SMM Morning Comment For SHFE Base Metals (Dec 26)

SHANGHAI, Dec 26 (SMM) –

Copper

Downstream Procurement Demand at Half, Overall Maintains Just-in-Time Procurement [SMM Copper Morning Meeting Summary]

Futures Market: LME copper was closed overnight. The most-traded SHFE copper 2502 contract opened at 74,180 yuan/mt overnight, initially hitting a high of 74,210 yuan/mt before fluctuating downward to an intraday low of 74,070 yuan/mt. It then fluctuated upward and consolidated sideways at the end, finally closing at 74,160 yuan/mt, up 0.14%. Trading volume reached 6,000 lots, and open interest stood at 139,000 lots.

Prices: Macro side, the PBOC conducted 192.3 billion yuan of 7-day reverse repo operations. Macro analyst Qing Wang stated that although the peak of local government bond issuance has passed, the PBOC may cut the RRR by 0.25-0.5 percentage points by year-end to support banks in increasing credit issuance, continue supporting government bond issuance, and sustain growth-stabilizing signals. Meanwhile, the policy signals released by the recent domestic fiscal work conference have boosted market sentiment, stabilizing copper prices. However, the US dollar index remained at high levels, which will exert some pressure on copper prices. Overall, copper prices lack further upward momentum. Fundamentals side, supply side, domestic copper cathode circulation was limited, with most transactions involving imported cargoes during the day. Demand side, downstream purchasing sentiment was average, with overall purchasing as needed. As trading shifted to cargoes with invoices dated next month, the market is expected to become even quieter. Copper prices are expected to fluctuate rangebound at current levels today.

Aluminum

LME Aluminum Closed for Two Days Due to Holiday, SHFE Aluminum Maintained a Weak Trend Overnight [SMM Aluminum Morning Meeting Summary]

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,875 yuan/mt, hit a high of 19,935 yuan/mt, a low of 19,780 yuan/mt, and closed at 19,820 yuan/mt, down 75 yuan/mt or 0.37% from the previous trading day.

Summary: Macro front, market expectations for the extent of US Fed interest rate cuts next year remain pessimistic, with the US dollar index hovering near its two-year high, putting pressure on base metals. Fundamentals side, domestic aluminum supply pressure has eased recently, with a slight decline in operating capacity. Some aluminum smelters in Sichuan and Guangxi have reported capacity technological transformations or production cuts due to losses. On the demand side, market demand continues to weaken during the off-season, with sluggish performance in the aluminum plate/sheet and strip and aluminum extrusion sectors, and strong expectations for inventory buildup. Overall, macro uncertainties around the pace of US Fed interest rate cuts and weak demand during the off-season, despite slightly reduced supply pressure, contribute to growing risks of inventory buildup in social stocks. In the short term, aluminum prices are expected to fluctuate downward.

Lead

Frequent Domestic Environmental Protection Incidents; Lead Prices Show Strong Resistance to Decline [SMM Lead Morning Meeting Summary]

Futures Market:

Due to the Christmas holiday, multiple exchanges in the European and US markets were closed, and the LME was also in a holiday closure.

Overnight, the most-traded SHFE lead 2502 contract opened at 17,350 yuan/mt. As the year-end approached, market trading further weakened, with trading volume and open interest continuing to shrink. SHFE lead mostly consolidated around 17,350 yuan/mt before finally closing at 17,355 yuan/mt, down 0.17%. Its open interest stood at 55,378 lots, a decrease of 1,624 lots compared to the previous trading day.

Macro side, the PBOC has conducted scaled-down MLF rollovers for five consecutive months and kept rates unchanged for three consecutive months, with a significant net withdrawal of 1.15 trillion yuan. According to China Securities Journal, the PBOC assessed that current market liquidity is ample. The National People's Congress passed the VAT Law of China, which will take effect on January 1, 2026.

Fundamentals side, the overseas market has entered a holiday state, and the domestic market has also seen weakened trading due to year-end factors. Currently, environmental protection measures in many regions of China are impacting the market, with a greater effect on lead ingot supply than on the consumption side. The spot market supply remains relatively tight. On the consumption side, some large downstream enterprises are closing accounts and taking inventory at the year-end, reducing lead ingot procurement activities. The market continues to exhibit a weak supply and demand pattern. Additionally, we need to keep monitoring the dynamic changes in the domestic market's environmental protection impacts.

