about October. As of Thursday, October 24, SMM copper inventories in major regions across China increased slightly by 200 mt from Monday to 219,600 mt, still 54,100 mt higher than before the holiday. However, weekly destocking was achieved this week, though the destocking volume was not large, only 9,600 mt. In summary, although the US dollar index fell back from its high, market trading remained mediocre. Copper prices are expected to maintain a fluctuating trend at this level today.

Aluminum

Relaxation of Secondary Aluminum Import Restrictions, Continued Destocking of Aluminum Ingot Inventory [SMM Aluminum Morning Briefing Oct 25]

Overnight, the most-traded SHFE aluminum 2412 contract opened at 21,020 yuan/mt, reaching a high of 21,075 yuan/mt and a low of 20,615 yuan/mt, closing at 20,805 yuan/mt, down 115 yuan/mt from the previous close, a decrease of 0.55%. Trading volume was 136,700 lots, open interest was 229,700 lots, with a daily reduction of 12,400 lots. On Thursday, LME aluminum opened at $2,663/mt, hitting a high of $2,715/mt and a low of $2,613/mt, closing at $2,639.5/mt, down $17/mt, a decrease of 0.64%.

Summary: On the macro front, domestic policies continue to boost the economy, and global market liquidity remains ample. However, the potential ceasefire in the Middle East introduces new variables to macro sentiment. On the fundamentals side, the bauxite supply crisis has driven alumina prices to high levels, significantly increasing costs in the aluminum industry. Overall, in the short term, the supply-demand mismatch in the aluminum market is not prominent, but the uncertainties on the macro and cost sides may support aluminum prices to fluctuate at relatively high levels.

Lead

Interwoven Bullish and Bearish Factors Make Short-term Lead Prices Stagnant [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,056/mt. During the Asian session, LME lead traded quietly, fluctuating between $2,050-2,060/mt. Entering the European session, multiple positive US economic data supported market bets on a November US Fed interest rate cut, causing the US dollar to weaken. LME lead fluctuated upward, reaching around $2,080/mt, and finally closed at $2,071.5/mt, up 0.8%.

Overnight, driven by the rise in LME lead, the most-traded SHFE lead 2412 contract opened at 16,895 yuan/mt. It initially jumped to 16,900 yuan/mt, but due to mediocre fundamentals, SHFE lead jumped initially and then pulled back, finally closing at 16,780 yuan/mt, down 0.03%. Its open interest increased by 1,678 lots to 39,381 lots compared to the previous trading day.

Macro side, the US October Markit Manufacturing PMI continued to contract, while the services sector remained stable. Inflation improved, but employment was weak. Multiple positive US economic data supported market bets on a 25 basis point interest rate cut by the US Fed in November. Initial jobless claims in the US unexpectedly fell last week, while continuing claims, affected by the hurricane, rose to the highest level in three years. The Eurozone October Manufacturing PMI remained sluggish, with German manufacturing better than expected, while France saw an accelerated contraction across the board.

Fundamentally, the supply-demand mismatch in the lead market is not prominent, and prices remain relatively stable. Currently, regions like Anhui are undergoing environmental protection inspections, leading some companies to reduce shipments. Meanwhile, the spread between futures and spot prices has widened, and holders are inclined to deliver next month, transferring lead ingot inventory to social warehouses. Additionally, the seasonal improvement in the lead-acid battery market is limited. As the month is about to end, downstream companies are not very active in buying and selling, resulting in a quiet market.

