SMM Morning Comment For SHFE Base Metals (Nov 12)

SHANGHAI, Nov 12 (SMM) –

Copper

Macro and Fundamentals Lack Resonance, Copper Prices Continue to Face Pressure [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,424/mt, initially reaching a high of $9,426/mt, then declined all the way, hitting a low of $9,282/mt near the close, and finally settled at $9,299/mt, down 1.42%. Trading volume reached 18,000 lots, and open interest was 274,000 lots. Overnight, the most-traded SHFE copper 2412 contract opened at 76,160 yuan/mt, fluctuated rangebound initially, reached a high of 76,240 yuan/mt during the session, then declined all the way, hitting a low of 75,870 yuan/mt near the close, and finally settled at 75,900 yuan/mt, down 0.85%. Trading volume reached 31,000 lots, and open interest was 147,000 lots. Macro side, Trump's proposals for comprehensive tariffs, tax cuts, and large-scale deportation of undocumented immigrants are expected to bring new pressure on inflation and widen the deficit. Many economists have already lowered their expectations for the US Fed to cut interest rates next year. Meanwhile, after Trump's election, the US dollar continued to rebound, with the US dollar index hitting a four-month high, putting pressure on copper prices. Fundamentals side, supply side, as the SHFE copper 2411 contract is approaching its delivery period, traders have a low willingness to sell at low prices, and the subsequent arrivals of domestic copper cathode are expected to decrease, leading to tight spot copper supply. Demand side, due to copper price fluctuations, downstream buyers remain cautious and mostly maintain just-in-time procurement. Additionally, due to concentrated meetings during the week, the trading atmosphere among suppliers is relatively quiet, and overall spot market transactions are mediocre. According to SMM data, as of Monday, November 11, SMM copper inventories in major regions nationwide decreased by 14,700 mt to 177,800 mt compared to last Thursday, but total inventory was 123,300 mt higher compared to 54,500 mt in the same period last year. Price side, in the context of a lack of resonance between macro and fundamentals, copper prices are expected to remain under pressure today.

Aluminum

The US dollar index hit a four-month high, but aluminum futures prices continued to decline overnight [SMM Aluminum Morning Briefing Nov 12]

Overnight, the most-traded SHFE aluminum 2412 contract opened at 21,280 yuan/mt, reaching a high of 21,325 yuan/mt and a low of 21,210 yuan/mt, and closed at 21,275 yuan/mt, down 185 yuan/mt from the previous close, a decrease of 0.86%. The trading volume was 60,500 lots, and the open interest was 189,700 lots, with a daily reduction of 10,800 lots. On the previous trading day, LME aluminum opened at $2,629/mt, reached a high of $2,634/mt, a low of $2,571.5/mt, and closed at $2,572/mt, down $48.5/mt, a decrease of 1.85%.

Summary: On the macro front, the easing of the Middle East situation overseas has reduced market risk aversion sentiment, and the US dollar index hit a four-month high, putting pressure on non-ferrous metals. Domestically, the first round of fiscal scale was relatively lower than expected, mainly due to the 6 trillion yuan incremental debt funds, which may help improve corporate balance sheets and boost residents' employment and income expectations. On the fundamentals side, domestic aluminum ingot inventory remained below 600,000 mt during the week. Recently, transportation in north-west China has improved, interrupting the continuous destocking trend of aluminum ingot inventory, so support for aluminum futures prices may weaken. Spot alumina supply remains tight, coupled with production disruptions at some enterprises, 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 may fluctuate upward. Continued attention should be paid to changes in macro sentiment and fluctuations in domestic and overseas alumina prices.

Lead

Limited Ingot Output Drives Strong Lead Prices [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,021.5/mt, fluctuated downward throughout the day, and its trading focus shifted lower compared to the previous day. During the Asian session, driven by strong SHFE lead, LME lead maintained a consolidation trend. However, entering the European session, the US dollar index hit a nearly four-month high, causing a general decline in base metals. LME lead weakened, reaching a low of $2,015.5/mt, and finally closed at $2,023.5/mt, flat compared to the previous day.

Overnight, the most-traded SHFE lead 2412 contract opened at 16,935 yuan/mt. SHFE lead surged initially, reaching a high of 16,990 yuan/mt. However, with the intensifying inventory buildup of lead ingots, SHFE lead jumped initially and then pulled back, fluctuating between 16,900-16,950 yuan/mt during the latter half of the trading session, and finally closed at 16,925 yuan/mt, up 0.39%. Its open interest reached 42,546 lots, down 874 lots from the previous trading day.

