SMM Morning Comment For SHFE Base Metals October 16

SHANGHAI, October 16(SMM) –
Copper
Copper prices down on rebounding US dollar index
LME copper prices opened at $7996/mt and closed at $7938/mt last Friday evening, a drop of 0.33%, with the low-end of $7927.5/mt and the high-end of $8000/mt. Trading volume was 17,000 lots, and open interest stood at 272,000 lots. The most active SHFE 2311 copper contract prices opened at 66420 yuan/mt and finished at 66180 yuan/mt last Friday evening, down 0.38%, with the low-end of 65890 yuan/mt and the high-end of 66390 yuan/mt. Trading volume was 32,000 lots, and open interest stood at 162,000 lots. On the macro front, Fed Harker said the Fed may have completed raising interest rates, supporting a longer-term high interest rate stance. Economic growth will slow next year, but a recession is not expected. After Fed Harker's speech, swaps reduced the likelihood of the Fed raising interest rates this year. On the fundamentals, as of October 13, SMM copper inventory across major Chinese markets increased by 3,000 mt from last Monday to 117,300 mt, up 23,700 mt from pre-holiday level. Due to the arrival of a large amount of imported copper in East China after the holidays, the inventory increase is more obvious. In South China, due to lower copper prices after the holidays, downstream buyers replenished stocks after the holidays, resulting in a decline in inventories. Given low copper prices, demand is expected to remain acceptable. The copper prices will remain at low levels against a high US dollar.
Aluminum

Last Friday night, the most-traded SHFE 2311 aluminum contract opened at 18,985 yuan/mt, with its lowest and highest at 18,875 yuan/mt and 18,985 yuan/mt before closing at 18,910 yuan/mt, down 30 yuan/mt or 0.16% compared with the previous trading day. LME aluminum opened at $2,204/mt on last Friday, with its high and low at $2,212/mt and $2,190/mt respectively before closing at $2,190/mt, a decrease of $11/mt or 0.5%.
Overall, external macro news disturbed market. The swinging expectations of short-term interest rate hikes and the intensification of the Palestinian-Israeli conflict added uncertainty to market. The domestic manufacturing PMI data in September rebounded to beyond 50%, further confirming the consumption recovery. Subsequent favorable policies and internal system adjustments are expected to further promote the economy. In terms of fundamentals, the domestic aluminum supply side was approaching its peak, and it is difficult to see a significant increase in the short term. Under various factors, although the domestic social inventory of aluminum accumulated in stages and soared after the holiday, the total volume still remained at a relatively low level over the same period in history. Based on the current survey of domestic aluminum downstream operations, downstream orders turned to gain after the holiday. Driven by the intensive downstream replenishment after the holiday, there were already signs of destocking in mid-week. In the short term, short-term inventory pressure may lift Shanghai aluminum and spot premiums, but in the medium and long term, with the growth rate of the supply side narrowing significantly, the tight supply-demand balance may remain, giving support to SHFE aluminum price and narrowing its downside room.
Lead
LME and SHFE lead prices hit new lows
Data source: SMM
SHANGHAI, Oct 16 (SMM) -
Last Friday, LME lead opened at $2062.5/mt. During the Asian trading session, prices basically fluctuated between $2060/mt and $2075/mt. During the European session, the US dollar strongly suppressed non-ferrous metals, and LME lead plummeted. In addition, LME lead inventories continued to increase, and LME lead continued its weak decline, reaching as low as $2,040/mt during the period, setting a new three-month low. The contract finally closed at $2,051/mt, a decrease of 0.44%.
Last Friday, domestic lead ingot inventories were accumulated. The most active SHFE lead contract prices opened as low as 16,160 yuan/mt, with the lowest of 16,080 yuan/mt, falling to a new low in nearly a month and a half. The contract closed at 16150 yuan/mt, a decrease of 0.58%. Open interest stood at 85111 lots, a growth of 2275 lots from the previous trading day.
Zinc
SMM Zinc Morning Comment
Data source: SMM
LME zinc prices opened at $2446/mt last Friday evening and closed up $5/mt or 0.2% at $2447/mt, with the low-end of $2433/mt. Trading volume rose to 7209 lots, and open interest increased by 607 lots to 221,000 lots. LME zinc inventory decreased by 250 mt to 86775 mt. Last Friday, under the strength of the US dollar and concerns about high interest rates, LME zinc was under pressure. The contango of LME 0-3 remained, indicating that overseas consumption was still weak and LME zinc was running weakly.
The most active SHFE 2311 zinc contract prices opened at 21215 yuan/mt and lost 15 yuan/mt or 0.07% to settle at 21140 yuan/mt in overnight trading with the high-end of 21305 yuan/mt and the low-end of 21075 yuan/mt. Trading volumes decreased to 97005 lots and open interest fell 2003 lots to 95271 lots. Overall, given the poor performance of the macroeconomic environment, the output of smelters in the industry is expected to reach a high level during the year, while downstream consumption has not yet seen a seasonal peak season. The overall price continues to have insufficient impetus. The market mainly maintains range-bound fluctuations.
Tin