Zinc

SHFE Zinc Records a Five-Day Winning Streak, Daily Candlestick Center Continues to Rise [SMM Zinc Morning Comment]

Overnight, Hamas and Israel accused each other of obstructing ceasefire negotiations; it was reported that Russia began using Bitcoin in foreign trade; the MLF was partially renewed at 300 billion yuan, with the RRR cut window still open; Japan announced plans to ease visa requirements for Chinese tourists; and the Ministry of Finance will launch a pilot program to address abnormally low prices in government procurement.

Overnight, LME zinc was closed for the Christmas holiday.

Overnight, the most-traded SHFE zinc 2502 contract opened at 25,480 yuan/mt. At the beginning of the session, bulls and bears engaged in intense competition, with SHFE zinc fluctuating around the daily moving average. It dipped to a low of 25,405 yuan/mt before bulls increased their positions, driving SHFE zinc to fluctuate upward and reach a high of 25,515 yuan/mt. It eventually closed higher at 25,505 yuan/mt, up by 80 yuan/mt or 0.31%. Trading volume decreased to 37,451 lots, while open interest increased by 4,940 lots to 148,000 lots. Overnight, SHFE zinc formed a small bullish candlestick, with resistance at the upper Bollinger Band and support from various moving averages below. As year-end approaches, downstream consumption is expected to gradually weaken; however, tightness in the spot market continues to support zinc prices, which are likely to hover at highs in the short term.

Tin

SHFE tin prices remained volatile during yesterday's night session, with spot market transactions being lackluster. [SMM Tin Morning Brief]

Yesterday, SHFE tin prices exhibited a relatively stable but slightly fluctuating trend. At the opening, SHFE tin prices were influenced by the previous day's market sentiment, starting the day with a relatively steady stance. However, as international market dynamics shifted and domestic supply and demand factors came into play, prices experienced slight fluctuations. Yesterday, the opening price of the most-traded SHFE tin contract rose slightly compared to the previous day's closing price, indicating that demand for tin remained robust. Subsequently, prices pulled back slightly, possibly due to profit-taking by some investors and short-term arbitrage trading. Nevertheless, SHFE tin prices did not experience a significant decline, reflecting the market's overall optimism about the future of tin. During the afternoon session, SHFE tin prices gradually stabilized and rebounded to some extent. The relative stability on the supply side also provided some support for prices. Technically, SHFE tin prices remained within the recent trading range, showing no significant breakout signals. Market analysts pointed out that investors should closely monitor changes in international and domestic economic conditions as well as relevant policy developments to formulate reasonable investment strategies. Overall, the SHFE tin market on December 25 presented a stable trend with slight fluctuations, and market expectations for the future remain optimistic. Investors are advised to remain cautious in their operations and adjust strategies flexibly based on market dynamics.

SMM Nickel Morning Comment (Dec 26)

Spot Premiums/Discounts: The mainstream spot premiums for Jinchuan #1 nickel were 4,000-4,400 yuan/mt, with an average of 4,200 yuan/mt, down 200 yuan/mt compared to the previous trading day. The spot premiums for Norilsk nickel were -200-0 yuan/mt, with an average of -100 yuan/mt, down 50 yuan/mt compared to the previous trading day.

Futures Market: In the morning, nickel prices fluctuated at low levels, rising by 770 yuan/mt to 125,470 yuan/mt, an increase of 0.6%.

Spot Premiums/Discounts: Following the decline in the night session, nickel prices once again reached a short-term low. The premiums for Jinchuan-branded nickel were raised again. Although the sentiment of short-term supply tightens was alleviated, the tight availability of spot cargo in the market persisted. The spot premiums/discounts for other brands of nickel plates in the spot market showed relatively small changes overall.

Yesterday, nickel prices fluctuated within a range, continuing the upward trend from the previous trading day's daytime session. The premiums for Jinchuan-branded nickel remained largely stable at high levels, but as the sentiment of short-term supply tightens was gradually digested by the market, the premiums showed slight loosening. The spot premiums/discounts for other brands of nickel plates remained largely stable this month. This week, nickel prices overall fluctuated upward, while the sentiment for low-price restocking among downstream buyers weakened, and market transactions turned cold again in the past two days.

Price Spread with Nickel Sulphate: Nickel briquette prices were in the range of 124,750-125,150 yuan/mt, up 1,250 yuan/mt compared to the previous trading day. Nickel sulphate remained at a discount to refined nickel.