SMM Morning Comment For SHFE Base Metals December 14

SHANGHAI, December 14 (SMM) –
Copper
LME copper prices opened at $8300.5/mt overnight before reaching a low of $8290.5/mt and a high of $8358/mt, and closed at $8339/mt, a drop of 0.04%. Trading volumes were 16,000 lots and open interest stood at 286,000 lots. The most active SHFE 2401 copper contract prices opened at 67700 yuan/mt and finished at 67820 yuan/mt last evening, down 0.1%, with the low-end of 67690 yuan/mt fell high-end of 68090 yuan/mt. Trading volume was 17,000 lots, and open interest stood at 143,000 lots. On the macro front, the Federal Reserve kept interest rates unchanged, acknowledging that the economy and inflation have slowed, and the dot plot suggests that it will cut interest rates three times next year. Federal Reserve Chairman Jerome Powell said he believes policy rates have reached or are close to their peak, and interest rate cuts are beginning to come into view. Domestically, M2 grew by 10% year-on-year at the end of November, and the growth rate was 0.3 percentage points and 2.4 percentage points lower than the end of last month and the same period last year respectively. In terms of fundamentals, the market price moved down yesterday, and the enthusiasm for downstream purchasing in East China has recovered. However, as the price spread between front-month and next-month contracts was still widening, the market still remained cautious before delivery; the outbound volume in South China increased slightly, but downstream buyers still pushed for lower prices. Cargo merchants were unwilling to give up profits, and the stalemate between the two sides resulted in low trading volume. In terms of consumption, most downstream companies said that copper prices have fallen and downstream orders will increase to a certain extent. However, the increase will be limited due to the high price spread between front-month and next-month contracts. It is expected that demand will pick up after the delivery. Due to the influence of macro sentiment, copper prices will have limited downside room in the near future.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18385 yuan/mt, with high and low at 18500 yuan/mt and 18380 yuan/mt before closing at 18465 yuan/mt, up 140 yuan/mt or 0.76%. LME aluminum opened at $2122.5/mt yesterday, with its high and low at $2147/mt and $2109/mt respectively before closing at $2145/mt, up 0.99%.
On the macro front, the market is beginning to bet on the Federal Reserve to cut interest rates next year. There are growing expectations for the release of favorable policies in China at the end of the year, but it will still take time to transmit to the manufacturing industry and other sectors. In terms of fundamentals, there are no further changes expected on the supply side in the short term, and market trading logic generally focuses on the resilience of consumer demand in the off-season. Aluminum prices may be relatively weak, but should find support from falling stocks.
Lead
LME lead opened at $2040/mt and fell during the Asian trading hours. During the European trading hours, LME lead briefly hit the highest point at $2049.5/mt and the lowest of $2030/mt, closing up 0.22% at $2040.5/mt overnight.
The most active SHFE 2401 lead contract prices opened at 15595 yuan/mt last evening, and closed at 15495 yuan/mt, a drop of 0.35%, with the high-end of 15615 yuan/mt and the low-end of 15470 yuan/mt.
Zinc
Last evening, LME zinc prices opened at $2428/mt and went up to close at $2439/mt, up $11/mt or 0.45%. Trading volume decreased to 5723 lots, and open interest decreased 1579 lots to 202,000 lots. LME zinc inventory dropped by 1175 mt or 0.56% to 211075 mt. The annualised PPI in the United States in November was 0.9%, which was lower than the expected 1%, a new low since June this year. The PPI in November was 0%, and the market expected 0.1%. The Federal Reserve kept interest rates unchanged, acknowledging that the economy and inflation have improved. Slowing down, Powell said that interest rate cuts have come into view. The dovish speech has obviously improved market sentiment, and LME zinc has been boosted by this.
The most active SHFE 2311 prices opened at 20490 yuan/mt and lost 35 yuan/mt or 0.17% to settle at 20540 yuan/mt in last evening trading with the high-end of 20585 yuan/mt and the low-end of 20490 yuan/mt. Trading volumes decreased to 21999 lots and open interest grew 547 lots to 74278 lots. SHFE zinc rose overnight, and found support at the middle of the Bollinger Bands. The People's Bank of China said that at the end of November, M2 increased by 10% year-on-year, and the growth rate was 0.3 and 2.4 percentage points lower than the end of last month and the same period last year respectively. The increase in social financing in November was 2.45 trillion yuan, 455.6 billion more than the same period last year. The growth rate of M1 in November hit a new low in the past two years. China's financial data in November was generally unsatisfactory. With weak physical demand, economic vitality needs to be further activated. However, from the domestic fundamentals, the strong supply and weak demand have not changed.
Tin
SHFE 2401 tin contract moved sideways last night, and closed at 207820 yuan/mt, up 0.13%. Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 0-400 yuan/mt over SHFE 2401 tin contract, versus premiums of 200-800 yuan/mt for delivery brands, premiums of 800-1100 yuan/mt for Yunxi brand, and discounts of 200-800 yuan/mt imported brand tin ingots. The spot market was relatively quiet yesterday, and most downstream companies had no purchasing plans.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 131320 yuan/mt, and closed at 130400 yuan/mt, down 1400 yuan/mt. Trading volume rose 33170 lots, and open interest increased 628 lots. On the macro front, the U.S. non-seasonally adjusted CPI rate recorded 3.1% in November, down 0.1% from the previous month, in line with market expectations, but it is worth noting that the core CPI rate has rebounded. From a fundamental perspective, the supply of pure nickel has declined slightly, but downstream demand for pure nickel is limited. Nickel price is expected to move rangebound, with little upward momentum.