SMM Morning Comment For SHFE Base Metals (Nov 26)

SHANGHAI, Nov 26 (SMM) –

Copper

US Dollar Falls Back from Highs, Copper Prices Rebound Overnight [SMM Copper Morning Comment]

LME copper opened at $9,041/mt overnight, initially fluctuating slightly upward to a high of $9,081/mt during the session, then fluctuating downward to a low of $9,019/mt near the close, and finally closing at $9,044/mt, up 0.8%. Trading volume reached 15,000 lots, and open interest was 271,000 lots. The most-traded SHFE copper 2501 contract opened at 74,160 yuan/mt overnight, initially dipping to 73,970 yuan/mt, then fluctuating rangebound to a high of 74,210 yuan/mt during the session, and finally closing at 74,120 yuan/mt, up 0.2%. Trading volume reached 21,000 lots, and open interest was 146,000 lots. Macro side, since Trump nominated Bessent as Treasury Secretary last week, US Treasury bonds rebounded yesterday. The 10-year Treasury yield saw its largest single-day drop since early August, and the 2-year Treasury yield also fell, weakening the US dollar's interest rate advantage. The US dollar fell back from a two-year high yesterday, and copper prices rebounded. Fundamentally, supply side, domestic copper cathode arrivals significantly decreased, and with today entering the next month's invoice trading, month-end long-term contract deliveries are mostly completed, and suppliers' willingness to sell is weak, limiting the supply of spot copper cathode. Demand side, according to SMM data, the destocking trend in major warehouses nationwide was evident over the weekend. As of Monday, November 25, SMM copper inventories in national major regions fell by 28,000 mt to 133,000 mt compared to last Thursday, but total inventories were 74,000 mt higher compared to 59,000 mt in the same period last year. Price side, with Trump appointing Bessent as Treasury Secretary, who has publicly supported a strong US dollar and tariffs, the exchange rate may only fall back temporarily. Copper prices are expected to face resistance today.

Aluminum

The month-end inventory turning point is expected to appear [SMM Aluminum Morning Meeting Minutes Nov 26]

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,590 yuan/mt, reached a high of 20,705 yuan/mt, a low of 20,565 yuan/mt, and closed at 20,670 yuan/mt, up 135 yuan/mt from the previous day, an increase of 0.66%. Yesterday, LME aluminum opened at $2,632.5/mt, hit a high of $2,643/mt, a low of $2,610/mt, and closed at $2,630/mt, down $1.5/mt, a decrease of 0.06%.

Summary: Macro front, the market generally believed that Trump's rise to power would boost the US dollar, while expectations for the US Fed's interest rate cut next year weakened, pushing the US dollar index to a new high for the year on Friday, suppressing the performance of non-ferrous metals. The uncertainty of the Russia-Ukraine conflict intensified, and market risk aversion sentiment increased. Domestically, Li Qiang chaired a State Council executive meeting to discuss work related to promoting the healthy development of the platform economy. Fundamentals side, aluminum costs fluctuated at highs, raising market concerns about production cuts at high-cost enterprises. Downstream demand slightly rebounded in the short term, stimulated by a rush to export. Multiple sources reported that Xinjiang railway shipments have continued to improve, and short-term backlog pressure has been somewhat relieved. With the concentrated arrival of goods in transit, despite continued outflows from warehouses in the past week, inventory buildup is expected this week. The off-season inventory turning point is expected to arrive soon, and the tight state of the domestic spot market may ease, with low inventory support for aluminum prices gradually weakening. In the short term, the support logic of high costs and low inventory for domestic aluminum remains, but the support for aluminum prices has weakened. Coupled with the negative impact of the cancellation of export tax rebates for aluminum semis on medium and long-term aluminum demand, market sentiment is suppressed, and short-term aluminum prices are expected to mainly fluctuate and consolidate.

Lead

Lead Smelters Stand Firm on Quotes, Downstream Enterprises Cautious in Procurement [SMM Lead Morning Comment]

Overnight, LME lead opened with a gap at $2,022.5/mt, fluctuated upward during the Asian session, and reached a high of $2,048/mt, boosted by destocking and increased long positions in the European session. It then plunged to a low of $2,018.5/mt before closing at $2,022.5/mt, up 0.22%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,185 yuan/mt, briefly touched a low of 17,170 yuan/mt at the beginning of the session, then fluctuated rangebound around the daily moving average, and finally closed at 17,190 yuan/mt, up 1.63%.

Macro side, the US 2/10-year Treasury yield curve inverted again for the first time in two months. The PBOC conducted a 900 billion yuan Medium-term Lending Facility (MLF) operation with a one-year term and an interest rate of 2.00%, unchanged from the previous rate. The Head of the Treaty and Law Department of the Ministry of Commerce of China answered reporters' questions regarding the EU's bringing China's temporary anti-dumping measures on EU brandy to the WTO dispute settlement mechanism: China has received the EU's request for consultations and will handle it in accordance with relevant WTO rules.

