SMM Morning Comment For SHFE Base Metals On December 2

SHANGHAI, December 2 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,006/mt, fluctuated widely throughout the session, reaching a high of $9,027.5/mt at the beginning and a low of $8,980.5/mt during the session, and finally closed at $9,015/mt, up 0.31%. Trading volume reached 13,000 lots, and open interest was 273,000 lots. Last Friday evening, the most-traded SHFE copper 2501 contract opened at 73,720 yuan/mt, fluctuated initially and then declined to a low of 73,620 yuan/mt, followed by an upward fluctuation, reaching a high of 73,920 yuan/mt at the end of the session, and finally closed at 73,900 yuan/mt, up 0.18%. Trading volume reached 23,000 lots, and open interest was 160,000 lots. Macro side, Tokyo's inflation rebound ignited expectations of a rate hike by the Bank of Japan. Japanese media reported that Kazuo Ueda stated that if the yen further depreciates after inflation starts to rise, it will pose a risk to the economic outlook, and he is considering the timing of a potential rate hike. Meanwhile, the NBS announced that the November manufacturing PMI rose by 0.2 percentage points from the previous month, indicating a slight acceleration in the pace of manufacturing expansion, providing some support to copper prices. Fundamentally, end-use sectors maintained a high operating rate supported by previous orders, coupled with good stocking demand over the weekend. Additionally, the shortage of copper scrap also benefits copper cathode consumption. It is expected that spot premiums will continue to rise after returning to cargoes with invoices dated this month. Overall, downstream consumption is expected to remain at a good level with a high operating rate, providing some support to copper prices today.

Aluminum

Last Friday night, the most-traded SHFE aluminum 2501 contract opened at 20,375 yuan/mt, reached a high of 20,425 yuan/mt, a low of 20,320 yuan/mt, and closed at 20,420 yuan/mt, up 30 yuan/mt or 0.15% from the previous day. Last Friday, LME aluminum opened at $2,594/mt, hit a high of $2,620/mt, a low of $2,586/mt, and closed at $2,599/mt, up $9/mt or 0.35%.

Summary: On the macro front, there is a possibility of a ceasefire in the Middle East and the Russia-Ukraine situation. Trump is expected to impose tariffs on Canada, Mexico, and China, raising concerns about a global tariff and trade war, putting pressure on the non-ferrous metals market. Domestically, positive signals were released, with November's manufacturing PMI above the 50 mark. On the fundamentals side, aluminum costs fluctuate at highs, sparking concerns about production cuts at high-cost enterprises. However, in the off-season, downstream buying sentiment has weakened, and the spot market is undergoing weak consolidation. In terms of inventory, railway shipments in Xinjiang have continued to improve, and arrivals have stabilized. Coupled with the limited sustainability of the off-season increase in aluminum ingot outflows from warehouses, it may be difficult to prevent continuous inventory buildup. The off-season inventory turning point is expected to arrive soon, significantly weakening the support of low inventory for aluminum prices. In the short term, apart from the cost side, the aluminum market faces limited additional support. The cancellation of export tax rebates for aluminum semis negatively impacts medium and long-term aluminum demand, putting overall market sentiment under pressure. Aluminum prices are expected to maintain a trend of fluctuating consolidation in the near term.

Lead

Last Friday, LME lead opened at $2,050.5/mt. With the US dollar index showing a weak performance and the threat of tariff hikes by the US and Europe on China, overseas consumption expectations rose, supporting LME lead to continue its upward fluctuation trend, mostly trading between $2,075-2,080/mt during the day. At night, the US dollar rebounded after dipping, and lead ingot inventory increased, causing LME lead to give back some gains, trading around $2,050/mt. By the end of the session, LME lead rose again, finally closing at $2,081.5/mt, up 1.83%.

Last Friday, the most-traded SHFE lead 2501 contract opened at 17,355 yuan/mt. Due to the overall increase in lead ingot market inventory, SHFE lead initially dropped sharply to 17,235 yuan/mt. With the strong performance of the US dollar, SHFE lead rebounded but failed to surpass 17,400 yuan/mt, finally closing at 17,395 yuan/mt, up 0.12%. Its open interest was 57,514 lots, a decrease of 1,036 lots from the previous trading day.

Macro side, China's official manufacturing PMI for November was 50.3, expanding for three consecutive months, while the non-manufacturing business activity dropped back slightly. Reportedly, Trump threatened to impose a 100% tariff on BRICS countries! Experts say that raising tariffs could bankrupt many US companies. Additionally, Chinese enterprises faced unprecedented large-scale visa rejections by the US. According to Observer.com, among the approximately 4,000 CES exhibitors from around the world, it is estimated that over 30% are from China.

