SMM Morning Comment For SHFE Base Metals (Dec 20)

SHANGHAI, Dec 20 (SMM) –

Copper

Moderate Consumption and Strong US Dollar Index; Copper Prices Expected to Face Resistance [SMM Copper Morning Comment Dec 20]

Overnight, LME copper opened at $8,915.5/mt, fluctuated rangebound in early trading, and slightly rose during the session to a high of $8,936.5/mt. The center shifted downward to a low of $8,859.5/mt, and LME copper closed at $8,885/mt, down 1.77%. Trading volume reached 19,000 lots, and open interest stood at 265,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 73,650 yuan/mt, fluctuated upward in early trading, reaching a high of 73,870 yuan/mt during the session, then fluctuated downward to a low of 73,520 yuan/mt before closing at 73,540 yuan/mt, down 0.61%. Trading volume reached 17,000 lots, and open interest stood at 130,000 lots. Macro side, the US Q3 GDP was unexpectedly revised upward, and initial jobless claims fell more than expected. The US dollar index continued to strengthen. Meanwhile, cautious remarks from US Fed and ECB policymakers regarding further monetary easing heightened concerns over potential economic slowdown, putting pressure on copper prices. Fundamentally, while there were still arrivals of imported copper recently, domestic copper arrivals were relatively low. With moderate consumption, destocking continued during the week. According to the warehouse warrant daily report, nearly 10,000 mt of new warrants were registered at the Steinweg warehouse during the week, leading to continued destocking in the Shanghai region. As of Thursday, December 19, SMM data showed that copper inventories in major regions across China decreased by 4,400 mt WoW to 98,700 mt, down 23,600 mt compared to last Thursday. However, the destocking speed slowed during the week. In summary, with the US dollar remaining at a high level, copper prices are expected to face some resistance.

Aluminum

Economic Data Strengthens Expectations for US Fed's Cautious Interest Rate Cut, Aluminum Weakens Overnight [SMM Aluminum Morning Meeting Summary]

Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,845 yuan/mt, hitting a high of 19,910 yuan/mt and a low of 19,825 yuan/mt, before closing at 19,845 yuan/mt, down 5 yuan/mt or 0.03% from the previous day. On Thursday, LME aluminum opened at $2,524/mt, reached a high of $2,527.5/mt and a low of $2,505.5/mt, and closed at $2,515/mt, down $16/mt or 0.63%.Summary: On the macro front, Thursday's US economic data reinforced market expectations that the US Fed will adopt a cautious approach to interest rate cuts in the coming year. The US dollar index hit a two-year high, weighing on non-ferrous metals. On the fundamentals side, domestic aluminum operating capacity saw a slight decline, with overall supply remaining stable. On the demand side, downstream operating rates continued to fall due to the off-season, the cancellation of export tax rebates, and disruptions from regional environmental protection-driven production restrictions. Overall, the US Fed's more cautious stance on interest rate cuts and the deepening off-season in consumption have led to increasingly bearish market sentiment. In the short term, aluminum prices are expected to fluctuate downward.

Lead

Downstream Enterprises Purchase on Dips as Needed, Spot Market Trading Activity Improves [SMM Lead Morning Comment Dec 20]

Overnight, LME lead opened lower at $1,974/mt, briefly touching a high of $1,975.5/mt during the Asian session. Due to the high-level fluctuation of the US dollar index, LME lead came under pressure during the European session, dipping to $1,955.5/mt and finally closing at $1,973/mt, down 0.5%.

Overnight, the most-traded SHFE lead 2502 contract opened at 17,415 yuan/mt, briefly touching a high of 17,430 yuan/mt in early trading before fluctuating downward. It dipped to 17,280 yuan/mt by the end of the session and closed at 17,335 yuan/mt, down 1.42%.

Macro side, the US Q3 GDP was revised up from 2.8% to 3.1%, exceeding expectations of no change. Initial jobless claims in the US decreased by 22,000 compared to the previous figure, a larger drop than expected. China's Ministry of Commerce announced plans to accelerate the release of policy documents promoting the debut economy.

Fundamentals, supply side, environmental protection-driven production restrictions continued to emerge. After dipping, SHFE lead rebounded relatively, while spot market circulating cargoes remained limited. Suppliers stood firm on quotes, with sharply increased premiums for cargoes self-picked up from production sites in regions affected by environmental protection measures. Downstream enterprises purchased on dips as needed, with increased inquiries, leading to improved trading activity in the spot market. Overall, lead prices are expected to maintain a fluctuating trend.