Fundamentals, recently, lead smelters have frequently reduced or halted production due to smog, mainly affecting secondary lead smelters in Hebei and Anhui. This week, the smog warnings in Anhui and other regions were lifted, and the resumption of production needs to be monitored. Additionally, primary lead smelters in Jiangxi and Guangdong entered maintenance this week, further reducing lead ingot supply, while downstream enterprises continued to consume social warehouse inventory. Due to the limited circulation of lead ingots, lead smelters stood firm on quotes, especially as the price spread between secondary refined lead and primary lead was minimal, with some regions even quoting 50-100 yuan/mt higher than primary lead ex-factory. Overall, lead prices are likely to fluctuate at highs in the short term.

Zinc

Macro Policies and Supply-Demand Imbalance Expected to Keep Zinc Prices Hovering at Highs [SMM Zinc Morning Comment Nov 26]

Overnight, the US 2/10-year Treasury yield curve inverted for the first time in two months; Israel and Lebanon reached an agreement on the terms to end the Israel-Hezbollah conflict; Analysts reported that Ukraine launched a large-scale missile attack on Russia's Kursk region using foreign-made missiles; OPEC+ may discuss maintaining current oil production cuts at its December 1 meeting; Li Qiang held talks in Beijing with representatives of enterprises participating in the second Chain Expo; The central bank and nine other departments proposed to tilt policies more towards private and small-to-medium-sized enterprises; The central bank conducted a 900 billion yuan Medium-term Lending Facility (MLF) operation; Twelve departments issued the "Sailing" Action Upgrade Plan for the Large-scale Application of 5G.

Overnight, LME zinc opened at $2,982/mt. In the early session, LME zinc fluctuated around the daily average. During the European trading hours, LME zinc fluctuated upward above the daily average, reaching a high of $2,032/mt. By the end of the session, LME zinc fluctuated rangebound around $3,015/mt, closing up at $3,020/mt, an increase of $48/mt or 1.62%. Trading volume increased to 78,108 lots, and open interest increased by 372 lots to 245,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the 10-day moving average providing support below. LME inventory decreased by 3,125 mt to 258,200 mt, a reduction of 1.20%. With the US 2/10-year Treasury yield curve inverting for the first time in two months, LME zinc is expected to maintain a fluctuating trend.

Overnight, the most-traded SHFE zinc 2412 contract opened at 25,225 yuan/mt. In the early session, shorts reduced positions, and SHFE zinc fluctuated upward above the daily average, reaching a high of 25,445 yuan/mt by the end of the session, closing up at 25,430 yuan/mt. Trading volume decreased to 32,386 lots, and open interest decreased by 2,718 lots to 79,514 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the upper Bollinger Band forming resistance above and the 10-60 day moving averages providing support below. On the macro front, the central bank and nine other departments proposed to tilt policies more towards private and small-to-medium-sized enterprises, while the central bank conducted a Medium-term Lending Facility operation. On the fundamental side, supply shortages persist, and SHFE zinc is expected to hover at highs.

Tin

SHFE tin slightly declined during the night session; the spot market showed mediocre performance [SMM Tin Morning Brief Nov 26]

Yesterday, the spot tin market saw sluggish trading, with quotes from trading companies remaining stable and showing no significant fluctuations. The price range of domestic tin ingots across various brands remained relatively fixed. Small-brand tin ingots and imported tin ingots were at a slight discount against SMM 1# tin ingot prices, while delivery brand prices and Yunnan Tin brand tin ingots were at a slight premium against SMM 1# tin ingot prices. In yesterday's market, tin prices fluctuated rangebound, maintaining stable operation during the night session, with trading activities in the spot market appearing somewhat sluggish. Most downstream enterprises had completed their restocking needs and adopted a wait-and-see attitude. On the trading companies' side, most engaged in scattered transactions, with a few achieving trading volumes of 20-30 mt. Overall, the market trading atmosphere was relatively sluggish. In summary, the short-term demand of most downstream enterprises has been largely met, and the spot market is likely to remain sluggish.

Nickel

The mainstream spot premium for Jinchuan #1 nickel was 3,100-3,500 yuan/mt, with an average of 3,300 yuan/mt, up 150 yuan/mt compared to the previous trading day. The spot premium for Norilsk nickel was -300-100 yuan/mt, with an average discount of 100 yuan/mt, down 25 yuan/mt compared to the previous trading day.

In the futures market: On November 25, the most-traded SHFE nickel 2412 contract fluctuated. After an initial rise following the morning opening, it fell back again, with the midday closing price rising by 760 yuan/mt to 126,650 yuan/mt, a decrease of 0.6%.

In the spot market: In the morning, the spot premiums for Jinchuan brand nickel plates in east and south China continued last week's high levels. The reason is that, in the short term, the supply of domestic spot refined nickel tightened amid the restocking pace of downstream sectors. Additionally, the direct sales of electrodeposited nickel by enterprises to end-use sectors and the increase in exports of domestically produced electrodeposited nickel have further reduced the supply in the spot market, causing spot premiums to continue rising, although overall demand remained weak. Meanwhile, the recent increase in Norilsk nickel imports has led to more active quotations for various specifications of Norilsk nickel in the market, which may temporarily ease the tightening sentiment in the refined nickel market.

The price of nickel briquette was 126,850-127,150 yuan/mt (out of stock), up 2,100 yuan/mt compared to the previous trading day.