SMM Morning Comment For SHFE Base Metals On January 3

SHANGHAI, January 3 (SMM) –

Copper

Overnight, LME copper opened at $8,776.5/mt, initially bottomed at $8,766/mt, then its center rose and maintained wide fluctuations, peaking intraday at $8,819/mt before finally closing at $8,801/mt, up 0.22%. Trading volume reached 18,000 lots, and open interest stood at 258,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 73,130 yuan/mt, initially declined to a low of 72,780 yuan/mt, then its center gradually rose during fluctuations, peaking at 73,250 yuan/mt near the close and finally settling at 73,190 yuan/mt, down 0.15%. Trading volume reached 37,000 lots, and open interest stood at 160,000 lots. Macro side, the market expects Trump's policies to boost the US dollar, with the US dollar index continuing to hit new highs since November 2022, exerting pressure on copper prices. Domestically, during a survey in Shandong, Qiang Li emphasized the need to continue implementing trade-in policies for consumer goods this year and vigorously promote the construction of battery swapping infrastructure. Fundamentally, on the first trading day after the New Year’s holiday, copper prices fell while premiums rose, but downstream restocking demand was moderate, with overall trading only slightly better than before the holiday. As of Thursday, January 2, SMM copper inventories in major regions nationwide increased by 1,200 mt from Monday to 114,300 mt, up 8,900 mt from last Thursday, marking the second consecutive week of inventory growth. In summary, with the US dollar index continuing to hit new highs and manufacturing consumption relatively weak, copper prices are expected to face resistance above.

Aluminum

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,915 yuan/mt, hit a high of 20,025 yuan/mt, a low of 19,915 yuan/mt, and closed at 19,960 yuan/mt, up 15 yuan/mt or 0.08%. On Thursday, LME aluminum opened at $2,554/mt, reached a high of $2,574/mt, a low of $2,527.5/mt, and closed at $2,529/mt, up $26.5/mt or 0.92%.

Summary: On the macro front, the ECB and US Fed may slow the pace of future interest rate cuts, while the Chinese government continues to focus on boosting consumption. On the fundamentals side, although multiple aluminum smelters in Sichuan and Guangxi reduced production in December, and some capacity resumption progress stalled, production still showed YoY growth. On the demand side, market demand weakened further during the off-season, with operating rates in the aluminum processing industry declining steadily as some aluminum processing plants approached holiday closures. Overall, on the fundamentals side, supply-side pressure eased slightly, but weak demand during the off-season and the risk of inventory buildup in social stocks persisted. In the short term, aluminum prices are expected to fluctuate downward. In the long term, attention should be paid to changes in the US Fed's future interest rate cut stance and the pace of consumption recovery.

Lead

Overnight, LME lead opened at $1,950/mt and consolidated around the daily moving average during the Asian session. Entering the European session, it briefly touched a high of $1,966/mt before fluctuating downward to a low of $1,933/mt, closing down by $18/mt or 0.92%.

Overnight, the most-traded SHFE lead contract opened at 16,795 yuan/mt, briefly touched a high of 16,855 yuan/mt at the beginning of the session before weakening to a low of 16,735 yuan/mt. Before the close, it rebounded to near the daily moving average, finally settling at 16,780 yuan/mt, down by 35 yuan/mt or 0.21%.

Macro side, weak global manufacturing activity has heightened demand concerns, while a stronger US dollar has also pressured the overall non-ferrous metals market. Fundamentals side, primary lead smelter supply recovery in December remained limited, with the impact of environmental protection-driven production restrictions in Hunan not fully dissipated. Additionally, smelter supply in Guangdong and Yunnan declined, leading to limited circulating supply of primary lead in the South China market, where spot orders maintained high premiums. Meanwhile, this week, the smog alert in Anhui was lifted, and local secondary lead smelting enterprises gradually resumed production. However, as lead prices declined, secondary lead profits shrank, prompting smelting enterprises to stand firm on quotes. Secondary refined lead prices inverted against primary lead. Downstream battery manufacturers gradually resumed procurement, with some continuing to consume social warehouse inventory. Moving forward, attention should be paid to the potential boost to lead prices from downstream raw material stocking ahead of the Chinese New Year.

