SMM Morning Comment For SHFE Base Metals (Nov 22)

SHANGHAI, Nov 22 (SMM) –

Copper

Diminished US Fed Interest Rate Cut Expectations Boost US Dollar Index, Copper Prices Open Lower [SMM Copper Morning Comment]

LME copper opened at $9,038.5/mt overnight, initially rising to a high of $9,086/mt before maintaining a wide fluctuation range. It then fell to a low of $9,002/mt towards the end of the session, before rebounding to close at $9,023/mt, down 0.65%. Trading volume reached 16,000 lots, and open interest was 269,000 lots. The most-traded SHFE copper 2501 contract opened at 74,110 yuan/mt, initially rising to a high of 74,250 yuan/mt before declining throughout the session to a low of 73,800 yuan/mt, and finally closing at 73,840 yuan/mt, down 0.89%. Trading volume reached 33,000 lots, and open interest was 143,000 lots. On the macro front, US Fed's Goolsbee reiterated support for further interest rate cuts and expressed openness to a slower pace of action. Market expectations suggest fewer interest rate cuts by the Fed next year, boosting the US dollar index and putting pressure on copper prices. In terms of fundamentals, overall market consumption remained stable. Although smelter inventories were low and social inventories decreased, a large influx of imported copper was observed during the week. As of Thursday, November 21, SMM copper inventory in major regions nationwide increased by 2,100 mt to 161,300 mt compared to Monday, but decreased by 3,000 mt compared to last Thursday, marking the fifth consecutive week of destocking, although the destocking speed is slowing. Overall, the strong US dollar index is expected to exert some resistance to copper prices today. Attention should be paid to the routine policy briefing; if favourable macro policies are released, market sentiment may improve.

Aluminum

Downstream Restocking and "Rush Exports" Drive Aluminum Ingot Inventory to New Lows in H2 [SMM Aluminum Morning Meeting Summary Nov 22]

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,700 yuan/mt, reaching a high of 20,710 yuan/mt and a low of 20,590 yuan/mt, closing at 20,620 yuan/mt, down 100 yuan/mt from the previous close, a decrease of 0.48%. On Thursday, LME aluminum opened at $2,634/mt, hitting a high of $2,650/mt and a low of $2,620/mt, closing at $2,633/mt, up $3/mt, an increase of 0.11%.

Summary: On the macro front, as the market expects fewer interest rate cuts by the US Fed next year, the US dollar index continued to rise on Thursday, suppressing the performance of non-ferrous metals. Domestically, the Ministry of Commerce issued a notice on several policy measures to promote stable growth in foreign trade, increasing financial support for foreign trade enterprises. On the fundamentals side, high aluminum costs have raised concerns about production cuts at high-cost enterprises. Downstream demand has slightly rebounded due to the stimulus from rush exports, and aluminum social inventory has returned to a destocking state. The backlog in Xinjiang is unlikely to see concentrated arrivals in the short term, keeping the domestic spot market relatively tight. In the short term, the support logic of high costs and low inventory for domestic aluminum remains, but the support for aluminum prices has weakened, with short-term aluminum prices expected to fluctuate and consolidate.

Lead

Overnight Lead Prices Fluctuated Downward, Downstream Demand Leaned Towards Primary Lead[SMM Lead Morning Comment]

Overnight, LME lead opened at $2,017.5/mt, peaked at $2,024/mt during the Asian session, and then fluctuated downward. During the European session, it weakened to a low of $1,982.5/mt before rebounding, facing resistance at $2,010/mt and slightly consolidating, finally closing at $2,003/mt, down $10/mt, a decrease of 0.5%.

Overnight, the most-traded SHFE lead 2501 contract opened at 16,925 yuan/mt, briefly touched a high of 16,940 yuan/mt, then dipped to 16,855 yuan/mt, and finally closed at 16,880 yuan/mt, down 95 yuan/mt, a decrease of 0.56%.

Macro side, the US dollar index fluctuated at a high level, and the US Fed remained slow and cautious on the path of interest rate cuts.