Zinc

LME Warehouses Receive 7,000 mt, Dampening Bullish Sentiment in Zinc [SMM Zinc Morning Comment Oct 25]

Overnight, the number of initial jobless claims in the US last week hit a new low since the week of September 28; the US Fed's overnight reverse repo operations volume nearly fell below $200 billion; parties in the Gaza ceasefire negotiations reconvened in Doha, Qatar, with Hamas representatives heading to Cairo to hear the agreement; ECB Governing Council member Wunsch stated that at this stage, there is no need to discuss a 50 basis point interest rate cut; UK Chancellor Reeves confirmed adjustments to the UK's fiscal rules; the National Development and Reform Commission announced further opening of major national scientific research infrastructure to private enterprises; Shenzhen Municipal Financial Office aims to form a trillion-yuan government investment fund group; multiple banks in Guangzhou received instructions that mortgage loan rates should not be lower than the provident fund loan rates.

Overnight, LME zinc opened at $3,147/mt. At the beginning of the session, longs increased their positions, causing LME zinc to fluctuate upward, reaching a high of $3,284/mt during European trading hours. Subsequently, bullish sentiment waned, and LME zinc fluctuated downward, with its focus shifting to around $3,200/mt. Entering the night session, LME zinc accelerated its decline, with its focus further shifting to around $3,170/mt, and finally closed up at $3,174/mt, an increase of $28/mt or 0.89%. Trading volume increased to 21,139 lots, and open interest increased by 1,092 lots to 257,000 lots. Overnight, LME zinc recorded a long upper shadow bearish candlestick, with various moving averages below providing support. Overnight, LME inventory increased by 7,000 mt to 239,150 mt, an increase of 3.02%, recording an increase in LME inventory. The concentration of funds in LME zinc significantly increased, with LME zinc breaking through previous highs. However, LME warehouses received 7,000 mt, dampening bullish sentiment, causing LME zinc to fall back from highs. Attention should be paid to the pace of fund withdrawal and inventory changes.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,610 yuan/mt. At the beginning of the session, there was a tug-of-war between longs and shorts, with SHFE zinc fluctuating around the daily moving average, reaching a high of 25,695 yuan/mt during the period. Subsequently, longs took profits and exited, causing SHFE zinc to fluctuate downward, hitting a low of 25,070 yuan/mt by the end of the session, and finally closed down at 25,180 yuan/mt, a decrease of 125 yuan/mt or 0.49%. Trading volume decreased to 155,000 lots, and open interest decreased by 6,955 lots to 123,000 lots. Overnight, SHFE zinc recorded a bearish candlestick, with the KDJ indicator narrowing. Overnight, bullish sentiment waned, and SHFE zinc followed the downward trend. Meanwhile, the downstream consumption peak season is expected to end soon, and the environmental protection season in the north is starting again, hindering the upward momentum of zinc prices.

Tin

SHFE tin prices opened lower during the night session, with downstream purchasing sentiment being poor [SMM Tin Morning News Oct 25]

SMM, October 25: Yesterday, the closing price of the most-traded SHFE tin contract was 254,160 yuan/mt, down 530 yuan/mt, a decrease of 0.21%, with the highest at 255,900 yuan/mt and the lowest at 253,040 yuan/mt. During yesterday's morning session, the quotations for various domestic tin ingot brands by trading companies showed little change compared to recent days. Among them, small brand tin ingot quotations against the SHFE 2411 contract were +0~+200 yuan/mt, delivery brand prices were +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 quotations were -700 yuan/mt against the SHFE 2411 contract. Yesterday's rise in tin prices suppressed the purchasing willingness of downstream enterprises. Most trading companies had scattered transactions, with a few trading companies transacting around one truckload. Overall, the spot market transactions remained sluggish yesterday.

Nickel

On October 24, Jinchuan nickel was quoted at a premium of 1,600-1,700 yuan/mt, with an average of 1,650 yuan/mt, up 50 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 200-100 yuan/mt, with an average of 150 yuan/mt, unchanged from the previous trading day. On the morning of October 24, the futures market fluctuated, and there was no significant change in the spot premium compared to the previous working day. Nickel briquette prices were 125,600-126,000 yuan/mt (out of stock), down 500 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 459 yuan/mt (nickel sulphate prices were 459 yuan/mt lower than nickel briquette prices).