SMM Morning Comment For SHFE Base Metals (Nov 25)

SHANGHAI, Nov 25 (SMM) –

Copper

US November PMI Data Hits Record High, Copper Prices Under Pressure [SMM Copper Morning Comment]

Last Friday evening, LME copper opened at $8,967.5/mt, initially dipped to $8,938/mt, then rose to an intraday high of $9,014/mt, and finally fluctuated widely to close at $8,972.5/mt, down 0.56%. Trading volume reached 19,000 lots, and open interest was 269,000 lots. Last Friday evening, the most-traded SHFE copper 2501 contract opened and dipped to 73,400 yuan/mt, initially rose to 73,950 yuan/mt, then fluctuated slightly, and finally closed at 73,730 yuan/mt, down 0.26%. Trading volume reached 32,000 lots, and open interest was 148,000 lots. Macro side, the US November S&P Global Manufacturing PMI preliminary value was 48.8, a four-month high. The US November S&P Global Services PMI preliminary value was 57, a 32-month high. The US November S&P Global Composite PMI preliminary reading was 55.3, a 31-month high. Currently, with persistent inflation, the market generally expects the US Fed to adopt more accommodative monetary policies. The US dollar is supported, and the US dollar index climbed to a nearly 13-month high, putting pressure on copper prices. Fundamentally, downstream stocking demand over the weekend led to noticeably active procurement, with market transactions better than expected. Meanwhile, due to the decline in copper prices, the operating rate of copper semis producers rebounded, providing support for spot premiums. Spot premiums are expected to stabilize this week. Price-wise, macro sentiment is bearish under the strong US dollar backdrop, with limited support from fundamentals. Copper prices still face resistance above and are expected to fluctuate downward today.

Aluminum

US Dollar Index Nears 13-Month High, Aluminum Market Sentiment Under Pressure [SMM Aluminum Morning Brief Nov 25]

Last Friday night, the most-traded SHFE aluminum 2501 contract opened at 20,360 yuan/mt, reached a high of 20,560 yuan/mt, a low of 20,355 yuan/mt, and closed at 20,490 yuan/mt, down 60 yuan/mt from the previous day, a decline of 0.29%. Last Friday, LME aluminum opened at $2,632.5/mt, hit a high of $2,643/mt, a low of $2,610/mt, and closed at $2,630/mt, down $1.5/mt, a decline of 0.06%.

Summary: On the macro front, the market generally believes that Trump's rise to power will boost the US dollar, while expectations for the US Fed's interest rate cut next year have weakened. On Friday, the US dollar index hit a new high for the year, suppressing the performance of non-ferrous metals. The uncertainty of the Russia-Ukraine conflict has intensified, raising market risk aversion sentiment. Domestically, Li Qiang chaired a State Council executive meeting to discuss promoting the healthy development of the platform economy. On the fundamentals side, aluminum costs fluctuate at highs, sparking concerns about production cuts at high-cost enterprises. Downstream demand has slightly rebounded in the short term, stimulated by a rush to export. Although aluminum social inventory returned to a destocking state last week, feedback indicates that shipments from Xinjiang have continuously improved, releasing short-term backlog pressure. The off-season inventory turning point is expected to appear in the next two weeks, and the tight spot market condition may ease, gradually weakening the support of low inventory for aluminum prices. 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. Coupled with the negative impact of the cancellation of export tax rebates for aluminum semis on medium and long-term aluminum demand, market sentiment is suppressed. Aluminum prices are expected to mainly fluctuate and consolidate in the short term.

Lead

Limitations on ingot supply will support lead prices to continue fluctuating upward [SMM Lead Morning Comment]

Last Friday, LME lead opened at a low of $2,004.5/mt, fluctuated upward during the Asian session, and continued to rise as bulls increased positions in the European session, reaching a high of $2,034/mt. It then pulled back at the end of the session, closing at $2,018/mt, up 0.75%.

Last Friday night, the most-traded SHFE lead 2501 contract opened at 16,955 yuan/mt, briefly touched a low of 16,935 yuan/mt at the beginning of the session, and then rose to 17,050 yuan/mt as bulls increased positions, finally closing at 17,040 yuan/mt, up 0.74%.

Macro side, last Friday, the market generally believed that Trump's rise to power would boost the US dollar, and the weakening of the US Fed's interest rate cut expectations for next year further supported the US dollar's performance. The US dollar index once surged above the 108 mark, approaching a 13-month high. The preliminary value of the US November S&P Global Manufacturing PMI recorded 48.8, a 4-month high. The preliminary value of the US November S&P Global Services PMI recorded 57, a 32-month high. The preliminary value of the US November S&P Global Composite PMI recorded 55.3, a 31-month high.

Fundamentals, due to air pollution, secondary lead smelters repeatedly reduced or halted production, and primary lead smelters added new maintenance. The limitations on ingot supply will support lead prices to fluctuate upward. Meanwhile, downstream production adjustments amid enterprises' routine inventory checks at month-end may slow down their purchasing activities. Under the stalemate of supply and demand, lead prices are expected to remain in a consolidation trend.

Zinc

SHFE Zinc Records a Bullish Candle, SHFE Zinc Still Fluctuates at Highs [SMM Zinc Morning Comment Nov 25]

Last Friday, the US November PMI data increased; the total US national debt has surpassed $36 trillion; Russian Defense Minister: Ukraine's "strongest troops" have been annihilated; Senior Advisor to Iran's Supreme Leader: Preparing to "respond" to Israel; Oil market observers: OPEC+ is expected to delay production increases again; Premier Li Qiang presided over a State Council executive meeting to discuss promoting the healthy development of the platform economy; Ministry of Foreign Affairs: Visa-free entry for Bulgaria, Romania, Japan, and other countries.

