SMM Morning Comment For SHFE Base Metals On December 5

SHANGHAI, December 5 (SMM) –

Copper

Overnight, LME copper opened at $9,093/mt, initially fluctuated downward to a low of $9,041/mt, then rebounded, reaching an intraday high of $9,122.5/mt, before the center dropped and only rose again just before the close, finally settling at $9,097/mt, down 0.26%. Trading volume reached 17,000 lots, and open interest was 269,000 lots. Overnight, the most-traded SHFE copper 2501 contract opened at 74,490 yuan/mt, initially dipped to 74,230 yuan/mt, then fluctuated upward, maintained wide fluctuation, reaching an intraday high of 74,730 yuan/mt, and finally settled at 74,540 yuan/mt, down 0.31%. Trading volume reached 26,000 lots, and open interest was 159,000 lots. Macro side, Fed Chairman Jerome Powell stated that he does not see any possibility of a "shadow Fed Chairman" and that caution can be maintained when seeking the neutral rate. The French parliament voted to pass a motion of no confidence against the government, leading to the resignation of the Prime Minister. The outlook for US Fed interest rate cuts remains uncertain, with the US dollar staying strong, putting pressure on copper prices. Fundamentally, imported supplies continue to flow in, while year-end downstream procurement sentiment is generally moderate, leading to weak overall trading. Premiums are expected to decline slightly. In summary, the market is waiting for domestic consumption prospects, and with the future of Fed interest rate cuts uncertain, copper prices are expected to maintain a fluctuating trend today.

Aluminum

Overnight, the most-traded SHFE aluminum 2501 contract opened at 20,535 yuan/mt, reached a high of 20,695 yuan/mt, a low of 20,535 yuan/mt, and closed at 20,650 yuan/mt, up 195 yuan/mt from the previous day, an increase of 0.95%. On Wednesday, LME aluminum opened at $2,607/mt, hit a high of $2,648.5/mt, a low of $2,603/mt, and closed at $2,638.5/mt, up $31.5/mt, an increase of 1.21%.

Summary: Macro front, political disputes in France and South Korea intensified, and the situations in the Middle East and Russia-Ukraine remained uncertain, keeping market risk aversion sentiment alive. US Fed officials were open to an interest rate cut in December, leading to a slight rebound in non-ferrous metals. 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 raised concerns about production cuts in high-cost enterprises, but downstream buying sentiment weakened in the off-season, leading to a weak spot market. 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. Overall, the cancellation of aluminum semis export tax rebates in December negatively impacts mid-term aluminum demand, but short-term market sentiment has eased somewhat, and the cost side, with alumina continuing to provide strong support, suggests that aluminum prices are expected to mainly fluctuate in the near term.

Lead

Overnight, LME lead opened at $2,078/mt, with the overall trading center further moving upward during the day, reaching a high of $2,088/mt, marking a one-and-a-half-month high. Even during the European session, LME lead was suppressed by the strong US dollar, experiencing a short-term decline, but subsequently recovered the losses, finally closing at $2,086.5/mt, up 0.12%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,560 yuan/mt. The year-end limitations on ingot supply remain a market anchor, with SHFE lead fluctuating upward, gradually moving from around 17,550 yuan/mt towards 16,700 yuan/mt, and finally closing at 17,685 yuan/mt, up 0.83%. The open interest reached 55,566 lots, a decrease of 456 lots from the previous trading day.

Macro side, Xinhua News Agency reported breaking the "growth worship"; China's economic growth of around 5% is acceptable; stabilize the real estate and stock markets, and strengthen risk prevention in key areas. US Fed Beige Book: Economic activity slightly increased in most regions of the US, with businesses more optimistic about future demand; November ISM services index unexpectedly fell, with the expansion rate hitting a three-month low; November US ADP employment data showed an increase of 146,000 jobs, the lowest in four months. Additionally, the French government collapsed for the first time in over 60 years due to a no-confidence motion passed by parliament, with Prime Minister Barnier, in office for only three months, becoming the shortest-serving prime minister since 1958.

Fundamentals, with rising lead prices, secondary lead profits are improving, but some large secondary lead enterprises that have been shut down for a long time are unable to resume production quickly in the short term, leading to limitations in year-end ingot supply. Meanwhile, the spread between futures and spot prices exceeds 200 yuan/mt, increasing the willingness of delivery brands to deliver, resulting in a sentiment to stand firm on quotes and limited market circulation. We need to monitor the movements of suppliers transferring stocks for delivery.

