SMM Morning Comment For SHFE Base Metals (Nov 19)

SHANGHAI, Nov 19 (SMM) –

Copper

Will the Bank of Japan continue to raise interest rates? Copper prices are expected to have bottom support [SMM Copper Morning Comment]

LME copper opened at $9,009.5/mt overnight, with the initial focus dropping to $8,958/mt. It then fluctuated upward, reaching a high of $9,106/mt at the end of the session, and finally closed at $9,094.5/mt, up 1.38%. Trading volume reached 17,000 lots, and open interest was 276,000 lots. Overnight, the most-traded SHFE copper 2412 contract opened at 73,550 yuan/mt, initially dipping to 73,510 yuan/mt amid fluctuations. It then fluctuated upward, reaching a high of 74,100 yuan/mt at the end of the session, and finally closed at 74,030 yuan/mt, up 0.27%. Trading volume reached 21,000 lots, and open interest was 133,000 lots. Macro side, Bank of Japan Governor Kazuo Ueda stated that if the economy and prices meet expectations, the Bank of Japan will continue to raise interest rates and adjust the intensity of monetary support. The US dollar index weakened again, and copper prices rose. Fundamentally, in the short term, orders for copper semis perform well, and spot consumption maintains moderate growth. It is also worth noting that due to the widening Shanghai-Guangdong price difference, northern goods have started to flow southward, which may suppress premiums in South China. As of Monday, November 18, SMM copper inventories in national major regions decreased by 5,100 mt compared to last Thursday to 159,200 mt, but total inventories were 103,900 mt higher compared to 55,300 mt in the same period last year. Looking ahead, it is reported that both imported and domestic copper arrivals will be less than last week. Overall, with moderate recovery in recent consumption, copper prices are expected to have bottom support.

Aluminum

Transportation Improvement Signals Turning Point in Aluminum Ingot Inventory, Weakening Support to Aluminum Price [SMM Aluminum Morning Meeting Summary Nov 18]

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,350 yuan/mt, reached a high of 20,505 yuan/mt, a low of 20,525 yuan/mt, and closed at 20,480 yuan/mt, down 35 yuan/mt or 0.17% from the previous close. On Monday, LME aluminum opened at $2,651.5/mt, hit a high of $2,689/mt, a low of $2,576/mt, and closed at $2,610.5/mt, down $46/mt or 1.73%.

Summary: On the macro front, recent speeches by Fed officials, including Fed Chairman Jerome Powell, suggest that the US Fed will be cautious on the path to interest rate cuts, and the market expects the pace of rate cuts to slow down. On the fundamentals side, the domestic aluminum supply remains stable; on the demand side, there are signs of continued improvement in shipments from Xinjiang, and concentrated arrivals are expected in Gongyi and Wuxi regions in the short term. The inventory turning point may appear as early as next week. Additionally, attention should be paid to the "rush to export" by downstream sectors before the official implementation of the cancellation of export tax rebates on aluminum semis and whether the aluminum price correction continues to drive spot cargo outflows from warehouses. Overall, domestic aluminum remains in a state of low inventory and high costs, but the support for aluminum prices is gradually weakening. The short-term tax rebate policy has triggered market panic sentiment, and aluminum prices are expected to fluctuate and consolidate in the coming days.

Lead

The US dollar dropped back slightly, and LME lead surged significantly. Domestic social inventory growth slowed down [SMM Lead Morning Comment]

Overnight, LME lead opened at $1,964.5/mt. During the Asian session, it fluctuated upward slightly, and in the European session, it first dipped and then rose, hitting a low of $1,948.5/mt before climbing to a high of $1,998.5/mt. It finally closed at this level, up $47.5/mt, an increase of 2.43%.

Overnight, the most-traded SHFE lead 2412 contract opened at 16,740 yuan/mt. It initially rose to a high of 16,820 yuan/mt before weakening slightly to a low of 16,730 yuan/mt. It then fluctuated under pressure around the daily moving average and finally closed at 16,775 yuan/mt, up 35 yuan/mt, an increase of 0.21%.

Macro side, the US dollar index dropped back slightly, easing the pressure on base metals, leading to a rebound in LME lead.

Fundamentally, primary lead smelters maintained stable production in November, with limited room for increase. The smog warnings in Hebei, Henan, and other regions were lifted, and vehicle transportation in Henan and other areas returned to normal, leading to a gradual transfer of refined lead inventory from northern warehouses. Although secondary refined lead production mainly resumed this week, environmental protection measures in autumn and winter may still affect secondary refined lead supply. This week marks the last week for the delivery of November lead ingot long-term contracts. Before the start of new monthly long-term contracts, the transferable inventory from smelters is expected to be limited, and there was no significant adjustment in the premium of primary lead at the beginning of the week. Downstream battery producers had a moderate operating rate, but due to the sharp fluctuations in lead prices, they generally adopted a wait-and-see approach. Once lead prices stabilize, procurement demand is expected to be gradually released, and no significant increase in social inventory is anticipated in the near future.