Last Friday, LME zinc opened at $2,996/mt. At the beginning of the session, LME zinc fluctuated upward along the daily moving average and reached a high of $3,014.5/mt. However, due to insufficient momentum, it fell below the daily moving average. Subsequently, LME zinc briefly fluctuated rangebound around the daily moving average, then plunged and continued to fluctuate downward, reaching a low of $2,962.5/mt. By the end of the session, it slightly recovered some losses and finally closed down at $2,972/mt, a decrease of $31.5/mt or 1.05%. Trading volume decreased to 77,815 lots, while open interest increased by 1,721 lots to 244,000 lots. Last Friday, LME zinc turned from bullish to bearish, with the 20-day moving average forming resistance above and the lower Bollinger Band providing support below. LME social inventory decreased by 3,300 mt to 261,325 mt, a reduction of 1.25%, indicating a decline in LME inventory. The current fundamental supply remains tight, providing short-term support for zinc prices.

Last Friday, the most-traded SHFE zinc 2512 contract opened at 25,030 yuan/mt. At the beginning of the session, SHFE zinc fluctuated upward above the daily moving average, reaching a high of 25,235 yuan/mt. Subsequently, SHFE zinc's center of gravity slightly declined, fluctuating around 25,150 yuan/mt, and finally closed down at 25,165 yuan/mt, a decrease of 5 yuan/mt or 0.02%. Trading volume decreased to 51,368 lots, while open interest decreased by 6,411 lots to 86,173 lots. Last Friday, SHFE zinc recorded a bullish candle, with the upper Bollinger Band forming resistance above and the middle Bollinger Band providing support below. Domestic supply-side issue also exists, with the arrival of the off-season combined with winter stockpiling, still supporting zinc prices to fluctuate at highs.

Tin

The Strengthening US Dollar Suppresses SHFE Tin Prices Awaiting Macro Adjustments [SMM Tin Morning Meeting Summary Nov 25]

The latest unemployment data released by the US Department of Labor has garnered significant market attention. According to the data, the number of initial jobless claims in the US has dropped to 213,000, a decrease of 6,000 from the previous week and below the expected 220,000. This better-than-expected unemployment data reveals the robustness and vitality of the US labour market, thereby boosting market confidence in the US economic outlook to some extent. Against this backdrop, the US dollar exchange rate has received solid support. Additionally, given the positive performance of the unemployment data, the US Fed may consider further tightening monetary policy. This move would not only provide additional support to the US dollar exchange rate but could also exert a suppressive effect on metal prices.

In the domestic tin ore market, the import volume of tin ore in October showed a significant upward trend, mainly driven by increases from Myanmar, Nigeria, and Bolivia. Although the timetable for the resumption of Myanmar's tin ore production remains unclear and its export volume is expected to remain low until year-end, the incremental imports from Nigeria and Bolivia have somewhat alleviated the tight supply situation. However, considering Bolivia's domestic smelting capacity, the sustainability of subsequent import volume from the country still requires further observation. These variable factors collectively influence the domestic tin ore supply landscape, thereby impacting the price trend of SHFE tin.

On the other hand, the import volume of tin ingot in October also showed a recovery trend, primarily due to the intermittent opening of the import profit window. Nevertheless, due to the instability of the profit window, the import volume of tin ingot is still difficult to recover to the level of the same period last year. Meanwhile, although the export volume of tin ingot has increased MoM, it is expected that its export volume will be difficult to achieve significant growth in the future due to the recent closure of the export window.

In summary, despite the slight decline in SHFE tin prices in the short term due to macroeconomic factors, given that the subsequent supply of ore is unlikely to meet the demand from the smelting side, SHFE tin prices are expected to show a fluctuating upward trend in the foreseeable future.

Nickel

Last week, refined nickel prices fluctuated upward, with spot prices ranging from 124,000 to 129,000 yuan/mt. Fundamentally, there were no significant structural changes compared to the previous week. Last week, on the supply side, domestic spot refined nickel supply tightened slightly in the short term but did not affect the overall surplus expectation of primary nickel. On the demand side, the weak demand from ternary cathode precursor, stainless steel, and alloy electroplating continued, making it difficult to positively impact prices.

From the perspective of various links in the nickel industry chain: In terms of nickel ore, the downward trend of Indonesian domestic trade laterite nickel ore persisted. For nickel sulphate, it remained in a state of weak supply and demand, with sentiment to stand firm on quotes still present, and prices are expected to fluctuate with the stalemate between upstream and downstream. In the NPI sector, market transaction prices hit new lows, and prices were under pressure due to the supply-demand mismatch. Regarding the fundamentals of refined nickel itself, last week, the spot market was affected by multiple factors. Many electrodeposited nickel enterprises directly sold products to end-users, coupled with the continuous increase in the export volume of domestically produced electrodeposited nickel, leading to a tightening of domestic spot market supply and a rise in spot premiums. However, downstream restocking was mainly based on rigid demand, and overall demand remained weak. In summary, refined nickel prices are expected to maintain sideways movement, and given the bearish fundamentals, refined nickel lacks upward momentum. The expected nickel price range for this week is 122,000-128,000 yuan/mt.