SMM Morning Comment For SHFE Base Metals (Nov 21)

SHANGHAI, Nov 21 (SMM) –

Copper

US Dollar Index Falls from Highs, Copper Prices Expected to Rebound [SMM Copper Morning Comment]

Overnight, LME copper opened at $9,118.5/mt, initially rising to $9,155/mt before fluctuating downward, hitting a low of $9,086/mt at the end of the session, and finally closing at $9,082/mt, a decline of 0.38%. Trading volume reached 15,000 lots, and open interest was 270,000 lots. Overnight, the most-traded SHFE copper 2501 contract opened at 74,670 yuan/mt, initially rising to 74,770 yuan/mt before fluctuating downward, hitting a low of 74,360 yuan/mt at the end of the session, and finally closing at 74,410 yuan/mt, with no change. Trading volume reached 18,000 lots, and open interest was 136,000 lots. Macro side, with the Trump administration becoming clearer, the US dollar index rebounded again, putting pressure on copper prices. Meanwhile, US Fed's Bowman stated that the task of price stability faces greater risks, and Collins mentioned that due to the still restrictive policy, some additional interest rate cuts are needed. Fundamentally, copper prices have risen, downstream procurement willingness has weakened, and spot market transactions were flat. Overall, with the US dollar index falling from its highs, copper prices are expected to rise again.

Aluminum

US Dollar Index Rebounds, Aluminum Futures Under Pressure Overnight [SMM Aluminum Morning Brief Nov 21]

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,750 yuan/mt, reaching a high of 20,815 yuan/mt and a low of 20,645 yuan/mt, and closed at 20,675 yuan/mt, down 125 yuan/mt from the previous close, a decline of 0.6%. On Wednesday, LME aluminum opened at $2,651.5/mt, peaked at $2,692.5/mt, and closed at a low of $2,630/mt, down $15.5/mt, a drop of 0.59%.

Summary: On the macro front, the US dollar rose 0.45% overnight. Market expectations for the interest rate cut path have recently narrowed but remain volatile. According to CME's FedWatch Tool, the market sees a 52% probability of a 25 basis point interest rate cut by the US Fed at the December meeting, down from 82.5% a week ago. Recent statements by US Fed officials, including Fed Chairman Jerome Powell, indicate that the Fed will proceed slowly and cautiously on the rate cut path. Domestically, attention is on the State Council's regular policy briefing by the State Council Information Office tomorrow, which will introduce measures to promote stable growth in foreign trade. On the fundamentals side, domestic aluminum remains stable, with alumina prices continuing to rise, maintaining cost side pressure. On the demand side, shipments from Xinjiang show signs of further improvement, and concentrated arrivals are expected in Gongyi and Wuxi regions in the short term. The inventory turning point may appear as early as next week. Additionally, observe the impact of downstream "rush exports" on outflows from warehouses before the official implementation of the aluminum semis export tax rebate cancellation. Overall, the US Fed remains cautious on the rate cut path on the macro front, while alumina costs continue to rise on the fundamentals side. The high costs and low inventory of aluminum persist, leading to short-term aluminum prices mainly fluctuating and consolidating.

Lead

Overnight Lead Prices Slightly Increased, Refined Lead Supply May Be Affected Again by Smog Warnings [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,012/mt, fluctuated upward during the Asian session, continued to strengthen during the European session, reaching a high of $2,043.5/mt before falling under pressure, and finally closed at $2,013/mt, up $8.5/mt, an increase of 0.42%.

Overnight, the most-traded SHFE lead contract switched to the 2501 contract, opened at 17,060 yuan/mt, slightly weakened after touching a high of 17,080 yuan/mt at the beginning of the session, then consolidated sideways around the intraday moving average, and finally closed at 16,995 yuan/mt, up 135 yuan/mt, an increase of 0.80%.

Macro side, concerns over the escalation of the Russia-Ukraine conflict eased, and the US dollar index temporarily halted its decline and rebounded slightly. Fu Linghui, spokesperson for the NBS, stated that market confidence was boosted in October, with active stock market trading. In October, the trading volume and value of stocks in the Shanghai and Shenzhen markets both increased approximately 1.5 times YoY. Attention can be focused on the Central Economic Work Conference in mid-December and subsequent policy space.

Fundamentals, domestic refined lead circulation remains insufficient, and refined lead supply may be affected again by smog warnings. Secondary refined lead producers maintained firm quotes and were reluctant to sell, with no large discount quotes available in the market. Winter stockpiling in north China is nearing completion, but the supply of crude lead and lead concentrate in Hunan, Yunnan, and other regions has tightened again, with processing fees for some crude lead containing multiple metals already declining. However, the transmission of rising raw material prices is not smooth, making it relatively difficult to trade spot cargoes at high premiums. Downstream sentiment remains cautious, and lead prices may continue to fluctuate rangebound in the short term.

