SMM Morning Comment For SHFE Base Metals (Oct 16)

SHANGHAI, Oct 16 (SMM) –

Copper

US Dollar Index Hit Over Two-Month High, Copper Prices Declined Overnight [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,540.5/mt, initially rose to a high of $9,602.5/mt, then fluctuated downward throughout the session, reaching a low of $9,520/mt near the close, and finally settled at $9,520/mt, down 1.33%. Trading volume reached 22,000 lots, and open interest was 283,000 lots. Overnight, the most-traded SHFE copper 2411 contract opened at 76,340 yuan/mt, initially moved slightly upward before declining to a low of 76,380 yuan/mt, then rose to a high of 76,710 yuan/mt, and fluctuated throughout the session, finally closing at 76,590 yuan/mt, down 0.39%. Trading volume reached 29,000 lots, and open interest was 152,000 lots. Macro side, US Fed's Daly stated that the monetary policy remains restrictive and the Fed is working to reduce inflation. The market also expects the Fed to cut interest rates at a slower pace over the next year and a half and that Trump will win the election, boosting the US dollar. The US dollar index continued its upward trend, reaching a two-month high, which is bearish for copper prices. Additionally, international oil prices fell due to eased concerns over Iranian supply and a weakening demand outlook, dragging down copper prices. Fundamentally, supply side, today marks the last trading day for the SHFE copper 2410 contract. Traders are reassessing future price trends, with the market currently holding a bearish view on short-term premiums and discounts, leading to noticeable selling sentiment among traders and an increase in copper cathode spot supply. Conversely, consumption side, downstream sentiment remains cautious, with purchases mainly based on immediate needs, resulting in mediocre overall market transactions. Price-wise, the US dollar index continued to fluctuate at high levels, while domestic downstream consumption showed no significant improvement. Copper prices are expected to maintain a fluctuating trend today.

Aluminum

Macro sentiment weakens, the US dollar index hits a two-month high, leading to a decline in aluminum futures overnight [SMM Aluminum Morning Meeting Summary Oct 16]

Overnight, the most-traded SHFE aluminum 2411 contract opened at 20,570 yuan/mt, reaching a high of 20,730 yuan/mt and a low of 20,560 yuan/mt, closing at 20,675 yuan/mt, up by 70 yuan/mt or 0.34% from the previous close. On Tuesday, LME aluminum opened at $2,600.5/mt, with a high of $2,606/mt and a low of $2,535.5/mt, closing at $2,671.5/mt, down by $24.5/mt or 0.94%.

Summary: Macro front, the market expects the US Fed to slow the pace of interest rate cuts, with the US dollar index reaching a more than two-month high, putting pressure on non-ferrous metals. Domestically, the Ministry of Finance has released a package of incremental policy measures, and the State Council Information Office will hold a press conference on Thursday regarding the promotion of stable and healthy development of the real estate market. Fundamentals side, expectations for production cuts in Yunnan in the fourth quarter have 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 alumina spot market remains in a tight balance, with an expected increase in domestic aluminum costs in October. Demand side, the current downstream operating rate of producers is generally stable, with inventory falling back to pre-holiday levels during the week, and market circulation remains tight. Overall, the supply-demand mismatch in the aluminum market fundamentals is not prominent, with a short-term fluctuating trend expected, focusing on changes in macro sentiment both domestically and internationally and end-use consumption.

Lead

The overall macro atmosphere is relatively warm, providing good support for lead prices [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,065.5/mt. Due to the strengthening US dollar index, it fluctuated downward after the opening, reaching a low of $2,035.5/mt during the European session. It then rebounded and closed at $2,078.5/mt, up 0.29%.

Overnight, the most-traded SHFE lead 2411 contract opened at 16,495 yuan/mt, briefly touched a low of 16,460 yuan/mt at the beginning of the session, and then was boosted by the rise in LME lead to reach 16,770 yuan/mt, finally closing at 16,780 yuan/mt, with an increase of 1.7%.

Macro side, the market expects the US Fed to cut interest rates at a slow pace over the next year and a half and Trump to win the election, which may boost the US dollar. The US dollar index continued to rise, reaching a more than two-month high. US Fed's Daly stated that the monetary policy remains restrictive and the Fed is working to reduce inflation. China's State Council Information Office will hold a press conference on Thursday regarding the promotion of stable and healthy development of the real estate market. The China Financial Regulatory Commission and the National Development and Reform Commission held a meeting to deploy local governments to establish a coordination mechanism to support financing for small and micro enterprises.

