SMM Morning Comment For SHFE Base Metals On February 7

Copper

LME copper prices opened at $8375/mt and closed at $8401.5/mt in last evening trading, a rise of 0.32%, with the low-end of $8367/mt and the high-end of $8428/mt. Trading volume was 17,000 lots, and open interest stood at 290,000 lots. The most active SHFE 2403 copper contract prices opened at 68020 yuan/mt and finished at 68120 yuan/mt overnight, down 0.01%, with the low-end of 67800 yuan/mt and the high-end of 68240 yuan/mt. Trading volume was 18,000 lots and open interest stood at 129,000 lots. On the macro front, the US dollar weakened slightly, while oil prices rose. In terms of fundamentals and consumption, we are entering the countdown to the Chinese New Year. More companies are closing for the Chinese New Year holiday, and market transactions tend to be quiet. In terms of price, on the whole, high oil prices and a slight weakening of the US dollar have driven copper prices higher. However, due to the continued suppression of expectations of interest rate cuts by Federal Reserve officials and the current weak demand, the upside space for copper prices is limited.

Aluminium

The most-traded SHFE 2403 aluminium contract opened at 18,905 yuan/mt overnight, with its low and high at 18,870 yuan/mt and 19,020 yuan/mt before closing at 18,970 yuan/mt, up 0.64%. LME aluminium opened at $2,206/mt on Tuesday, with its low and high at $2,203/mt and $2,242/mt respectively before closing at $2,229/mt, up 1.11%.

As CNY is drawing near, inventory grew amid subdued consumption. Transactions in the spot market was sluggish, in line with market expectations. From a macro perspective, expectations for an interest rate cut by the Federal Reserve in March fell. The Chinese government continued to stress efforts to boost market confidence. In the short term, aluminium prices are expected to move rangebound.

Lead

LME lead prices opened at $2110.5/mt and closed at $2116.5/mt last evening, up $10.5/mt or 0.5%, with the low-end of $2110/mt and the high-end of $2136.5/mt.

The SHFE 2403 lead contract opened at 16185 yuan/mt last night, hitting the lowest point at 16155 yuan/mt, and closed at 16100 yuan/mt, down 45 yuan/mt or 0.28%.

Zinc

Overnight, LME zinc prices opened at $2419.5/mt, hitting a low and high of $2419.5/mt and $2445/mt respectively, and closed at $2431.5/mt, up $6.5/mt or 0.27%. Trading volume increased to 10349 lots, and open interest grew 2351 lots to 227,000 lots. LME zinc inventory decreased by 500 mt or 0.25% to 196775 mt. Fed official Mester spoke in favor of cutting interest rates three times this year. Minneapolis Fed President Kashkari believed that the current inflation situation has improved significantly, but more concessions are needed. The dollar weakened, and LME zinc continued to destock, and LME zinc fell.

The most interest-traded SHFE 2403 zinc contract opened at 20530 yuan/mt overnight and fell to 20455 yuan/mt before rallying to a peak of 20615 yuan/mt. It eventually settled at 20570 yuan/mt, up 45 yuan/mt or 0.22%. Trading volume decreased to 29871 lots, and open interest gained by 1744 lots to 78885 lots. As the Chinese New Year holiday approaches, spot transactions in the market have been light recently, and overall downstream demand has weakened. However, with low zinc prices, smelting plant cost support has been strong.

Tin

SHFE 2403 tin contract picked up slightly before closing at 209,510 yuan/mt, up 0.61%.

Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 0-500 yuan/mt against SHFE 2403 tin contract, versus premiums of 0-1,000 yuan/mt for delivery brands, premiums of 300-800 yuan/mt for Yunxi brand, and discounts of 1,000 yuan/mt to premiums of 300 yuan/mt for imported brand tin ingots. Tin prices moved rangebound in early trading yesterday. The drop in tin prices triggered purchasing enthusiasm among downstream companies and they began to purchase tin ingots.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 124860 yuan/mt, and closed at 124960 yuan/mt, down 100 yuan/mt. Trading volume rose 70399 lots, and open interest decreased by 3598 lots. On the macro front, the Federal Reserve's interest rate meeting announced on the evening of February 1st showed that the interest rate range for February would remain unchanged. Powell said that expectations for an interest rate cut during the year still exist, but there is no possibility of an interest rate cut in the short term. From a fundamental point of view, transaction in the spot market has cooled down as downstream pre-holiday stocking has basically ended. With new arrivals, the supply of pure nickel has increased. Nickel price is expected to swing on a soft note.