SMM Morning Comment For SHFE Base Metals On December 13

SHANGHAI, December 13 (SMM) –

Copper

Overnight, LME copper opened at $9,214/mt, initially peaked at $9,248/mt, then fluctuated downward, touching a low of $9,072/mt towards the close, and finally settled at $9,072/mt, with a decline of 1.14%. Trading volume reached 22,000 lots, and open interest was 267,000 lots. The most-traded SHFE copper 2501 contract opened and peaked at 74,990 yuan/mt, then fluctuated downward, touching a low of 74,530 yuan/mt mid-session, and slightly rebounded to close at 74,700 yuan/mt, with a decline of 0.94%. Trading volume reached 37,000 lots, and open interest was 145,000 lots. On the macro front, a report released by the US Department of Labor on Thursday showed that the Producer Price Index rose by 0.4% MoM in November, with economists having expected a rise of 0.2%. The market has almost fully priced in the expectation that the US Fed will cut interest rates by 25 basis points at next week's meeting, with the US dollar index breaking through the 107 level, suppressing copper prices. Domestically, the Central Economic Work Conference was successfully held, proposing to leverage economic system reforms to drive landmark reform measures to fruition. Fundamentally, copper prices maintain a fluctuating trend, with downstream sentiment still cautious and some suppliers offloading at low prices, but downstream purchase willingness remains low. Overall, market transactions weakened prior to the last trading day of the SHFE copper 2412 contract. As of December 12, Thursday, SMM national mainstream area copper inventories increased by 2,600 mt to 122,300 mt from Monday, but total inventories are 59,000 mt higher from last year's 63,000 mt. In terms of prices, copper prices are currently significantly suppressed by the US dollar index, and copper prices are expected to stabilize before the US Fed's interest rate decision meeting.

Aluminum

Overnight, the most-traded SHFE aluminum 2502 contract opened at 20,490 yuan/mt, peaked at 20,510 yuan/mt, dropped to a low of 20,420 yuan/mt, and closed at 20,500 yuan/mt, down 60 yuan/mt from the previous day, a decrease of 0.29%. On Thursday, LME aluminum opened at $2,605/mt, reached a high of $2,623/mt, a low of $2,589/mt, and closed at $2,604/mt, up $3/mt, an increase of 0.12%.

Summary: On the macro front, global liquidity remains ample, and domestically, positive signals are being released again. On the fundamentals side, aluminum costs fluctuate at highs, leading to some capacity reductions. Although aluminum ingot social inventory has started to build up due to sluggish consumption, it remains below 600,000 mt, a relatively low level. Short-term aluminum prices are expected to fluctuate. Changes in the macro situation and the direction of aluminum costs remain the biggest variables at present.

Lead

Overnight, LME lead opened at $2,041.5/mt, fluctuated around the daily moving average during the Asian session, and then slightly weakened. Entering the European session, it continued to fluctuate downward, reaching a low of $2,001/mt and finally closing at this level, down $31/mt, a decline of 1.53%.

Overnight, the most-traded SHFE lead 2501 contract opened at 17,460 yuan/mt, tested a low of 17,420 yuan/mt at the beginning of the session, then rose to a high of 17,540 yuan/mt, and later fluctuated around the daily moving average, finally closing at 17,465 yuan/mt, down 65 yuan/mt, a decline of 0.37%.

On the macro front, US Producer Prices in November increased more than expected MoM. The US dollar index slightly strengthened. The market gradually digested the expectation that the US Fed would cut interest rates by 25 basis points at next week's policy meeting.

Domestically, on the fundamentals side, with lead prices opening higher and moving downward during the week, the spot market saw average transaction activity. Secondary lead smelting enterprises resumed production and new capacity ramp-up progressed as scheduled, leading to an increase in market supplies, prompting downstream enterprises to opt for lower-priced secondary lead sources for just-in-time procurement. Additionally, as the delivery of the most-traded SHFE lead 2412 contract approaches, suppliers are transferring to delivery warehouses, and with the year-end cash flow recapture factor, some suppliers still prefer to sell off their holdings for cash realization. Compared to the inventory build-up before the mid-November delivery round, the increase in lead ingot inventory before this delivery has slowed down.