Zinc

Overnight, Fed Chairman Powell stated that he does not see any possibility of a "shadow Fed Chairman"; the French parliament voted to pass a no-confidence motion against the government, leading to the resignation of the Prime Minister; South Korea's opposition party formally proposed a motion to impeach President Yoon Suk-yeol; ECB President Lagarde said there was no pre-commitment to a specific rate path and that rates would continue to be lowered; Trump chose crypto-friendly Paul Atkins as SEC Chairman; the application for Chinese New Year to be listed as a UNESCO intangible cultural heritage was successful; the new round of oil price adjustments was halted, with no changes to oil prices this round; Japanese media reported that Japan might relax visa requirements for Chinese citizens.

Overnight, LME zinc opened at $3,095/mt, fluctuated and consolidated along the daily moving average after the opening, and during European trading hours, long positions increased, causing LME zinc to fluctuate upward and reach a high of $3,112/mt. However, the upward momentum was insufficient, and LME zinc quickly fell to a low of $3,070/mt, ultimately closing down at $3,085/mt, a decrease of $14/mt or 0.45%. Trading volume decreased to 9,433 lots, and open interest increased by 231 lots to 243,000 lots. Overnight, LME zinc recorded a small bearish candlestick, with LME inventory increasing by 100 mt to 278,100 mt, an increase of 0.04%. Despite the continuous inventory buildup, long funds remained in the market, and LME zinc mainly experienced slight fluctuations and adjustments. It is expected to fluctuate mainly today.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,385 yuan/mt. At the beginning of the session, SHFE zinc quickly fell to 25,270 yuan/mt, then long positions increased, causing SHFE zinc to fluctuate upward and reach a high of 25,480 yuan/mt. However, the upward momentum was insufficient, and it fell back to near the daily moving average, ultimately closing down at 25,360 yuan/mt, a decrease of 105 yuan/mt or 0.41%. Trading volume decreased to 72,685 lots, and open interest decreased by 1,296 lots to 130,000 lots. Overnight, SHFE zinc recorded a small bearish candlestick, with the 10-day moving average below providing support. Although there are concerns about consumption consumption, SHFE zinc still has support below, with the center slightly shifting downward. It is expected to fluctuate mainly today.

Tin

Yesterday, the tin market exhibited a price dynamic of bottoming out and rebounding. During the price dip, the spot market saw a brief boost in trading, but the rapid rebound in prices did not lead to a significant increase in trading volume. On the smelter side, their stance on standing firm on quotes remained unwavering. Trading enterprises showed a relatively positive attitude in their quotations; however, downstream enterprises' purchase willingness was not high. Only when prices touched the intraday low did downstream enterprises show limited purchasing interest. As prices gradually climbed, the wait-and-see sentiment among downstream enterprises intensified, with most opting to maintain a cautious purchasing strategy. Intraday trading mainly focused on meeting rigid demand and replenishing low inventory, reflecting the conservative nature of market participants' trading activities. Overall, market activity remained sluggish. Specifically, most trading enterprises' trading volume was around 10 mt, with a few reaching about one truckload. Considering the night session's trend of opening low and closing high, it is expected that the spot market will continue to maintain a sluggish trading atmosphere.

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: Spot Premiums/Discounts: The mainstream premium for Jinchuan #1 nickel was 2,900-3,100 yuan/mt, with an average of 2,900 yuan/mt, down 100 yuan/mt compared to the previous trading day. The Norilsk nickel premium was -300-0 yuan/mt, with an average of -150 yuan/mt, up 50 yuan/mt compared to the previous trading day.

Futures Market: On December 4, SHFE nickel opened high and remained stable at high levels in the morning session. The midday closing price rose by 2,690 yuan/mt to 127,370 yuan/mt, an increase of 2.16%. SMM #1 refined nickel prices increased by 3,300 yuan to 129,025 yuan/mt.

Spot Market: During the day, nickel prices rose, and the market prices remained stable at high levels. The spot premiums for Jinchuan brand nickel slightly decreased in the morning but overall remained largely unchanged. Midday Jinchuan ex-factory prices increased by 3,600 yuan/mt to 130,800 yuan/mt. The premiums/discounts for Norilsk nickel and domestic electrodeposited nickel plates showed little overall change. The rise in futures prices and the overall stability of premiums/discounts intensified downstream wait-and-see sentiment, leading to a noticeable weakening in transactions for the day.

Nickel briquette prices were 127,200-127,450 yuan/mt (out of stock), up 3,300 yuan/mt compared to the previous trading day.