SMM Morning Comment For SHFE Base Metals On December 9

SHANGHAI, December 9 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,160/mt, fluctuated rangebound initially, reaching a high of $9,178.5/mt during the session. It then fluctuated downward, briefly rebounded near the close, and continued to decline, hitting a low of $9,088/mt before finally closing at $9,092.5/mt, up 0.03%. Trading volume reached 15,000 lots, and open interest was 272,000 lots. Last Friday evening, the most-traded SHFE copper 2501 contract opened at 74,850 yuan/mt, initially rose to a high of 75,020 yuan/mt, then declined, and fluctuated rangebound at low levels during the session, hitting a low of 74,580 yuan/mt. It slightly rebounded near the close and finally closed at 74,810 yuan/mt, up 0.36%. Trading volume reached 25,000 lots, and open interest was 154,000 lots. Macro side, US non-farm payrolls increased by 227,000 in November, exceeding the expected 200,000, while the unemployment rate slightly rose to 4.2%, in line with market expectations. US one-year inflation expectations rose to 2.9%, the highest in six months. After the data release, the US interest rate futures market estimated an 85% probability of a 25 basis point rate cut by the Fed in December, up from about 70% before the data release. Meanwhile, the probability of pausing rate cuts dropped from 30% before the release of employment report to 15%, leading to a rise in copper prices. Fundamentally, on the consumption side, although copper prices have risen, traders are still holding onto their stocks in anticipation of higher prices, resulting in overall low activity. Downstream saw a focus on annual long-term contract negotiations last week, with mediocre purchasing sentiment. However, spot premiums slightly rebounded due to stocking demand over the weekend. Looking ahead to this week, domestic copper arrivals are not expected to increase significantly, while year-end orders from some companies will boost consumption. Spot premiums are expected to remain stable today. Price-wise, US dollar pressure has eased somewhat, but the macro outlook remains unclear, and fundamentals still provide support. Copper prices are expected to maintain a fluctuating trend today.

Aluminum

Last Friday night, the most-traded SHFE aluminum 2501 contract opened at 20,290 yuan/mt, reached a high of 20,370 yuan/mt, a low of 20,275 yuan/mt, and closed at 20,340 yuan/mt, up 30 yuan/mt from the previous day, an increase of 0.15%. Last Friday, LME aluminum opened at $2,633/mt, reached a high of $2,637.5/mt, a low of $2,584/mt, and closed at $2,607.5/mt, down $30.5/mt, a decrease of 1.16%.

Summary: On the macro front, expectations for a US Fed interest rate cut have strengthened, and positive signals have been released domestically, leading to a slight rebound in the non-ferrous metals market. On the fundamentals side, aluminum costs fluctuate at highs, raising concerns about production cuts at high-cost enterprises. Although the off-season has suppressed the operating rate of downstream enterprises, aluminum ingot social inventory remains low. In the short term, market sentiment is relatively calm, and aluminum prices are expected to maintain a trend of oscillation and consolidation. Close attention should still be paid to changes in aluminum costs and overseas tariff hike.

Lead

Last Friday night, LME lead opened at $2,091.5/mt. During the Asian session, it peaked at $2,102.5/mt before stabilizing. In the European session, bears increased their positions, causing LME lead to fluctuate downward, hitting a low of $2,065/mt, and finally closing at $2,066.5/mt, down $31.5/mt, a decline of 1.5%.

Last Friday night, the most-traded SHFE lead 2501 contract opened at 17,740 yuan/mt. It briefly touched a high of 17,800 yuan/mt at the beginning of the session, then consolidated around the daily moving average before weakening to a low of 17,630 yuan/mt. After a brief consolidation, it slightly rebounded and finally closed at 17,690 yuan/mt, down 60 yuan/mt, a decline of 0.34%.

Macro side, the US November non-farm payrolls data recorded the largest increase since March 2024, with the unemployment rate also rising, and the US dollar index adjusted at high levels.

Fundamentally, domestic lead ingot social inventory decreased, and supply-side disruptions pushed lead prices to continue fluctuating upward. Meanwhile, secondary lead profits improved, boosting the production enthusiasm of smelting enterprises. Although some smelters mentioned maintenance expectations in December, attention is still needed on the resumption of secondary lead enterprises and the release of new capacity. The overall production of secondary refined lead in December is expected to maintain an upward trend. Additionally, battery scrap prices may rise due to expectations for production increase in secondary lead enterprises, potentially reducing the continuous expansion of secondary lead profit margins. This week, as the SHFE lead 2412 contract approaches its delivery week, downstream purchasing enthusiasm slightly declined after lead prices strengthened, and spot transactions decreased. Attention should be paid to the risk of visible inventory accumulation due to lead ingot warehouse transfers for delivery.