Zinc

Overnight, US media reported that Biden might launch strikes before leaving office if Iran accelerates the development of nuclear facilities. An ECB Governing Council member predicted that interest rates would drop to 2% by this autumn. Elon Musk called for a re-election in the UK. South Korea's Corruption Investigation Office for High-ranking Officials issued an arrest warrant for Yoon Suk-yeol. Li Qiang emphasized the continued implementation of the trade-in policy for consumer goods. The Ministry of Commerce announced measures against 10 US companies under the unreliable entity list. Policies related to stock buybacks, increased holdings, and relending were adjusted and optimized.

Overnight, LME zinc opened at $2,992/mt. In early trading, it fluctuated near the daily moving average, briefly reaching a high of $3,020.5/mt. During European trading hours, longs exited the market, causing LME zinc to plunge downward, closing at the intraday low of $2,924/mt, down $65/mt or 2.17%. Trading volume increased to 15,006 lots, while open interest decreased by 3,247 lots to 221,000 lots. Overnight, LME zinc formed a large bearish candlestick with no lower shadow. LME zinc inventory decreased by 800 mt to 234,100 mt, a drop of 0.34%. The US dollar continued to rise, and concerns over increased tariffs dampened global demand. Additionally, global manufacturing data showed declines, weakening demand. LME zinc faced downward pressure and is expected to fluctuate downward today.

Overnight, the most-traded SHFE zinc 2502 contract opened at 24,920 yuan/mt. In early trading, SHFE zinc briefly rose to a high of 25,040 yuan/mt before longs reduced positions, causing SHFE zinc to fluctuate downward, hitting a low of 24,780 yuan/mt near the session's end. It ultimately closed at 24,800 yuan/mt, down 465 yuan or 1.84%. Trading volume decreased to 86,977 lots, while open interest fell by 6,940 lots to 124,000 lots. Overnight, SHFE zinc formed a small bearish candlestick. The middle Bollinger Band provided resistance, and the KDJ indicator showed a downward opening. Macro sentiment weakened as the US dollar continued to strengthen. Fundamentally, social inventory increased, easing the tight supply of zinc ingots. Consumption weakened as downstream enterprises gradually entered the holiday season. Dragged down by LME zinc, SHFE zinc declined and is expected to fluctuate downward today.

Tin

Yesterday, spot market prices fluctuated significantly. In the morning, SHFE tin prices opened low and moved higher, then fluctuated rangebound, while the spot market remained stable in the afternoon with a decline in transactions. Some downstream enterprises placed orders at low prices in the morning, but overall transactions were weak. Imported spot tin remained popular, considering the year-end and shipping schedule issues in Indonesia. The inventory of imported spot tin in the spot market was relatively low, with some imported tin futures expected to arrive at the port around mid-January. During the night session, SHFE tin prices continued to pull back, with the closing price of the 2502 contract dropping to approximately 241,000 yuan/mt, which may stimulate today's spot market sentiment. Overall, SHFE tin prices have shown a weak trend recently, and downstream enterprises are expected to plan year-end restocking at low levels.

Nickel

Spot Premiums/Discounts: The mainstream spot premiums for Jinchuan No. 1 nickel were quoted in the range of 2,700-3,100 yuan/mt, with an average premium of 2,900 yuan/mt, dropping slightly by 100 yuan. Russian nickel premiums/discounts were quoted in the range of -300 to 0 yuan/mt, with an average discount of -150 yuan/mt.

Futures: In the morning, nickel prices fluctuated at low levels, dropping 60 yuan to 124,630 yuan, up 0.05%.

The overall premiums for Jinchuan-branded nickel continued to drop slightly. The short-term downward trend in premiums remained unchanged. In January, leading refined nickel enterprises showed no intention of production cuts, while some small and medium-sized domestic refined nickel enterprises might implement small-scale production cuts due to narrow profit margins combined with holiday factors. Overall supply remained sufficient. Spot premiums/discounts for other brands of nickel plates also saw slight declines. In December, nickel prices mainly showed a downward trend, coupled with the arrival of some Russian nickel long-term contracts in the latter part of the month, the reflow of Jinchuan-branded nickel plates from exports, and shipments from some refined nickel enterprises, which exerted pressure on spot premiums/discounts. The absolute prices for downstream purchases were relatively low, and overall purchase willingness was moderate.

Regarding the Price Spread Between Nickel Sulphate and Refined Nickel: Nickel briquette prices were in the range of 123,650-124,400 yuan/mt, up 300 yuan/mt compared to the previous trading day's spot price. Nickel sulphate remained at a discount to refined nickel.