SMM Morning Comment For SHFE Base Metals On November 4

SHANGHAI, November 4 (SMM) –

Copper

LME copper opened at $9,550.5/mt last Friday, initially fluctuated slightly, and then rose to a high of $9,629.5/mt. It subsequently fell back amid fluctuations, hitting a low of $9,521/mt during the session, and finally closed at $9,539/mt, down 0.08%. Trading volume reached 18,000 lots, and open interest reached 272,000 lots. Last Friday, the most-traded SHFE copper 2412 contract opened at 76,680 yuan/mt, initially hit a high of 77,170 yuan/mt, then fell to a low of 76,350 yuan/mt during the session, and finally rebounded to close at 76,780 yuan/mt, up 0.38%. Trading volume reached 54,000 lots, and open interest reached 156,000 lots. Macro front, the US added 12,000 non-farm jobs in October, the smallest increase since December 2020. Traders increased their bets on a 25 basis point interest rate cut by the US Fed next week. Meanwhile, a New York Times poll showed Harris slightly leading Trump in several swing states. Domestically, the Caixin Manufacturing PMI for October returned to expansion territory. Additionally, data from the Ministry of Housing and Urban-Rural Development showed that the total transaction volume of new and second-hand houses in October achieved growth for the first time after eight consecutive months of decline. The US dollar index fell, domestic macro factors were favorable, but consumption remained flat, leading to fluctuating copper prices. On the fundamentals, due to the concentrated delivery of long-term contracts at the beginning of the month and a slight increase in downstream purchasing enthusiasm, premiums rose, and supply might be somewhat tight. As year-end approaches, downstream consumption is unlikely to see a significant increase. Overall, with domestic real estate transaction data rebounding, the market might receive some boost, and copper prices are expected to have some support today.

Aluminum

Futures market: Last Friday night, the most-traded SHFE aluminum 2412 contract opened at 20,880 yuan/mt, reaching a high of 20,905 yuan/mt and a low of 20,540 yuan/mt, and closed at 20,700 yuan/mt, down 25 yuan/mt or 0.12% from the previous close. The trading volume was 86,000 lots, and the open interest was 193,000 lots, with a daily reduction of 847 lots. Last Friday, LME aluminum opened at $2,622/mt, hit a high of $2,654/mt and a low of $2,582.5/mt, and closed at $2,603/mt, down $23/mt or 0.88%.

Summary: On the macro front, the US Fed's expectations for another interest rate cut have strengthened, and global liquidity remains ample. The Chinese government continues to boost consumption. On the fundamentals side, domestic aluminum social inventory has been affected by transportation issues, leading to continuous destocking and falling below the 600,000 mt mark. Alumina spot supply is tight, and some companies have reduced or halted production, causing alumina prices to fluctuate upward, providing strong support for aluminum prices on the cost side. Overall, domestic aluminum remains in a low inventory and high-cost state, and short-term aluminum prices are expected to fluctuate upward.

Lead

Last Friday, LME lead opened at $2,031.5/mt. During the Asian session, it briefly touched a low of $2,030/mt before fluctuating upward. As shorts continued to reduce positions, it reached a high of $2,070/mt in the European session. By the end of the session, LME lead jumped initially and then pulled back, closing at $2,038.5/mt, up 0.07%, recording a small positive candlestick with a long upper shadow.

Last Friday night, the most-traded SHFE lead 2412 contract opened at 16,885 yuan/mt. At the beginning of the session, it briefly touched a high of 16,945 yuan/mt. As bulls reduced positions, SHFE lead plummeted to a low of 16,690 yuan/mt, finally closing at 16,760 yuan/mt, up 0.42%.

Macro side, the US added 12,000 non-farm jobs in October, marking the smallest increase since December 2020. Traders increased their bets on a 25 basis point interest rate cut by the US Fed next week. The Caixin China Manufacturing PMI for October recorded 50.3, up 1 percentage point from September, returning to expansion territory. The Chinese Ministry of Commerce stated that it would introduce a batch of new policies in the consumer sector in collaboration with relevant departments.

Fundamentally, as northern regions begin winter heating, areas such as Henan, Hebei, and Anhui have successively issued air pollution warnings. Related regions have imposed vehicle restrictions, and lead smelters have reduced or halted production. The expected supply reduction may support lead prices to fluctuate upward. However, the current social inventory of lead ingots is on the rise. With the delivery of the SHFE lead 2411 contract scheduled for November, inventory buildup pressure from holders transferring stocks to warehouses will increase, so beware of lead prices jumping initially and then pulling back.

