SMM Morning Comment For SHFE Base Metals December 20

SHANGHAI, December 20 (SMM) –
Copper
LME copper prices opened at $8547.5/mt and closed at $8586/mt in last evening trading, a gain of 1.37%, with the low-end of $8526/mt and the high-end of $8630/mt. Trading volume was 21,000 lots, and open interest stood at 283,000 lots. The most active SHFE 2401 copper contract prices opened at 68710 yuan/mt and finished at 68860 yuan/mt overnight, up 0.55%, with the low-end of 68690 yuan/mt and the high-end of 69260 yuan/mt. Trading volume was 30,000 lots and open interest stood at 132,000 lots. On the macro front, a spokesman for the Houthi armed forces warned that an operation may be carried out in the Red Sea every 12 hours. There are market rumors that the United States will launch a military strike. Crude oil rose sharply, which also drove copper prices higher. In terms of fundamentals, from the supply side, although domestic social stocks of copper increased slightly at the beginning of the week, and imported copper gradually arrived in the middle of the week, copper supply during the week may tighten due to the time required for customs clearance and the current acceptable downstream consumption. In addition, it is understood that the earthquake in Gansu has no direct impact on the production of surrounding copper refineries, but due to the continued heavy snowfall in the northwest, transportation has been delayed; in terms of consumption, after the prices fell slightly yesterday, it stimulated downstream procurement demand. But due to the sharp drop in copper prices last night, it is expected that market demand will be suppressed to some extent. Due to the influence of macro sentiment, copper prices will move strongly in the near future.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18965 yuan/mt, with its low and high at 18900 yuan/mt and 19000 yuan/mt before closing at 18920 yuan/mt, down 70 yuan/mt or 0.37%. LME aluminum opened at $2283/mt yesterday, with its high and low at $2283/mt and $2257/mt respectively before closing at $2265/mt, down 0.74%. On the macro front, the Federal Reserve decided to keep the benchmark interest rate unchanged at the range of 5.25%-5.50% at its December meeting, in line with market expectations. The overall performance of domestic social financing data was good, and financial support for the real economy was strong. The credit structure has improved, and the macroeconomic atmosphere at home and abroad has improved, boosting market confidence. In terms of fundamentals, the supply side has entered a period of stable operation in the short term, but we still need to be wary of the risks of reductions in aluminum production capacity caused by extreme weather and power rationing in the heating season. On the demand side, some aluminum processing industries have started to pick up slightly. The market in the off-season seems to be less sluggish than usual thanks to year-end promotions in some end-use sectors. Delays in domestic aluminum ingot transportation and active downstream replenishment drove domestic aluminum ingot social inventories to be significantly reduced, which have fallen below 500,000 mt. In the short term, the supply of aluminum ingots in circulation is tight, and the macro atmosphere has improved, and some terminal sectors have also picked up, keeping front-month contract price firm.
Lead
Overnight, LME lead prices opened at $2052.5/mt. Entering the European session, LME lead stocks decreased by 2200 tons, and LME lead rose to a high of $2084.5/mt. The contract closed at $2067.5/mt, a gain of 0.78%.
The most active SHFE 2402 lead contract prices opened at 15670 yuan/mt with the high-end of 16700 yuan/mt, and closed at 15630 yuan/mt,down 0.22%. Open interest increased 394 lots to 56767 lots.
Zinc
Overnight, LME zinc prices opened at $2538/mt, rising to an intraday high of $2585/mt, and closed at $2577.5/mt, up $39/mt or 1.54%. Trading volume increased to 9816 lots, and open interest decreased 2191 lots to 203,000 lots. LME zinc stocks increased by 1200 mt or 0.58% to 207150 mt overnight. The weak US dollar overnight provided support to the metals.
The most-traded SHFE 2402 zinc contract rose 170 yuan/mt or 0.82% to close at 21015 yuan/mt last night. Trading volumes decreased to 49670 lots, with open interest down 3826 lots to 78666 lots. Basically, domestic mines entered a stage of seasonal production reduction. At the same time, social inventories continued to be destocked, and the import window is closed, which supported SHFE zinc prices.
Tin
SHFE 2401 tin contract fell to 209210 yuan/mt overnight, and closed at 208800 yuan/mt, up 0.5%.
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 0-200 yuan/mt over SHFE 2401 tin contract, versus premiums of 200-800 yuan/mt for delivery brands, premiums of 1000-1100 yuan/mt for Yunxi brand, and discounts of 500-800 yuan/mt imported brand tin ingots. Tin prices continued to rise yesterday, and traders reported that downstream companies placed more orders at low prices.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 132,820 yuan/mt, and closed at 131,070 yuan/mt, down 2,320 yuan/mt. Trading volume reduced 16,819 lots, and open interest decreased by 5,078 lots. On the macro level, the US Fed has kept the range of interest rate for December stable, but market expects the Fed to lower its interest rate for three times next year. On fundamentals, affected by significant price reduction of nickel sulphate and stabilising SHFE nickel price , it is now profitable to produce refined nickel using nickel sulphate. Therefore, it is expected to see the supply growth of refined nickel in December.