Macro side, China’s new social financing in October was 1.4 trillion yuan, with new RMB loans at 500 billion yuan. The growth rates of social financing and RMB loans slowed. M1 decline narrowed to 6.1%, and M2 growth expanded to 7.5%, reducing the negative growth gap between M1 and M2. Pan Gongsheng: Increase the counter-cyclical adjustment of monetary policy and improve policy tools to address abnormal stock market fluctuations. Additionally, media reports suggest that the next US Treasury Secretary candidate might be finalized this week, with Trump leaning towards a Wall Street veteran.

Fundamentals side, after the start of winter heating, frequent smog warnings were issued in regions like Henan and Anhui, further restricting vehicle transportation and extending factory delivery times. Moreover, as the front-month SHFE lead contract enters delivery this week, delivery brands are being transferred to warehouses, continuing the rise in social inventory of lead ingots. Additionally, we need to keep monitoring the resumption of secondary lead enterprises and the price spread between secondary lead and primary lead, which could lead to potential consumption shifts.

Zinc

Zinc Ingot Social Inventory Increases Again, SHFE Zinc Fluctuates Downward [SMM Zinc Morning Comment Nov 12]

The Israeli cabinet agreed on the framework of a ceasefire agreement with Lebanon; Israeli Defense Minister: Israel may achieve its most important goals; Shigeru Ishiba was re-elected as the Prime Minister of Japan; The world's largest gold ETF experienced the largest weekly capital outflow since 2022; Pan Gongsheng: Improve policy tools to deal with abnormal fluctuations in the stock market; The cumulative increase in social financing in the first ten months was 27.06 trillion yuan; Ministry of Commerce: Implement temporary anti-dumping measures on EU brandy imports; Shenzhen plans to increase the maximum amount of provident fund loans.

Overnight, LME zinc opened at $2,990/mt, fluctuated widely around the daily moving average after the opening, reached a high of $3,026/mt during the session, fell below the daily moving average in the night session, and hit a low of $2,968.5/mt near the close, finally closing down at $2,980/mt, down $4/mt, a decrease of 0.13%. Trading volume decreased to 9,890 lots, and open interest increased by 2,744 lots to 246,000 lots. Overnight, LME zinc recorded a bearish candlestick, with support provided by the lower Bollinger Band. LME zinc inventory decreased by 725 mt to 244,500 mt, a decrease of 0.3%. The US dollar index continued to rise, and market concerns about future demand remained unresolved, putting pressure on LME zinc prices.

Overnight, the most-traded SHFE zinc 2412 contract opened at 24,860 yuan/mt, initially dipped to 24,860 yuan/mt, then fluctuated upward to a midday high of 25,150 yuan/mt, before falling back from highs to below the daily moving average, maintaining a fluctuating trend near the close, and finally closing down at 24,900 yuan/mt, down 75 yuan/mt, a decrease of 0.3%. Trading volume decreased to 74,118 lots, and open interest increased by 1,966 lots to 102,000 lots. Overnight, the most-traded SHFE zinc contract recorded a bullish candlestick, with resistance formed by the 60-day moving average. Macro factors continued to pressure zinc prices, and SMM reported on Monday that zinc ingot inventory increased by 3,600 mt WoW to 123,600 mt. Weak spot cargo consumption persisted, and SHFE zinc also fluctuated downward.

Tin

SHFE tin prices opened low and moved lower during the night session, while trading in the spot market remained active [SMM Tin Morning Brief Nov 12]

Yesterday, trading in the spot tin market was relatively active, with quotes from trading companies remaining stable without significant fluctuations. The price range for domestic brands of tin ingots was relatively fixed, with small brand tin ingots and imported tin ingots slightly discounted against the SMM 1# tin ingot price, while delivery brand prices and Yunnan Tin brand tin ingots had a slight premium over the SMM 1# tin ingot price. In yesterday's market, tin prices overall remained at a high level, opening low and moving lower during the night session, while trading activity in the spot market remained active. Most downstream companies were restocking. For trading companies, most had trading volumes of 10-20 mt, with a few companies achieving trading volumes of more than two truckloads. Overall, the market trading atmosphere was quite active.

Nickel

On November 11, Jinchuan nickel was quoted at a premium of 1,700-1,900 yuan/mt, with an average of 1,800 yuan/mt, up 100 yuan/mt compared to the previous trading day. Norilsk nickel was quoted at a discount of 400-0 yuan/mt, with an average of 200 yuan/mt, remaining flat compared to the previous trading day. On the morning of November 8, the futures market fluctuated downward, and spot market premiums saw a slight increase compared to the previous working day. Nickel briquette prices were 127,300-128,200 yuan/mt (in short supply), down 1,825 yuan/mt compared to the previous trading day. The price spread between nickel sulphate and nickel briquette was approximately 4,341 yuan/mt (nickel sulphate prices were 4,341 yuan/mt lower than nickel briquette prices).