Zinc

US November non-farm payrolls slightly exceeded expectations; "Cautious" and "Gradual" become the buzzwords of US Fed officials; Trump: No plans to replace Powell, will raise tariffs, no commitment to keep the US in NATO; South Korean ruling party leader: Yoon Suk-yeol has agreed to step down early and will not interfere in South Korean politics before leaving office; Syrian opposition claims to have captured Damascus, overthrowing Assad's regime, US says it will maintain its presence in eastern Syria; Final text of the US FY2025 National Defense Authorization Act released, biosafety bill not included; PBOC increased gold holdings for the first time in six months in November, foreign reserves turned upward; Xinhua Commentary: Future monetary policy will continue to strengthen counter-cyclical adjustments; Yu'ebao yield hits a historic low.

Last Friday, LME zinc opened at $3,110.5/mt, fluctuated around the daily moving average after the opening, reached a high of $3,130.5/mt, then slid all the way down to $3,053/mt during the night session, and subsequently rebounded, finally closing down at $3,072/mt, down $36/mt, a decline of 1.16%. Trading volume increased to 9,872 lots, and open interest increased by 1,125 lots to 245,000 lots. Last Friday, LME zinc recorded a bearish candlestick, with the 40-day moving average providing support below. LME zinc inventory increased by 1,050 mt to 278,850 mt, an increase of 0.38%. US November non-farm payrolls data recorded the largest increase since March 2024, and the unemployment rate also rose. The US dollar index slightly strengthened, putting some pressure on LME zinc's performance. Attention should be paid to subsequent macroeconomic guidance.

Last Friday, the most-traded SHFE zinc 2501 contract opened at 25,430 yuan/mt, briefly rose to a high of 25,535 yuan/mt after the opening, then fell all the way down to 25,255 yuan/mt, and subsequently slightly rebounded from the low, finally closing down at 25,335 yuan/mt, down 160 yuan/mt, a decline of 0.63%. Trading volume decreased to 95,382 lots, and open interest decreased by 609 lots to 130,000 lots. Last Friday, SHFE zinc recorded a bearish candlestick, with the 5-day moving average forming resistance above. Domestic zinc concentrate TCs slightly rebounded, and smelter production in December is expected to increase MoM. Supply-side support for zinc prices may weaken, and the SHFE zinc center slightly declined.

Tin

Last Friday night session, SHFE tin prices moved downwards after a higher opening. Amid price fluctuations, the overall trading atmosphere in the spot market appeared rather quiet, with trading volume continuing to shrink. Smelters still stand firm on quotes, providing some support to market prices. Although trading enterprises actively quoted prices, the range of quoted brands has narrowed compared to earlier periods, reflecting the tight supply in the market. Recently, the market performance of imported tin has been particularly impressive, with spot cargo almost sold out and pre-sold portions quickly absorbed. Despite this, downstream enterprises' enthusiasm for procurement has not been fully ignited. Most enterprises only show mild interest in prices, with a small amount of inquiries and just-in-time procurement, and some have adopted a pricing strategy. Due to the large inventory accumulated earlier, as prices gradually rise, downstream enterprises are more inclined to adopt a wait-and-see attitude, awaiting new market developments. Prudence has become the main theme in procurement strategies. Enterprises generally choose to remain cautious to cope with market uncertainties. From the overall trading situation, market activity remains sluggish, and the trading atmosphere is dull. Specifically, most trading enterprises' trading volume barely maintains around 10 mt, with a few enterprises achieving a trading volume of 1-2 truckloads, which is already considered outstanding in the market. Looking ahead, the spot market is expected to continue the current mediocre trading atmosphere. In the tug-of-war between sellers and buyers, the market may continue to seek a new balance point.

Nickel

Last week, nickel prices fluctuated, with spot prices ranging from 124,000 to 131,000 yuan/mt and SHFE nickel prices ranging from 124,000 to 129,000 yuan/mt. Fundamentally, there were no structural changes compared to the previous week, and the sentiment remained relatively bearish.

On the fundamentals of refined nickel, export profitability continued in the long term, and the trend of increasing domestic electrodeposited nickel remained unchanged. Although downstream alloy electroplating would choose appropriate prices for procurement, December, being a traditional off-season, coupled with the need for pre-year-end destocking by enterprises, would lead to relatively cautious purchasing. Therefore, demand would hardly provide significant support to prices. In terms of inventory, on December 2, LME warehouse warrants surged by 3,168 mt to 163,134 mt, marking a new high in three years. The high inventory levels both domestically and internationally exerted considerable pressure on the upward movement of nickel prices. On the macro side, although domestic policies aimed at stabilizing growth were reflected in market sentiment, the bearish fundamentals quickly offset the positive sentiment for nickel prices.

From December to the end of the year, spot premiums are expected to decline to some extent.