Zinc

Last Friday, LME zinc opened at $3,088/mt. Initially, with bulls increasing their positions, LME zinc fluctuated upward. Subsequently, with bears increasing their positions, LME zinc declined, hitting a low of $3,023/mt during European trading hours. Later, as bears reduced their positions, LME zinc fluctuated upward again, reaching a high of $3,088/mt during the night session. However, it lacked upward momentum and its focus fell back, ultimately closing up at $3,066/mt, an increase of $28.5/mt or 0.94%. Trading volume decreased to 12,774 lots, and open interest fell by 2,911 lots to 252,000 lots. Last Friday, LME zinc recorded a bullish candlestick, with LME inventory increasing by 350 mt to 247,075 mt, a decrease of 0.65%. On the macro front, US October non-farm payrolls data was unexpectedly weak, enhancing the likelihood of an interest rate cut, weakening the US dollar, and shifting LME zinc's focus upward. LME zinc is expected to fluctuate at high levels today.

Last Friday, the most-traded SHFE zinc 2412 contract opened at 25,030 yuan/mt. Initially, SHFE zinc briefly touched a high of 25,390 yuan/mt. Subsequently, lacking upward momentum, SHFE zinc's focus shifted downward to 24,985 yuan/mt, fluctuating and consolidating, hitting a low of 24,890 yuan/mt during the period. It ultimately closed up at 24,970 yuan/mt, an increase of 105 yuan/mt or 0.42%. Trading volume decreased to 126,000 lots, and open interest fell by 2,714 lots to 109,000 lots. Last Friday, the most-traded SHFE zinc contract recorded a long upper shadow bearish candlestick. Macro sentiment revived, with US non-farm payrolls data unexpectedly weak, reigniting expectations of a US Fed interest rate cut. Domestic Caixin PMI data returned to expansion territory, shifting SHFE zinc's focus upward. Attention still needs to be paid to the backwardation structure, and SHFE zinc is expected to fluctuate at high levels today.

Tin

Last Friday, the spot market showed mediocre performance, with little change in quotations from trading companies. The premiums and discounts of various domestic tin ingot brands remained stable. Small brand tin ingot was quoted at a discount of 100-0 yuan/mt against the SHFE 2412 contract, delivery brand was quoted at premiums of 0-300 yuan/mt over the SHFE 2412 contract, Yunnan tin brand was quoted at premiums of 500-700 yuan/mt over the SHFE 2412 contract, and imported tin brand was quoted at a discount of 700 yuan/mt against the SHFE 2412 contract. Tin prices opened high and moved higher in the night session last Friday, with spot market trading remaining sluggish. Downstream companies made small purchases mainly based on immediate needs as prices rose. Most trading companies only maintained scattered transactions, with a few companies having a trading volume of around one truckload. Overall, market trading sentiment was cautious. In general, tin prices showed a strong upward trend, which somewhat suppressed spot market trading.

Nickel

Last week, refined nickel prices fluctuated between 122,000-127,000 yuan/mt, slightly down compared to the previous week. During the week, the fundamental structure showed no significant changes compared to the previous week. Last week, both domestic and international macro data performed well, but due to the overall weak fundamentals of nickel, nickel prices were not boosted. By sector, the current market's main speculation point, nickel ore, saw progress in previous RKAB approvals combined with the possibility of temporary quotas being released within the year and the Philippines' continued supplementation of Indonesian nickel ore. Currently, the supply and demand of Indonesian nickel ore remain tightly balanced, alleviating the shortage. Therefore, nickel ore prices declined. From the nickel sulphate side, weak demand combined with inventory at safe levels led to weak purchasing enthusiasm for nickel sulphate from downstream ternary cathode precursor sectors. As a result, nickel salt prices maintained a downward trend during the week. On the NPI side, some traders, affected by financial pressure, conceded prices and began to sell, which, given the relatively sufficient social inventory, also pressured NPI prices. Therefore, under the overall bearish fundamentals, the downward driving force for nickel prices remains. However, due to the impact of the upcoming US election, market speculation sentiment may have a certain boosting effect on nickel prices. Therefore, the expected nickel price range for this week is 125,000-133,000 yuan/mt.