Fundamentals side, since mid-October, air pollution has continuously disrupted refined lead supply after heating started in north China. Secondary lead smelters' production was once again affected by the third round of warnings issued in Hebei, Henan, and Anhui. Production restrictions led to a tight supply of secondary refined lead in the market, with smelters' ex-factory prices remaining firm, quoted at premiums of 0-150 yuan/mt against the SMM 1# lead average price. Downstream enterprises' rigid demand leaned more towards primary lead. This week, delivery sources re-entered the market, and downstream enterprises purchased as needed, leading to a nearly 20,000 mt weekly decline in social inventory of lead ingots. Moving forward, we still need to monitor the lifting of production restrictions on lead smelters in smog-affected areas.

Zinc

Social Inventory Continues Destocking, Supporting Zinc Prices [SMM Zinc Morning Comment Nov 22]

Overnight, US Fed's Goolsbee expressed openness to acting at a slower pace; Ukrainian Air Force reported that Russia used an intercontinental ballistic missile for the first time during the conflict; the Technology Department of the People's Bank of China is accelerating the issuance of compliance guidelines for cross-border data flows in the financial industry; the Ministry of Industry and Information Technology (MIIT) emphasized the need to continuously increase R&D investment, focusing on computing power, models, and data; the State-owned Assets Supervision and Administration Commission (SASAC) urged central state-owned enterprises to navigate through economic cycles; China's manned lunar mission has fully entered the prototype development stage.

Overnight, LME zinc opened at $2,982.5/mt. Initially, LME zinc fluctuated rangebound around the daily moving average. During European trading hours, LME zinc briefly dipped to a low of $2,963/mt before returning to the daily moving average. In the night session, increased long positions pushed LME zinc upward, reaching a high of $3,019/mt. The focus then shifted to around $3,000/mt, and it finally closed up at $3,003.5/mt, an increase of $27/mt or 0.91%. Trading volume decreased to 9,151 lots, while open interest increased by 1,966 lots to 243,000 lots. Overnight, LME zinc recorded five consecutive days of gains, with the daily K-line moving higher, supported by the 5-day and 10-day moving averages below. Overnight, LME inventory decreased by 3,700 mt to 264,625 mt, a drop of 1.38%, marking another reduction in LME inventory. The supply-side issues for zinc persist, and long funds remain highly favored, driving zinc prices further upward.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,255 yuan/mt. Initially, SHFE zinc followed the daily moving average upward, quickly reaching a high of 25,340 yuan/mt before the focus fell back to around the daily moving average. Towards the end of the session, reduced long positions led SHFE zinc to dip to a low of 25,165 yuan/mt, and it finally closed flat at 25,185 yuan/mt. Trading volume decreased to 56,418 lots, while open interest decreased by 1,375 lots to 95,789 lots. Overnight, SHFE zinc turned from gains to losses, but the daily K-line moved higher, supported by various moving averages below. Overnight, SMM social inventory decreased by 9,200 mt to 118,700 mt. Downstream consumption remained moderate, supporting zinc prices.

Tin

SHFE tin dropped over 1% in the night session; the spot market is expected to recover today [SMM Tin Morning Brief Nov 22]

Yesterday, the spot tin market saw mediocre trading activity, with trade companies' quotations remaining stable and showing no significant fluctuations. The price range of domestic tin ingots across various brands remained 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 fluctuated rangebound. During the night session, metals broadly declined, with SHFE tin dropping over 1%, leading to a cooling of trading activities in the spot market. Most downstream enterprises had completed their restocking plans and showed low purchasing enthusiasm. On the trade companies' side, most companies had a trading volume of around 10 mt, with a few achieving a trading volume of about one truckload. Overall, the market trading was mediocre. In summary, with the decline in SHFE tin during the night session, the spot market trading is expected to recover today.

Nickel

On November 21, Jinchuan nickel was quoted at a premium of 2,800-2,900 yuan/mt, with an average of 2,850 yuan/mt, up 450 yuan/mt from 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, down 50 yuan/mt from the previous trading day. On the morning of November 21, the futures market fluctuated, and Jinchuan nickel premiums rose significantly compared to the previous working day, mainly due to the limited spot circulating supply. The premiums and discounts for imported nickel and electrodeposited nickel narrowed slightly as the futures market rose compared to the previous days. Nickel briquette prices were 126,600-127,100 yuan/mt (in short supply), up 1,000 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 7,304.55 yuan/mt (nickel sulphate prices were 7,304.55 yuan/mt lower than nickel briquette prices).