Zinc

US Dollar Rises to Two-Year High, LME Zinc Records Four-Day Losing Streak [SMM Zinc Morning Comment]Overnight, the US Q3 GDP was unexpectedly revised significantly upward, and initial jobless claims fell more than anticipated; the Bank of Japan held its policy steady again, with expectations for yen appreciation dropping to a one-month low; the Bank of England's voting split surprised the market, with its statement hinting at a quarterly interest rate cut; US House Republicans urgently sought alternative solutions to avoid a government shutdown; the "Administrative Measures for Online Marketing of Financial Products" may be released; brokers took action again to strictly prohibit disguised T+0 trading through securities lending; the PV Industry Association issued a rare four consecutive inquiries, questioning the winning bid results of central state-owned enterprise projects; ByteDance warned of market speculation on "Doubao concept stocks," advising against believing rumors.

Overnight, LME zinc opened at $2,980/mt. At the beginning of the session, LME zinc fluctuated rangebound around the daily moving average. During European trading hours, bears increased positions, pushing LME zinc down to $2,952.5/mt. Subsequently, the center returned to the daily moving average for consolidation, reaching a high of $3,001.5/mt during the night session. By the end of the session, the center shifted downward to $2,970/mt, closing down at $2,970/mt, a decrease of $31/mt or 1.03%. Trading volume increased to 11,716 lots, and open interest rose by 1,500 mt to 231,000 lots. Overnight, LME zinc recorded a four-day losing streak, with the daily candlestick center moving downward. LME inventory decreased by 2,875 mt to 257,525 mt, a drop of 1.1%, marking a reduction in LME inventory. The larger-than-expected decline in US initial jobless claims reinforced cautious expectations for future interest rate cuts, pushing the US dollar index to a two-year high. Base metals collectively retreated, with LME zinc's center moving downward.

Overnight, the most-traded SHFE zinc 2502 contract opened at 24,935 yuan/mt. At the beginning of the session, SHFE zinc briefly consolidated around the daily moving average before quickly rallying to a high of 25,040 yuan/mt. Subsequently, shorts launched high-level attacks, causing SHFE zinc to decline stepwise. By the end of the session, the center shifted downward to 24,890 yuan/mt, closing down at 24,895 yuan/mt, a decrease of 15 yuan/mt or 0.06%. Trading volume decreased to 42,637 lots, while open interest increased by 1,222 lots to 125,000 lots. Overnight, SHFE zinc recorded a five-day losing streak, with the 40-day moving average forming resistance above, and the KDJ indicator expanding downward. Although social inventory declined overnight, poor macro sentiment weighed on zinc prices.

Tin

SHFE Tin Prices Dropped Sharply Yesterday, Spot Market Trading Boomed [SMM Tin Morning Brief Dec 20]

In yesterday's trading, SHFE tin prices experienced a significant decline. Specifically, the most-traded SHFE tin contract closed at 240,650 yuan/mt, down 5,120 yuan/mt from the previous trading day, a drop of 2.08%. During the night session, SHFE tin prices fluctuated rangebound. Downstream enterprises showed strong purchasing enthusiasm, and with the sharp pullback in tin prices yesterday, downstream enterprises actively began restocking, while end-user enterprises also started stockpiling. Smelting enterprises maintained a sentiment to stand firm on quotes at current price levels, with daily quotes remaining relatively high. Overall, the spot market saw a booming trading atmosphere, with most trading enterprises achieving daily trading volumes of around 1-2 truckloads, while a few trading enterprises reached 3-6 truckloads. Most traders slightly raised spot premiums/discounts, but considering the sharp decline in SHFE tin prices, downstream enterprises' purchasing enthusiasm remained high, and some back-pricing orders were settled.

Nickel

Spot Premiums/Discounts: The mainstream spot premiums for Jinchuan #1 nickel were 3,800-4,000 yuan/mt, with an average of 3,900 yuan/mt, down 300 yuan/mt compared to the previous trading day. The spot premiums for Norilsk nickel were -200-0 yuan/mt, with an average of -100 yuan/mt, unchanged from the previous trading day.

Futures Market: On December 19, influenced by the US Fed's statement during the night session indicating "cautious interest rate cuts ahead," SHFE nickel fell again from the night session to the morning. The midday closing price dropped by 1,320 yuan/mt to 122,930 yuan/mt, a decline of 1.06%. The early morning average price of SMM 1# refined nickel fell by 1,325 yuan/mt to 124,900 yuan/mt.

Spot Market: The fundamentals remained bearish with no structural changes. Although the decline in futures prices slightly boosted downstream purchase willingness, the overall demand in December continued to be relatively sluggish.

Spot Premiums/Discounts: Due to the sentiment of supply tightening for Jinchuan-branded nickel plates recently, year-end premiums continued to rise, breaking through 4,000 yuan/mt the day before yesterday to reach an annual high. However, in the past two days, a certain amount of Jinchuan-branded exported nickel plates has been re-imported and gradually flowed into the spot market for pre-sale, alleviating the sentiment of short-term supply tightness for Jinchuan nickel plates. It is expected that the spot premiums for nickel plates may pull back in the future.

Price Spread with Nickel Sulphate: Nickel briquette prices were in the range of 122,300-122,800 yuan/mt, down 1,175 yuan/mt compared to the previous trading day.