Fundamentally, the trends of in-plant inventory and social inventory of lead ingots diverged, with overall inventory showing a slight increase, which is unfavorable for the continuation of strong lead prices. The main reasons for the previous rise in lead prices were environmental protection measures and maintenance bringing the phased reduction in lead ingot supply. However, this week, the smog warning was lifted, coupled with improved profits for secondary lead, increasing the production enthusiasm of smelting enterprises. The premium for primary lead prices was adjusted downwards, while secondary lead saw an increase in discounted shipments. Overall, with previous positive factors exhausted, future lead prices will still need to focus on the consumption side.

Zinc

Last Friday, Zelensky: Ready to end the Russia-Ukraine conflict even if Russia does not immediately return the land it controls; Russian Deputy Foreign Minister: Russia faces the issue of resuming nuclear tests; US officials: Not considering returning nuclear weapons to Ukraine; Hamas delegation to visit Cairo to discuss Gaza ceasefire; Kazuo Ueda: Considering the timing of potential interest rate hikes; Syrian opposition forces control a military airport in Aleppo; China's manufacturing expansion in November slightly accelerated; Market interest rate pricing self-regulatory mechanism work meeting emphasized: deposit rates must not be manually subsidized in violation of regulation, loan rates must comply with risk pricing principles; PBOC net purchased government bonds worth 200 billion yuan in November; Hangzhou's first-home loan interest rate suddenly increased to 3.1%; multiple automakers' November car sales hit record highs.

Last Friday, LME zinc opened at $3,049/mt, initially fluctuating along the daily moving average, dipping to $3,040.5/mt. Subsequently, with increased long positions, LME zinc fluctuated upward, peaking at $3,112.5/mt by the end of the session, closing up at $3,108.5/mt, an increase of $61/mt or 2%. Trading volume decreased to 10,611 lots, and open interest increased by 187 lots to 249,000 lots. Last Friday, LME zinc recorded a large bullish candlestick, with LME inventory increasing by 8,225 mt to 276,850 mt, a rise of 3.06%. On the macro front, the US Fed's December interest rate cut expectations resurfaced, the US dollar weakened, and base metals broadly rose, with LME zinc rising, expected to fluctuate at high levels today.

Last Friday, the most-traded SHFE zinc 2501 contract opened at 25,385 yuan/mt, initially fluctuating widely along the daily moving average, closing up at 25,550 yuan/mt, an increase of 350 yuan/mt or 1.39%. Trading volume decreased to 177,000 lots, and open interest decreased by 977 lots to 144,000 lots. Last Friday, the most-traded SHFE zinc contract recorded a bullish candlestick. With the US Fed's interest rate cut expectations resurfacing and the US dollar weakening, while domestically, mine disturbances persisted, SHFE zinc rose, expected to fluctuate at high levels today.

Tin

Last Friday, trading in the spot tin market cooled down, with trading enterprises' 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 last Friday's market, tin prices continued to rise, maintaining an upward trend during the night session, while trading activities in the spot market were slightly quieter compared to the beginning of the week. Most downstream enterprises had completed their restocking needs. Regarding trading enterprises, most had trading volumes of 10-20 mt, with a few achieving trading volumes of 1-2 truckloads. Overall, the market trading atmosphere cooled down. In summary, the short-term demand of most downstream enterprises has been largely met, and if tin prices do not fluctuate significantly, the spot market is likely to remain quiet.

Nickel

Last week, refined nickel prices remained stable at 124,000-131,000 yuan/mt. The fundamentals showed no structural changes compared to the previous week. From various segments of the nickel industry chain: In the nickel ore sector, the premium for Indonesian domestic trade laterite nickel ore decreased, weakening support for nickel prices; in the nickel sulphate sector, nickel salt prices remained stable with a slight upward trend, and sentiment to stand firm on quotes increased among salt producers; in the NPI sector, prices were under pressure due to supply-demand imbalance; regarding refined nickel itself, the domestic electrodeposited nickel continued its trend of increasing supply, and downstream alloy electroplating enterprises showed a slight recovery in month-end inventory sentiment, mainly reflected in just-in-time procurement. However, high inventory levels both domestically and internationally exerted significant pressure on nickel prices. Overall, refined nickel prices are expected to maintain sideways movement, with a bearish fundamental outlook limiting upward momentum. The expected trading range for nickel prices next week is 124,000-129,000 yuan/mt.