SMM Morning Comment For SHFE Base Metals December 21

SHANGHAI, December 21 (SMM) –
Copper
LME copper prices opened at $8621/mt and closed with a gain of 0.12% at $8596/mt last evening, with the low-end of $8549.5/mt and the high-end of $8621/mt. Trading volume stood at 16,000 lots. Open interest stood at 282,000 lots. The most active SHFE 2401 copper contract prices opened at 68750 yuan/mt and finished at 68850 yuan/mt overnight, down 0.12%, with the low-end of 68680 yuan/mt and the high-end of 68990 yuan/mt. Trading volume was 15,000 lots and open interest stood at 120,000 lots. On the macro front, the market is worried that the actions of Houthi militants will lead to tense international situations and trade disruptions, and the market has strong risk aversion. In addition, British inflation fell sharply, the pound fell, and the U.S. index rose, limiting the rise in copper prices. In terms of fundamentals, from the supply side, the current supply is tight in both the East and South China markets. It is understood that some supply from Shandong will go to Jiangsu, Zhejiang and Shanghai, while supply from North China is hindered by heavy snow. At present, spot resources are still tight, and most of the imported copper will not enter the market until next week. It is expected that the tight supply situation will continue until the end of this week. In terms of consumption, there has been some snowfall across China. Most copper processing companies said that it had no impact on their production. However, the rising copper prices and premiums and discounts have caused a certain decline in new orders. Some copper rod factories in East China have experienced high inventory of finished products and a reduction in production. In terms of if copper prices remain High, it is expected that the demand can weaken. There will be limited upside room for copper prices as the US dollar weighed.
Aluminum
The most-traded SHFE 2401 aluminum contract opened at 19,000 yuan/mt overnight, with its low and high at 18,920 yuan/mt and 19,000 yuan/mt before closing at 18,945 yuan/mt, down 100 yuan/mt or 0.53%. LME aluminum opened at $2,272/mt yesterday, with its high and low at $2,279/mt and $2,237.5/mt respectively before closing at $2,245.5/mt, down $19.5/mt or 0.86% compared to the previous day.
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 $2067.5/mt, Entering the European session, LME lead stocks continued their downward trend, with a daily decrease of 2,300 tons. LME lead finally closed at US$2,078/ton, an increase of 0.51%.
The most active SHFE 2402 lead contract prices opened at 15685 yuan/mt last evening and finally closed at 15650 yuan/mt, down 0.13%. Open interest decreased 104 lots to 55897 lots.
Zinc
LME zinc opened at $2576.5/mt last evening, and hit a high of $2611/mt before falling back to a low of $2560.5/mt, and closed at $2569.5/mt, down $8/mt or 0.31%. Trading volume was 9917 lots, and open interest decreased by 5960 lots to 197,000 lots. LME zinc stocks increased by 23450 mt or 1.23% to 230600 mt overnight, the highest since September 2021. In December, the U.S. consumer confidence index rose to the highest level in five months. Existing home sales unexpectedly increased in November, boosting market sentiment. At the same time, on December 18, Trafigura announced the closure of its Myra Falls polymetallic lead, zinc and copper mine again due to increased operating costs and low copper and zinc prices, exacerbating expectations of shortages in the ore supply. However, the large delivery of LME inventories suppressed market sentiment.
Overnight, the most-traded SHFE 2402 zinc contract opened at 21160 yuan/mt and hit a high of 21180 yuan/mt before closing at 21115 yuan/mt, up 45 yuan/mt or 0.21%. Trading volume was 44725 lots, and open interest increased by 435 lots to 84861 lots. 7
Tin
SHFE 2401 tin contract rose to 209,400 yuan/mt overnight and then declined to 208,200 yuan/mt, closing at 209,550 yuan/mt, up 0.23%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands did not changes much. 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 1,000-1,100 yuan/mt for Yunxi brand, and discounts of 500-700 yuan/mt imported brand tin ingots. The price of tin fell yesterday, and trading companies said that downstream companies were less willing to purchase, with most transactions being driven by essential needs. Overall, the spot market yesterday was relatively subdued.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 132,000 yuan/mt, and closed at 131,200 yuan/mt, up 130 yuan/mt. Trading volume reduced 8,357 lots, and open interest decreased by 3,152 lots. On the macro level, the Red Sea route has no impact on refined nickel transportation so far. On fundamentals, affected by price reduction of nickel sulphate and other raw materials as well as stabilising SHFE nickel price, some refined nickel enterprises have started to make profits and thus resumed production. In summary, it is expected that December will see a month-on-month increase of refined nickel output.