Zinc

Zinc Prices Maintain Fluctuating Trend with Limited Downside Potential [SMM Zinc Morning Comment Nov 19]

Overnight, the US allowed Kyiv to attack Russian depths within 300 kilometers; ECB Governing Council member: a 25 basis point interest rate cut in December is almost certain; Kazuo Ueda: if economic and price trends meet forecasts, the Bank of Japan will continue to raise rates; British media: Trump plans to enter the cryptocurrency trading platform; Norway's largest oil field temporarily shut down; Xi Jinping met with the British Prime Minister and the Australian Prime Minister; the Ministry of Finance has allocated a debt limit of 6 trillion yuan to various regions; the Central Air Traffic Control Committee is about to launch eVTOL trials in six cities.

Overnight, LME zinc opened at $2,953/mt. After a brief consolidation around the daily moving average, the focus shifted to around $2,965/mt. During European trading hours, it peaked at $2,984/mt, then bears shorted at high levels, causing LME zinc to plunge, with the night session focus shifting to around $2,925/mt, hitting a low of $2,920.5/mt. By the end of the session, the focus slightly lifted, closing up at $2,963/mt, an increase of $9.5/mt or 0.32%. Trading volume decreased to 9,468 lots, and open interest decreased by 1,986 lots to 245,000 lots. Overnight, LME zinc recorded a small bullish candlestick, with the 10-day moving average forming resistance above, and the KDJ indicator expanding upwards. Overnight, LME inventory increased by 11,050 mt to 259,500 mt, an increase of 4.45%, continuing the trend of rising inventory. The overnight weakening of the US dollar provided support for base metals, but the significant increase in LME inventory formed resistance above for LME zinc, maintaining a fluctuating trend.

Overnight, the most-traded SHFE zinc 2412 contract opened at 24,595 yuan/mt. Initially, SHFE zinc fluctuated downward along the daily moving average, hitting a low of 24,475 yuan/mt. Subsequently, bears took profits and exited, causing SHFE zinc to rebound from the low, peaking at 24,765 yuan/mt by the end of the session, closing up at 24,740 yuan/mt, an increase of 180 yuan/mt or 0.73%. Trading volume decreased to 71,066 lots, and open interest decreased by 1,855 lots to 96,416 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 5-day moving average providing support below. Overnight, SHFE zinc maintained a fluctuating trend. On the fundamentals side, with a large amount of warehouse receipts, SMM social inventory slightly increased, indicating moderate buying the dip by downstream enterprises, providing support on the fundamentals side.

Tin

SHFE tin continued to rise during the night session, and the spot market is expected to cool down [SMM Tin Morning News Nov 19]

Yesterday, the spot tin market remained hot, with trading companies' quotations staying stable without significant fluctuations. The price range of tin ingots from various domestic brands was relatively fixed. Small brand tin ingots and imported tin ingots had a slight discount against the SMM 1# tin ingot price, while delivery brand prices and Yunnan Tin brand tin ingots had a slight premium against the SMM 1# tin ingot price. In yesterday's market, tin prices rebounded from the bottom and continued to rise during the night session, with trading activities in the spot market remaining hot. Downstream companies no longer held a wait-and-see attitude and planned to complete restocking before prices rose significantly. On the trading companies' side, most companies had a trading volume of around 20 mt, with a few companies reaching a trading volume of 2-3 truckloads. Overall, the market trading atmosphere was relatively strong. In summary, as tin prices rise, the spot market trading volume is expected to cool down in the short term, as most downstream companies' short-term demand has been basically met.

Nickel

On November 18, Jinchuan nickel was quoted at a premium of 2,200-2,500 yuan/mt, with an average of 2,350 yuan/mt, up 300 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 200 yuan/mt to a premium of 100 yuan/mt, with an average discount of 50 yuan/mt, up 50 yuan/mt compared to the previous trading day. On the morning of November 18, the futures market fluctuated upward, and the spot market premium saw a significant increase compared to the previous working day. Nickel briquette prices were 122,900-123,300 yuan/mt (out of stock), down 50 yuan/mt compared to the previous trading day. The price spread between nickel sulphate and nickel briquette was about 1,964 yuan/mt (nickel sulphate prices were 1,964 yuan/mt lower than nickel briquette prices).