Zinc

SHFE Zinc Records Three-Day Winning Streak, Daily K-Line Moves Upward [SMM Zinc Morning Comment Nov 21]

Overnight, US Fed's Bowman stated that progress in reducing inflation seems to have stalled; Trump's team is considering establishing the first-ever cryptocurrency-related job title at the White House; the US vetoed the UN Security Council's resolution on a Gaza ceasefire; Nvidia's earnings report exceeded expectations but failed to meet everyone's expectations; foreign media reported that Ukraine fired British-made missiles at Russia; the State Council Information Office held a regular policy briefing on November 22; major asset restructurings of Guotai Junan and Haitong Securities were approved by the Shanghai SASAC; Quantitative Fund responded to the arrest of an employee involved in brokerage rebates.

Overnight, LME zinc opened at $2,969/mt, initially fluctuating upward along the daily moving average. During European trading hours, LME zinc accelerated upward, reaching a high of $3,007/mt. Subsequently, longs took profits, causing LME zinc to fluctuate downward, consolidating near the daily moving average. Entering the night session, LME zinc accelerated its decline, hitting a low of $2,955/mt, before rebounding to the daily moving average and closing up at $2,976.5/mt, an increase of $10.5/mt or 0.35%. Trading volume increased to 11,263 lots, and open interest decreased by 4,232 lots to 241,000 lots. Overnight, LME zinc recorded a four-day winning streak, with the 10-day moving average forming resistance above and the 5-day moving average providing support below. Overnight LME inventory increased by 7,375 mt to 268,325 mt, an increase of 2.83%, continuing its upward trend. Recently, market rumors of production cuts have resurfaced, causing LME zinc to rise slightly. However, the strengthening US dollar and increasing inventory have pressured LME zinc's upward movement.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,150 yuan/mt, initially fluctuating upward along the daily moving average, reaching a high of 25,270 yuan/mt. Subsequently, shorts targeted SHFE zinc at highs, causing it to fluctuate downward to a low of 25,065 yuan/mt. By the end of the session, it rebounded to the daily moving average, closing up at 25,170 yuan/mt, an increase of 220 yuan/mt or 0.88%. Trading volume decreased to 53,798 lots, and open interest increased by 586 lots to 98,559 lots. Overnight, SHFE zinc recorded a three-day winning streak, with the daily K-line moving upward and the MACD bearish bars narrowing. In October, zinc concentrate imports decreased by 18% MoM to 330,000 mt, lower-than-expected. Supply reduction has caused zinc prices to fluctuate at highs.

Tin

SHFE Tin Fluctuates Rangebound in Night Session, Spot Market Continues to Cool Down [SMM Tin Morning Brief Nov 21]

Yesterday, the spot tin market saw a cooling in trading activity, with trade companies' quotations remaining stable and showing no significant fluctuations. The price range of tin ingots from various domestic brands remained relatively fixed, with small-brand tin ingots and imported tin ingots showing a slight discount against the SMM 1# tin ingot price, while delivery brand prices and Yunnan Tin brand tin ingots showed a slight premium against the SMM 1# tin ingot price. In yesterday's market, tin prices fluctuated upward, maintaining a rangebound movement during the night session, and trading activity in the spot market cooled down. Most downstream enterprises have completed their restocking plans and showed low purchasing enthusiasm. On the trade companies' side, most companies had a trading volume of around 10 mt, with a few companies reaching a trading volume of about one truckload. Overall, the market's trading atmosphere cooled down. In summary, as tin prices are expected to rise in the short term, trading in the spot market will continue to cool down.

Nickel

On November 20, Jinchuan nickel was quoted at a premium of 2,300-2,500 yuan/mt, with an average of 2,400 yuan/mt, up 50 yuan compared to the previous trading day. Norilsk nickel was quoted at a discount of 100 yuan/mt to a premium of 100 yuan/mt, with an average discount/premium of 0 yuan/mt, up 25 yuan compared to the previous trading day. On the morning of November 20, the futures market fluctuated upward, and spot premiums saw a slight increase compared to the previous working day. Nickel briquette prices were 125,600-126,100 yuan/mt (in short supply), up 1,375 yuan/mt compared to the previous trading day. The price spread between nickel sulphate and nickel briquette was approximately 5,395 yuan/mt (nickel sulphate prices were 5,395 yuan/mt lower than nickel briquette prices).