SMM Morning Comment For SHFE Base Metals On December 4

SHANGHAI, December 4 (SMM) –

Copper

LME copper opened at $9,085.5/mt overnight, initially dipping to a low of $9,034/mt before climbing to an intraday high of $9,154/mt. It then maintained a fluctuating trend and finally closed at $9,120.5/mt, up 1.38%, with a trading volume of 27,000 lots and an open interest of 271,000 lots. The most-traded SHFE copper 2501 contract opened at 74,490 yuan/mt overnight, initially dipping to a low of 74,310 yuan/mt before climbing to an intraday high of 75,150 yuan/mt. It then maintained a fluctuating trend and finally closed at 74,920 yuan/mt, up 1.16%, with a trading volume of 55,000 lots and an open interest of 165,000 lots. Macro side, more US Fed officials have shown openness to an interest rate cut in December. Although market concerns about domestic demand persist, the weakening US dollar has supported copper prices. Additionally, OPEC+ sources indicated that the latest round of production cuts might be extended until the end of Q1 next year during Thursday's meeting. Fundamentally, as year-end approaches, some downstream enterprises have slowed their procurement demand. The rise in copper prices has also suppressed consumption, while increased imports have led to an inventory buildup in east China. Overall, copper prices are expected to fluctuate at highs today.

Aluminum

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,430 yuan/mt, reaching a high of 20,440 yuan/mt and a low of 20,340 yuan/mt, and closed at 20,405 yuan/mt, up 25 yuan/mt or 0.12% from the previous day. On Tuesday, LME aluminum opened at $2,597.5/mt, hit a high of $2,617/mt, a low of $2,575/mt, and closed at $2,607/mt, up $6.5/mt or 0.25%.

Summary: On the macro front, political disputes in South Korea have intensified, and the situations in the Middle East and Russia-Ukraine remain unclear, reigniting market risk aversion sentiment. US Fed officials are open to an interest rate cut in December, leading to a slight rebound in the non-ferrous metals market. Domestically, positive signals were released, with November's manufacturing PMI above the 50 mark, but potential risks of tariff and trade wars need attention. Fundamentals side, high costs of aluminum have raised concerns about production cuts among high-cost enterprises, but buying sentiment in the downstream has weakened due to the off-season, leading to weak spot market performance. Inventory-wise, although the shipping pace of goods from Xinjiang has recently eased, causing domestic aluminum ingot inventory to fluctuate, it is expected that the backlog in Xinjiang will continue to ease, and concentrated arrivals may pose pressure and risks. Meanwhile, although the year-end inventory buildup inflection point has been delayed, the limited sustainability of aluminum ingot outflows from warehouses during the off-season means that low inventory continues to provide short-term support for aluminum prices, but excessive optimism is not advisable. In the short term, the cancellation of export tax rebates for aluminum semis in December will negatively impact mid-term aluminum demand, but short-term market sentiment has somewhat eased, and the cost side continues to provide strong support. It is expected that aluminum prices will mainly fluctuate rangebound in the near term.

Lead

Overnight, LME lead opened at $2,073/mt, fluctuating upward throughout the day, mostly between $2,060-2,070/mt. By the end of the session, LME lead surged to a new three-month high of $2,084/mt before closing at $2,073/mt, down 0.41%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,430 yuan/mt. With an increase in lead warehouse warrant inventory, SHFE lead initially dipped to 17,405 yuan/mt. However, due to the longs and limited ingot supply, SHFE lead gradually rebounded to around 17,600 yuan/mt in the latter half of the trading session, finally closing at 17,590 yuan/mt, down 0.14%. Its open interest was 57,952 lots, a decrease of 718 lots from the previous trading day.

Macro side, China's Ministry of Commerce announced that, in principle, it will not permit the export of gallium, germanium, antimony, and related dual-use superhard materials to the US. South Korean President Yoon Suk-yeol declared a "state of emergency" late at night, causing a sharp drop in the Korean won and stocks, and a plunge in the Korean cryptocurrency market. The emergency order, which lasted over six hours, was lifted, and the Korean stock market opened as usual on Wednesday, with the government stating it would provide "unlimited liquidity" if necessary to stabilize the market. The French government faces a critical moment, with a no-confidence vote in parliament possibly taking place as early as Wednesday. US-Canada tensions escalated: Trump reportedly "rebuked" Trudeau, saying Canada might as well become the 51st state of the US if it cannot survive with tariffs.

