SMM Morning Comment For SHFE Base Metals (Nov 1)

SHANGHAI, Nov 1 (SMM) –

Copper

Overnight Copper Prices Declined, Data Supported US Fed's Cautious Interest Rate Cut [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,531.5/mt, initially rising to an intraday high of $9,580/mt before declining throughout the session, touching a low of $9,493.5/mt near the close, and finally settling at $9,547/mt, down 0.13%. Trading volume reached 16,000 lots, and open interest was 275,000 lots. Overnight, the most-traded SHFE copper 2412 contract opened at 76,670 yuan/mt, initially hitting a high of 767,100 yuan/mt before fluctuating lower throughout the session, touching a low of 76,100 yuan/mt near the close, and slightly rebounding to finally settle at 76,300 yuan/mt, down 0.25%. Trading volume reached 39,000 lots, and open interest was 157,000 lots. Macro side, the US core PCE price index YoY for September recorded 2.7%, higher than the expected 2.6% and unchanged from the previous value, boosting the US dollar index and negatively impacting copper prices. At the same time, the initial jobless claims for the week ending October 26 in the US recorded 216,000, lower than the expected 230,000, with the market still betting on a 25 basis point interest rate cut by the US Fed in November. Domestically, China's PMI for October was 50.1%, up 0.3 percentage points from the previous month, marking the second consecutive month of MoM increase, indicating that stimulus policies are helping the economy recover, providing some support for copper prices at the bottom. Fundamentally, copper prices continue to fluctuate rangebound, and on the last trading day of October, overall market trading sentiment was weak. However, some downstream buyers were bullish on premiums and restocked at lower prices. As of Thursday, October 31, SMM copper inventory in major regions nationwide slightly decreased by 300 mt from Monday to 209,800 mt, marking the second consecutive week of destocking. Total inventory was 146,100 mt higher compared to 63,700 mt in the same period last year. Today, driven by restocking demand, market transactions are expected to warm up. In terms of prices, the Standing Committee of the National People's Congress of China will meet from November 4 to 8. Before the policy implementation, the overall macro sentiment remains positive, and copper prices are expected to continue fluctuating rangebound today.

Aluminum

Supply side growth slows, coupled with low inventory and high costs persist, short-term aluminum is expected to fluctuate upward [SMM Aluminum Morning Meeting Summary Nov 1]

Overnight, the most-traded SHFE aluminum 2412 contract opened at 20,775 yuan/mt, reaching a high of 20,870 yuan/mt and a low of 20,705 yuan/mt, and closed at 20,725 yuan/mt, down 10 yuan/mt or 0.05% from the previous close. Trading volume was 65,100 lots, open interest was 195,000 lots, with a daily decrease of 3,112 lots. Yesterday, LME aluminum opened at $2,612/mt, hit a high of $2,650/mt, a low of $2,606.5/mt, and closed at $2,626/mt, up $11/mt or 0.42%.

Summary: On the macro front, US ADP employment data far exceeded expectations, enhancing the soft landing outlook, and the US dollar index strengthened. Additionally, the market is trading on the expectation of Trump's election, with the market widely awaiting the results of the US election on November 5, and global monetary policy is turning accommodative. In the domestic market, monetary policy is aligned with RRR cuts and interest rate cuts, releasing liquidity. The market is focused on the policy direction of the 14th National People's Congress Standing Committee meeting on November 4. On the fundamentals, the domestic aluminum supply side remains largely stable. Aluminum ingot arrivals are insufficient due to decreased railway transport efficiency in Xinjiang, maintaining a destocking state in the market. Spot alumina supply is tight, and some companies' production cuts and suspensions are causing disruptions, keeping alumina prices fluctuating upward. Domestic aluminum profitability has significantly narrowed, with high costs providing strong support for aluminum prices. On the demand side, downstream aluminum operating rates are intermittently weakening due to environmental protection issues. Research on companies' orders on hand indicates a potential further decline in downstream aluminum operating rates. In summary, the domestic aluminum supply side growth slows, and the fundamentals of low inventory and high costs persist, with short-term aluminum expected to fluctuate upward.

Lead

Overnight Lead Market: Overseas Market Outperformed Domestic Market, Domestic Smelters Continued to Hold Back Sales, Market Sentiment Remained Cautious [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,003.5/mt. During the Asian session, it was under pressure and consolidated along the intraday moving average. Entering the European session, it dipped to $1,993/mt before rebounding to a high of $2,039/mt. After a slight consolidation, it finally closed at $2,037/mt, up $33/mt, or 1.65%.

Overnight, the most-traded SHFE lead 2412 contract opened at 16,650 yuan/mt. It fluctuated downward at the beginning of the session, reaching a low of 16,550 yuan/mt. After a slight rebound, it was pressured by the intraday moving average and finally closed at 16,565 yuan/mt, down 125 yuan/mt, or 0.75%.

Macro side, US October ADP employment data recorded the largest increase since March this year. The September PCE price index annual rate recorded 2.1%, the lowest level since early 2021. The US Fed is still expected to cut interest rates by 25 basis points next week, and the US dollar index continued to fluctuate downward.

