SMM Morning Comment For SHFE Base Metals (Oct 11)

SHANGHAI, Oct 11 (SMM) –

Copper

US Fed Rate Cut Expectations Increased, Copper Prices Rose Overnight [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,675/mt, initially dipped to a low of $9,619/mt, then fluctuated upward, peaking at $9,749/mt by the end of the session, and finally closed at $9,737.5/mt, a decrease of 0.55%. Trading volume reached 19,000 lots, and open interest was 292,000 lots. Overnight, the most-traded SHFE copper 2411 contract opened lower at 76,850 yuan/mt, then maintained a fluctuating upward trend, peaking at 77,560 yuan/mt by the end of the session, and finally closed at 77,270 yuan/mt, a decrease of 0.34%. Trading volume reached 34,000 lots, and open interest was 160,000 lots. Macro side, the US September non-seasonally adjusted CPI year-on-year rate was 2.4%, declining for the sixth consecutive month but exceeding expectations across the board. US Fed officials stated that shifting policy to neutral over time is appropriate, with the overall trend clearly showing a significant drop in inflation and the job market cooling to full employment levels. Expectations for a Fed rate cut increased, leading to a slight rise in copper prices. Domestically, several banks announced that the mortgage rate on existing home loans would be uniformly reduced by 30 basis points below the LPR. Fundamentally, although copper prices currently show a downward trend, the price spread between front-month and next-month contracts is large, and prices remain high. There is no significant improvement in downstream restocking demand. As of Thursday, October 10, SMM copper inventories in major regions nationwide increased by 4,700 mt to 203,600 mt compared to Tuesday, and increased by 38,100 mt compared to before the holiday. The post-holiday first-week inventory accumulation was lower than the same period last year, which was 44,200 mt. Overall, domestic consumption has not shown significant improvement. The market is expected to see more actual real estate spending announced at the Ministry of Finance press conference on Saturday. Copper prices are expected to stabilize today.

Aluminum

Solid support from supply-demand fundamentals and cost side; macro expectations are loose; aluminum prices fluctuate upward [SMM Aluminum Morning Meeting Summary Oct 11]

SMM, Oct 11: Overnight, the most-traded SHFE aluminum 2411 contract opened at 20,670 yuan/mt, reaching a high of 20,775 yuan/mt and a low of 20,630 yuan/mt, closing at 20,695 yuan/mt, up 205 yuan/mt, an increase of 1.0%. Yesterday, LME aluminum opened at $2,545/mt, with a high of $2,595/mt and a low of $2,539/mt, closing at $2,591/mt, up $46/mt, an increase of 1.81%.

Summary: Macro side, the US September CPI data exceeded expectations, enhancing the outlook for a soft landing of the US economy. Meanwhile, the domestic market awaits the fiscal conference on Saturday. Fundamentally, the expectations for production cuts in Yunnan for the fourth quarter has decreased, along with the release of some new and resumed capacity, leading to continued growth in the domestic aluminum market supply side. Cost side, the spot alumina market remains in tight balance, making it difficult for domestic aluminum costs to decline. Demand side, October is a minor peak season for downstream aluminum processing, with overall stable industry operations, and future attention is needed on order changes. Overall, the aluminum market's supply-demand mismatch is not prominent, and with rising costs, short-term fluctuations are expected to remain upward. Future attention should focus on domestic consumption and changes in international macro sentiment.

Lead

Overnight Lead Prices Stabilized, Holders Continued to Transfer Inventory Awaiting Delivery [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,073.5/mt, fluctuated downward during the Asian session, and continued to decline in the European session, reaching a low of $2,045.5/mt. It then rose amid a general increase in base metals, finally closing at $2,074/mt, down $2/mt, a decrease of 0.1%.

Overnight, the most-traded SHFE lead 2411 contract started at a low of 16,525 yuan/mt, fluctuated upward to a high of 16,740 yuan/mt, and slightly dropped back before closing, finally settling at 16,680 yuan/mt, up 100 yuan/mt, an increase of 0.60%.

