SMM Morning Comment For SHFE Base Metals November 7

Copper
LME copper opened at $8253.5/mt overnight, with its session low and high at $8216/mt and $8255.5/mt before closing up 0.96% at $8247/mt. Trading volume was 18,000 lots, and open interest was 262,000 lots. SHFE 2312 copper contract opened at 67680 yuan/mt overnight, with its session high and low at 67830 yuan/mt and 67630 yuan/mt before closing up 0.36% at 67690 yuan/mt. Trading volume was 19,000 lots, and open interest was 147,000 lots. On the macro front, the Federal Reserve survey showed that credit conditions in the United States continued to tighten in Q3 but at a slower pace, and loan demand generally declined. In Europe, the final value of the Eurozone's services PMI in October was 47.8, a 32-month low; the Eurozone's final composite PMI in October was 46.5, a 35-month low. In terms of fundamentals, as of Monday November 6, copper stocks in mainstream areas of China decreased by 3,500 mt from last Friday to 60,200 mt, and also lower than 102,200 mt seen in the same period last year. Specifically, the customs clearance volume of imported copper in East China decreased last weekend, and the arrival of domestic copper also declined, causing local inventory to decrease; while in South China, due to the increase in arrival volume and the high premium in Guangdong, downstream purchasing enthusiasm declined, thus local inventories increased. In terms of consumption, as copper prices rebounded, the price difference between copper cathode and copper scrap expanded, weakening the advantage of the former and copper cathode demand is expected to decline. In terms of price, with the market in a wait-and-see mood, it is expected that copper prices will be difficult to continue to rebound.

Aluminium
The most-traded SHFE 2312 aluminum contract opened at 19305 yuan/mt overnight, with the highest and lowest prices at 19365 yuan/mt and 19305 yuan/mt before closing at 19335 yuan/mt, up 32 yuan/mt. LME aluminum opened at $2253/mt on Monday, with its low and high at $2243/mt and $2295/mt respectively before closing at $2286/mt, up $33/mt or 1.42%.
There is still great uncertainty in overseas macro front. U.S. economic data shows that the U.S. economy is resilient. The U.S. dollar index fluctuates at a high level, suppressing commodities. China has announced to issue an additional one trillion yuan of local government bonds, which could boost the economy and market. In terms of fundamentals, some aluminum billet factories have recently reduced production, the industry's ingot casting volume has increased month-on-month. The domestic aluminum supply will remain high in short-term. And imported ingots continue to enter China. The market supply in East China is loose. According to SMM statistics, as of November 6, the inventory of aluminum ingots in Wuxi was 223,000 mt, an increase of 13,000 mt from last Thursday. The inventory pressure is relatively large, mainly due to the shift to off-peak season of downstream consumption. Social inventories are still at 6-month high. Short-term aluminum prices may fluctuate rangebound.

Lead
LME lead opened at $2167/mt overnight, and once hit one-month high of $2194/mt due to weaker US dollar. Yet, high stocks caused LME lead to erase some gains later, closing at $2186/mt, up just 0.62%.
SHFE 2312 lead contract opened at 16550 yuan/mt overnight. Inventory build-up and expectations for output cuts co-exist. SHFE lead fell along with LME lead to 16455 yuan/mt initially, but then rebounded, closing up 0.36% at 16560 yuan/mt. Open interest added 635 lots to 66595 lots.

Zinc
Overnight, according to the Wall Street Journal: Minneapolis Fed President Neel Kashkari does not believe the rate hike cycle is over. Fed Governor Lisa Cook: The recent rise in U.S. long-term bond yields might not be driven by investor expectations of further interest rate hikes. She keeps a close eye on the vulnerabilities of non-bank financial institutions as Fed policy tightens financial conditions. China’s central bank published a column titled "Continuing to Deepen the Market-Based Reform of Interest Rates" to promote the further marketization of deposit and loan interest rates and insist on using reform methods to guide the continued decline of financing costs. China will continue to improve the marketization of mortgage interest rates to better support rigid housing demand and demand for improved housing. LME zinc opened at $2522/mt overnight, and closed at $2567.5/mt, an increase of $52/mt or 2.07%. The trading volume rose to 10776 lots, and open interest decreased by 2185 lots to 198,000 lots. LME zinc inventory decreased by 1850 mt to 76725 mt. Overnight, the most-traded SHFE 2312 zinc contract hovered sideways after opening at 21695 yuan/mt, and closed at 21685 yuan/mt, down 275 yuan/mt or1.28%. The trading volume fell to 72232 lots, and open interest increased by 4572 lots to 89755 lots. The weak U.S. dollar provides upward support for zinc prices. Fears of possible output cuts by zinc smelters in Yunnan due to power rationing also boosted zinc price.

Tin
SHFE 2312 tin contract fell to 207530 yuan/mt overnight and then bounced back a little to 209550 yuan/mt, closing at 209400 yuan/mt, up 0.87%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands changed little. Small brand tin ingots were offered at premiums of 300-600 yuan/mt over SHFE 2312 tin contract, versus premiums of 500-900 yuan/mt for delivery brands, premiums of 1000-1200 yuan/mt for Yunxi brand, and discounts of 300-600 yuan/mt for imported brand tin ingots. Tin prices began to rise slightly yesterday, and the willingness of downstream companies to purchase was still relatively high.

Nickel
Overnight, the most-traded SHFE nickel contract opened at 142830 yuan/mt, and closed at 142840 yuan/mt, up 10 yuan/mt. Trading volume increased by 20705 lots, and open interest decreased by 3319 lots. On the macro front, the United States released two important data last Friday: the U.S. unemployment rate in October and the seasonally adjusted U.S. non-farm payroll employment in October recorded 3.9% (higher than market forecast and previous value) and 150,000 (lower than the market forecast and previous value) respectively. This reflects that the U.S. job market has softened, reducing the possibility that the Federal Reserve will continue to raise interest rates in the future. From a fundamentals perspective, the trend of pure nickel inventory accumulation remains unchanged, and downstream demand has not yet improved. Yesterday’s spot market transactions were still weak. However, due to the positive macro sentiment, it is expected that nickel prices may rebound slightly in the future.