Fundamentally, primary and secondary lead smelting enterprises are undergoing both maintenance and recovery, while lead consumption expectations remain limited, resulting in no significant supply-demand imbalance for lead ingots. Meanwhile, SHFE lead rise has far outpaced the fundamentals, with the spread between futures and spot prices gradually widening in recent days. As of yesterday, mainstream delivery brand quotations were at a discount as low as 300 yuan/mt against the SHFE 2501 contract, with suppliers showing increased willingness to deliver into warehouses. Lead warehouse warrant inventory has shown a buildup trend. Moving forward, we need to continue monitoring the contribution of secondary lead enterprises' resumption and the price difference between primary lead and secondary lead.

Zinc

Overnight, another US Fed official expressed caution regarding action in December; Israeli Defense Minister Katz stated that if the ceasefire agreement breaks down, Lebanon and Hezbollah will no longer be distinguished; sources indicated that OPEC+ might extend the latest round of production cuts until the end of Q1 next year; France will review a no-confidence motion against the government on Wednesday local time (23:00 Beijing time); NDRC announced the improvement of the pricing mechanism for refined oil pipeline transportation; market news reported that the 10-year national bond yield fell below 2%, prompting an urgent survey by the central bank, with notifications already issued; four major industry associations, including semiconductors, jointly called for cautious selection of US chip purchases

Overnight, LME zinc opened at $3,079/mt, quickly dipped to $3,042/mt at the opening, then fluctuated upward with increased long positions, reaching a high of $3,105/mt during the night session, and finally closed up at $3,099/mt, an increase of $17.5/mt or 0.75%. Trading volume increased to 10,267 lots, while open interest decreased by 4,938 lots to 243,000 lots. Overnight, LME zinc recorded a long lower shadow bullish candlestick, with LME inventory increasing by 1,725 mt to 278,000 mt, an increase of 0.62%. The fundamental pattern remained unchanged, with the US Fed maintaining a cautious stance on interest rate cuts. LME zinc mainly fluctuated in adjustment, and it was expected to fluctuate mainly today.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,370 yuan/mt, quickly declined at the beginning of the session, then the center moved up to fluctuate near the daily average line. Subsequently, with increased short positions, SHFE zinc quickly dipped to 25,165 yuan/mt, then fluctuated upward with increased long positions, reaching a high of 25,405 yuan/mt at the end of the session, and finally closed up at 25,345 yuan/mt, an increase of 55 yuan/mt or 0.12%. Trading volume decreased to 89,282 lots, while open interest increased by 1,135 lots to 134,000 lots. Overnight, SHFE zinc recorded a small bearish candlestick. The fundamentals pattern remained unchanged, with the demand side slightly weakening due to weather impacts. Waiting for more macro guidance, the center of SHFE zinc slightly moved down, and it was expected to fluctuate mainly today.

Tin

In yesterday's trading, SHFE tin saw a late-session surge. However, this uptick failed to effectively boost the actual trading volume in the market. On the smelter side, firms continued to stand firm on quotes, demonstrating a steadfast attitude towards prices. Despite this, actual trading remained quite limited, reflecting that market demand has not fully recovered. Trading enterprises actively entered the market with quotes, attempting to seize opportunities. Nevertheless, downstream enterprises showed weak purchase willingness. The late-session surge further intensified the wait-and-see sentiment among downstream companies, with most choosing to remain cautious and wait for clearer market signals. Intraday trading was mainly focused on just-in-time and post-pricing transactions, indicating that market trading activity remained relatively conservative. Notably, some traders engaged in mutual purchasing to replenish inventories, which might alleviate some supply pressure in the market. However, overall trading activity remained lackluster, lacking sufficient buying support. According to feedback from downstream enterprises, end-users generally have low stockpiling willingness and are currently maintaining a just-in-time replenishment strategy.

Nickel

Spot Premiums/Discounts: The mainstream premium for Jinchuan #1 nickel was 2,900-3,100 yuan/mt, with an average of 3,000 yuan/mt, up 100 yuan compared to the previous trading day. The premium for Norilsk nickel was -400-0 yuan/mt, with an average of -200 yuan/mt, unchanged from the previous trading day.

Futures Market: On December 3, SHFE nickel opened lower and fluctuated at low levels in the morning. The midday closing price fell by 1,070 yuan/mt to 124,660 yuan/mt, a decrease of 0.85%.

Spot Market: During the day, nickel prices were adjusted downward again, continuing to fluctuate at low levels. The premiums/discounts for Jinchuan brand nickel, domestic electrodeposited nickel, and Norilsk nickel slightly increased overall but did not change significantly. The premium for imported Nikkelverk and Sumitomo nickel slightly rose, and the economic advantage (compared to Jinchuan nickel) seen in the past two weeks weakened, with overall transactions slightly declining. Futures prices fell this week, but considering the traditional off-season for downstream sales at year-end and the destocking phenomenon of downstream enterprises before the year-end, downstream procurement did not show significant improvement.

Nickel briquette prices were 123,850-124,200 yuan/mt (out of stock), down 675 yuan/mt from the previous trading day.