Macro side, after the release of US CPI data, expectations for an interest rate cut heated up again, leading to a general rebound in LME base metals. Yesterday, the People's Bank of China decided to establish the "Securities, Funds and Insurance companies Swap Facility (SFISF)," with an initial operation scale of 500 billion yuan, which can be further expanded as needed, providing a temporary boost to the financial market. Additionally, the market is widely focused on the domestic fiscal stimulus plan to be announced on Saturday. Fundamentals side, after the holiday, SHFE lead jumped initially and then pulled back, with holders actively selling. The ex-factory transaction price of refinery-sourced goods weakened, and yesterday, the spread between futures and spot prices widened to 300 yuan/mt (a discount of 300 yuan/mt to the SHFE lead 2411 contract ex-factory). With only three working days left until the delivery date of the SHFE lead 2410 contract, holders continued to transfer lead ingots to delivery warehouses, and social inventory of lead ingots may continue to increase. Entering October, primary lead smelters resumed production after maintenance, gradually increasing market supply. Although the automotive battery sector enters its peak season, replacing the electric vehicle replacement sector as the new focus of lead consumption in October, SMM assesses that short-term lead market supply may exceed consumption. Regarding secondary refined lead, mid-October will see environmental inspections in Anhui. With high battery scrap prices and severe losses in secondary lead smelting, unexpected production cuts or suspensions may occur, potentially easing the pressure on lead ingot inventory accumulation, with cost support for lead prices remaining adequate.

Zinc

US Fed Interest Rate Cut Expectations Rise, LME Zinc Focus Shifts Upward [SMM Zinc Morning Comment Oct 11]

SMM, Oct 11: Overnight, US CPI fell for the sixth consecutive time but exceeded expectations across the board; Wall Street Journal: Bostic is open to not cutting rates in November; Israel's security cabinet will meet to decide how to respond to Iran's attack; if Israel attacks Iran's nuclear facilities, Iran may change its nuclear principles; Li Qiang met with Japanese Prime Minister Shigeru Ishiba; mortgage rates on existing home loans were uniformly reduced to LPR minus 30 basis points; the Shanghai Stock Exchange held another brokerage symposium to promote the implementation of M&A policies; Hangzhou will issue 430 million yuan in consumption vouchers.

Overnight, LME zinc opened at $3,023/mt, initially fluctuating widely along the daily moving average, dipping to $3,003/mt during European trading hours. Subsequently, shorts reduced positions, and LME zinc fluctuated upward, peaking at $3,101/mt by the end of the session, closing up at $3,099/mt, an increase of $66.5/mt, or 2.19%. Trading volume decreased to 10,979 lots, and open interest fell by 364 lots to 260,000 lots. Overnight, LME zinc recorded a bullish candlestick, with LME inventory down by 1,575 mt to 242,450 mt, a decrease of 0.65%. Macro sentiment was positive, with US CPI falling for the sixth time but exceeding expectations, and US Fed interest rate cut expectations rising, shifting LME zinc's focus upward. It is expected to fluctuate at high levels today.

Overnight, the most-traded SHFE zinc 2411 contract opened at 25,005 yuan/mt. Initially, bulls increased positions, and SHFE zinc fluctuated upward, peaking at 25,430 yuan/mt by the end of the session, closing up at 25,330 yuan/mt, an increase of 530 yuan/mt, or 2.14%. Trading volume decreased to 97,234 lots, and open interest increased by 4,725 lots to 118,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, retracing to the 5-day moving average. Macro sentiment rose again, with US CPI data exceeding expectations, US Fed interest rate cut expectations rising, and domestic mortgage rates on existing home loans uniformly reduced to LPR minus 30 basis points, shifting SHFE zinc's focus upward. It is expected to fluctuate at high levels today.

Tin

During the night session, SHFE tin prices slightly rose; the spot market saw weak transactions [SMM Tin Morning News Oct 11]

SMM, October 11: Yesterday, the most-traded SHFE tin contract closed at 267,050 yuan/mt, up by 2,760 yuan/mt, an increase of 1.04%, with a high of 268,300 yuan/mt and a low of 265,210 yuan/mt. During the morning session, trading companies' quotes for domestic tin ingot brands showed little change compared to recent days. Small brand tin ingots were quoted at premiums of 0~200 yuan/mt against the SHFE 2411 contract, delivery brand at premiums of 200~600 yuan/mt, Yunnan Tin brand at premiums of 600~800 yuan/mt, and imported tin brands were quoted at discounts of 400~200 yuan/mt against the SHFE 2411 contract. Yesterday morning, tin prices fluctuated upward, with some downstream companies remaining on the sidelines. Most trading companies had scattered transactions, with a few trading companies completing transactions of about one truckload. Overall, the spot market transactions were sluggish yesterday.

Nickel

On October 10, Jinchuan nickel was quoted at a premium of 1,500-1,600 yuan/mt, with an average of 1,550 yuan/mt, up 150 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 400-200 yuan/mt, with an average of 300 yuan/mt, remaining flat compared to the previous trading day. On the morning of October 10, futures prices ran generally weak, and the spot premium spread remained stable. Nickel briquette prices were 132,200-132,700 yuan/mt, down 1,950 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 4,518 yuan/mt (nickel sulphate prices were 4,518 yuan/mt lower than nickel briquette prices).