SHFE 2311 tin contract surged rapidly after the opening of last Friday’s night session. After reaching a relatively high of 216,500 yuan/mt, it maintained sideways and finally closed at 216,160 yuan/mt, up 1.3%.

Spot premiums and discounts were basically unchanged from yesterday. Small brand tin ingots were offered at premiums of 200-400 yuan/mt, premiums of 500-700 yuan/mt for delivery brands, premiums of 1,000-1,200 yuan/mt for Yunxi brands, and discounts of 200-400 yuan/mt for imported tin brands. Tin prices rebounded slightly last Friday, but downstream companies were less willing to purchase. Most trading companies reported that most of the shipments were zero or less last Friday. Only a few companies were able to sell tin ingots of around 20 mt. Overall, the transactions in spot market was sluggish.

Nickel

Last Friday night, the most-traded SHFE 2311 aluminum contract opened at 18,985 yuan/mt, with its lowest and highest at 18,875 yuan/mt and 18,985 yuan/mt before closing at 18,910 yuan/mt, down 30 yuan/mt or 0.16% compared with the previous trading day. LME aluminum opened at $2,204/mt on last Friday, with its high and low at $2,212/mt and $2,190/mt respectively before closing at $2,190/mt, a decrease of $11/mt or 0.5%.
Overall, external macro news disturbed market. The swinging expectations of short-term interest rate hikes and the intensification of the Palestinian-Israeli conflict added uncertainty to market. The domestic manufacturing PMI data in September rebounded to beyond 50%, further confirming the consumption recovery. Subsequent favorable policies and internal system adjustments are expected to further promote the economy. In terms of fundamentals, the domestic aluminum supply side was approaching its peak, and it is difficult to see a significant increase in the short term. Under various factors, although the domestic social inventory of aluminum accumulated in stages and soared after the holiday, the total volume still remained at a relatively low level over the same period in history. Based on the current survey of domestic aluminum downstream operations, downstream orders turned to gain after the holiday. Driven by the intensive downstream replenishment after the holiday, there were already signs of destocking in mid-week. In the short term, short-term inventory pressure may lift Shanghai aluminum and spot premiums, but in the medium and long term, with the growth rate of the supply side narrowing significantly, the tight supply-demand balance may remain, giving support to SHFE aluminum price and narrowing its downside room.
On the macro front, against the background that the range of the September interest rate announced by the Fed was the same as the previous value, Chairman Powell's speech suggested that the Fed may be prepared to further raise interest rates under appropriate circumstances. Since then, the Fed had laid off employees for the first time after its enrollment expansion and other actions, leading to increased market expectations that it may raise interest rates in the second half of the year. It’s reflected in market that the US dollar continued to strengthen, commodities were under downward pressure, and nickel prices fell both in domestic and overseas markets.