Fundamentals side, according to SMM survey, primary lead smelters' production was relatively stable this week. However, due to smog warnings in Henan, vehicle movement was restricted, extending the delivery cycle of cargoes self-picked up from production site. Lead prices fluctuated downward during the week, and downstream spot demand was limited, leading to slow digestion of lead ingot social inventory. Additionally, with November approaching, the delivery of the SHFE lead 2411 contract is on the agenda. Coupled with the widening spread between futures and spot prices, some holders plan to transfer inventory for delivery, resulting in a slight increase in lead ingot social inventory.

Zinc

SHFE Zinc Recorded a Bearish Candle, Zinc Prices Expected to Maintain Fluctuating Trend [SMM Zinc Morning Comment Nov 1]

Overnight, the YoY growth rate of the US September PCE Price Index fell to its lowest level since early 2021; initial jobless claims in the US decreased last week; foreign media reported that Iran is preparing to launch a large-scale retaliatory attack on Israel using armed forces in Iraq; the Bank of Japan kept its policy rate unchanged; Russia imposed an astronomical fine on Google, amounting to 35 digits; the sixth meeting of the China-US Financial Working Group was held; China's PMI for October rose MoM for two consecutive months and returned to expansion territory; six major banks will implement a new mechanism for adjusting the mortgage rate on existing home loans.

Overnight, LME zinc opened at $3,078.5/mt. At the beginning of the session, LME zinc fluctuated rangebound around the daily moving average, then climbed to a high of $3,129.5/mt. Subsequently, LME zinc fluctuated downward below the daily moving average, attempted to rebound from the low but was ultimately blocked and fell back to a low of $3,015.5/mt below the daily moving average. By the end of the session, LME zinc slightly moved up and closed down at $3,037.5/mt, down $49.5/mt, a decline of 1.6%. Trading volume increased to 122,000 lots, and open interest increased by 2,152 lots to 255,000 lots. Overnight, LME zinc recorded a bearish candle, with the upper Bollinger Bands forming resistance and the lower Bollinger Bands providing support. LME social inventory increased by 5,500 mt to 246,725 mt, an increase of 2.28%, recording an inventory rise. Currently, the US September PCE Price Index YoY growth rate recorded 2.1%, the lowest level since early 2021, and initial jobless claims in the US decreased last week. LME zinc is expected to maintain a fluctuating trend today.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,235 yuan/mt. At the beginning of the session, SHFE zinc fluctuated rangebound around the daily moving average, reaching a high of 25,260 yuan/mt. Subsequently, longs reduced positions, and SHFE zinc fluctuated downward below the daily moving average to a low of 24,810 yuan/mt. By the end of the session, shorts increased positions, and SHFE zinc slightly moved up, closing down at 24,875 yuan/mt, down 400 yuan/mt, a decline of 1.58%. Trading volume decreased to 106,000 lots, and open interest decreased by 6,946 lots to 115,000 lots. Overnight, SHFE zinc recorded a bearish candle, with the upper Bollinger Bands forming resistance and the 40-day moving average providing support. Currently, domestic supply remains tight, and TC is still at a low level, while overall domestic demand is also weak. SHFE zinc is expected to maintain a fluctuating trend, with more macro data anticipated in the future.

Tin

SHFE Tin Prices Opened Lower in Night Session, Some Downstream Enterprises Chose to Wait and See [SMM Tin Morning News Nov 1]

SMM, November 1, 2024: Yesterday, the most-traded SHFE tin contract closed at 254,900 yuan/mt, up 620 yuan/mt, with an increase of 0.24%. The highest price was 255,250 yuan/mt, and the lowest was 253,530 yuan/mt. During yesterday's morning session, the quotations of various domestic tin ingot brands by trading companies 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 prices were quoted at premiums of +200~+600 yuan/mt against the SHFE 2411 contract, Yunnan tin brand quotations against the SHFE 2411 contract were +600~+800 yuan/mt, and imported tin brand spot cargo was quoted at -600 yuan/mt against the SHFE 2411 contract. Yesterday, tin prices fluctuated rangebound, and in the night session, tin prices opened lower and remained stable. Downstream enterprises had a strong wait-and-see sentiment, with some choosing to restock as needed. Some trading companies made scattered transactions, with a few trading companies transacting around one truckload. Overall, the spot market was relatively quiet yesterday.

Nickel

On October 31, Jinchuan nickel was quoted at a premium of 1,400-1,600 yuan/mt, with an average of 1,500 yuan/mt, down 300 yuan/mt from the previous trading day. Norilsk nickel was quoted at a discount of 500-150 yuan/mt, with an average of 325 yuan/mt, down 225 yuan/mt from the previous trading day. On the morning of October 31, the futures market fluctuated, and spot premiums slightly decreased compared to the previous working day, mainly due to the overall decline in nickel prices. Nickel briquette prices were 123,200-123,600 yuan/mt (out of stock), down 200 yuan/mt from the previous trading day. The price spread between nickel briquette and nickel sulphate was about 891 yuan/mt (nickel sulphate prices were 891 yuan/mt higher than nickel briquette prices).