Zinc

US household net assets rose to record highs in Q3; Trump: For me, the stock market is everything; plans to do great things in the cryptocurrency sector; military officials: preparations are underway for a possible strike on Iran's nuclear facilities; the European Central Bank cut interest rates by 25 basis points as expected, Swiss National Bank significantly cuts rates by 50 basis points; sources: Bank of Japan likely to keep rates steady next week; Texas legislator proposes a bill to establish a strategic Bitcoin reserve within the state budget; Central Economic Work Conference: next year's focus will be on maintaining growth, employment, implementing a more proactive fiscal policy, moderately loose monetary policy, boosting consumption vigorously, improving investment returns, and comprehensively expanding domestic demand among nine major tasks. Chinese President Xi Jinping met with United Russia party chairman Medvedev in Beijing; Ministry of Commerce: open to engaging with the new US administration's economic and trade team.

Overnight, LME zinc opened at $3,119/mt, fluctuated rangebound around the daily moving average, touching a high of $3,143/mt before descending, probing a low of $3,064/mt towards the close, finally settling down at $3,080.5/mt, a decrease of $38.5/mt or 1.23%, with trading volume increasing to 9,925 lots, and open interest decreasing by 2,920 lots to 237,000 lots. Overnight, LME zinc recorded a bearish candle, with the upper Bollinger Band acting as resistance, LME zinc inventory decreased by 1,300 mt to 273,650 mt, a drop of 0.47%, US November PPI was up 3% YoY, higher than previous figures and market expectations, US dollar index rose again, and LME zinc's center continued to slide.

Overnight, the most-traded SHFE zinc 2501 contract opened at 25,790 yuan/mt, initially trading above the daily moving average, reaching a high of 25,805 yuan/mt before falling back from highs to below the daily moving average, probing a low of 25,590 yuan/mt and maintaining a fluctuating trend, finally closing down at 25,675 yuan/mt, a decrease of 290 yuan/mt or 1.12%, with trading volume increasing to 87,986 lots, and open interest decreasing by 10,993 lots to 131,000 lots. Overnight, SHFE zinc recorded a bearish candle, with the middle Bollinger Band providing support, the Central Economic Work Conference proposed implementing more active and effective macro policies, but specific measures still need further disclosure. Zinc ingot social inventory destocking showed a slowdown Thursday, and downstream consumption may gradually weaken, so SHFE zinc opened lower with a gap, continuing to slide in center.

Tin

In last night's trading session, SHFE tin prices opened low and continued to decline, showing an overall weak trend. However, in the spot market, the daytime trading atmosphere remained subdued, with overall trading volume staying at a low level. Looking at the smelter quotations, most manufacturers' prices were stable around 252,000-255,000 yuan/mt, with actual shipments being few. Despite trading enterprises actively quoting downstream businesses to seek trading opportunities, the market response was lukewarm. Most downstream businesses still opted for a wait-and-see approach with no intention of restocking, with only a few making purchases due to rigid demand. Regarding the overall market trading situation, the level of transaction activity continues to be sluggish. Most trading enterprises' trading volumes remain at sporadic trading levels, with only a few able to achieve a truckload of goods in transactions. Currently, as tin prices have fallen below 250,000 yuan/mt, the upward momentum has not been sustained, and most market participants believe there is insufficient drive for price increases, waiting for further declines.

Nickel

Spot Premiums/Discounts: The mainstream spot premiums for Jinchuan #1 nickel ranged from 3,900 to 4,000 yuan/mt, with an average of 3,950 yuan/mt, up 350 yuan from the previous trading day. The spot premiums for Russian nickel ranged from -300 to -100 yuan/mt, with an average of -200 yuan/mt, down 75 yuan from the previous trading day.

Futures Market: On December 12, nickel prices led a significant rise in the non-ferrous sector in the morning. The closing price at noon ranged from 3,590 yuan/mt to 128,950 yuan/mt, with an increase of 2.86%. The average price of SMM # 1 refined nickel rose by 2,425 yuan to 129,400 yuan/mt, an increase of 1.91%.

Spot Market: Adjustments were made to Indonesia's nickel resource policy, coupled with favorable domestic macro policies, leading to a significant rise in SHFE nickel yesterday, reaching a price point with strong resistance. In terms of spot premiums/discounts, this week's Jinchuan brand nickel spot supply was relatively tight, with continued increases in premiums/discounts, while changes in other brand nickel plates were relatively small. The rise in nickel prices led to a weakening in spot transactions for the day.

Price Spread with Nickel Sulphate: The price of nickel briquettes ranged from 126,800 to 127,400 yuan/mt, up 2,300 yuan/mt from the previous trading day. The price spread between refined nickel and nickel sulphate was 7,100 yuan/mt.