Spot fundamentals, the overall macro atmosphere is relatively warm, and the import window for lead ingots remains closed. Additionally, the supply issues of lead concentrate and battery scrap within the year have not been fully alleviated, providing good support for lead prices. Although refined lead supply is expected to recover mainly in late October, downstream consumption, especially the operation of producers for automotive start-stop batteries, is expected to improve. The lead market fundamentals may enter a phase of simultaneous increase in supply and demand. Further attention is needed on the recovery progress of smelter production and changes in domestic social inventory.

Zinc

Support from Supply Side Remains, SHFE Zinc Moves Upward after Opening Lower [SMM Morning Comment Oct 16]

US Fed's Daly: Monetary policy remains restrictive; the market increases bets on a significant 50 basis point interest rate cut by the central bank; Lebanon receives US assurance that Israel will reduce attacks; North Korea destroys parts of inter-Korean routes; the State Council Information Office will hold a real estate-related press conference on October 17; the Financial Regulatory Administration and the National Development and Reform Commission: establish a coordination mechanism to support financing for small and micro enterprises; the Ministry of Finance and other three departments: all water resource tax revenue will belong to local governments; the Shenzhen Stock Exchange strengthens regulation of program trading.

Overnight, LME zinc opened at $3,087/mt, initially reaching a high of $3,092/mt, then fluctuated downward to a low of $2,992/mt, before rebounding from the low to recover some losses, finally closing down at $3,052/mt, a decrease of $42.5/mt, or 1.37%. Trading volume decreased to 12,804 lots, and open interest decreased by 2,523 lots to 260,000 lots. Overnight, LME zinc recorded a bearish candlestick, with the middle Bollinger Band providing support. LME zinc inventory decreased by 1,325 mt to 239,300 mt. The US dollar index fluctuated at highs, exerting continuous pressure, combined with the market having largely digested China's previous stimulus policy, poor macro sentiment dragged LME zinc's focus further down.

Overnight, the most-traded SHFE zinc 2411 contract opened at 24,800 yuan/mt, initially dipping to 24,780 yuan/mt, then fluctuated upward along the daily moving average, reaching a high of 25,150 yuan/mt near the close, finally closing up at 25,090 yuan/mt, an increase of 135 yuan/mt, or 0.54%. Trading volume decreased to 69,930 lots, and open interest decreased by 543 lots to 110,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 10-day moving average above forming resistance. The high futures market prices continued to suppress downstream consumption, yet the tight ore situation remained unchanged, with the supply side still supporting zinc prices. Additionally, the State Council Information Office will hold a press conference on Thursday regarding the promotion of stable and healthy development of the real estate market, which may stir market sentiment again. SHFE zinc opened lower and then moved upward throughout, with attention on the subsequent macro trend.

Tin

Night session SHFE tin prices opened high and moved higher, suppressing downstream purchasing willingness [SMM Tin Morning News Oct 16]

SMM, October 16: Yesterday, the most-traded SHFE tin contract closed at 266,190 yuan/mt, up by 2,680 yuan/mt, an increase of 1.02%, with a high of 267,450 yuan/mt and a low of 263,080 yuan/mt. During yesterday's morning session, the domestic tin ingot brand premiums and discounts quoted by trading companies showed little change compared to recent days. Small brand tin ingot quotations against the SHFE 2411 contract were +0~+200 yuan/mt, delivery brand prices: against the SHFE 2411 contract were +200~+600 yuan/mt, Yunnan tin brand quotations against the SHFE 2411 contract were +600~+800 yuan/mt, and imported tin brand spot quotations against the SHFE 2411 contract were -700 yuan/mt. During yesterday's morning session, tin prices fluctuated at low levels, and some downstream companies continued purchasing. Some trading companies traded around 10 mt, while a few traded 2-3 trucks. Overall, the spot market remained active yesterday.

Nickel

On October 15, Jinchuan nickel was quoted at a premium of 1,200-1,500 yuan/mt, with an average of 1,350 yuan/mt, down 100 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 unchanged from the previous trading day. On the morning of October 15, the futures market fluctuated, and the spot premiums narrowed compared to the previous working day. The nickel briquette prices were 133,550-134,050 yuan/mt, down 275 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was approximately 5,595 yuan/mt (nickel sulphate prices were 5,595 yuan/mt lower than nickel briquette prices).