SMM Morning Comment For SHFE Base Metals (Dec 25)

SHANGHAI, Dec 25 (SMM) –

Copper

National Fiscal Work Conference Held, Copper Prices Rose Overnight [SMM Copper Morning Comment Dec 25]

Overnight, LME copper opened at $8,971/mt, initially reaching a high of $8,988/mt before fluctuating downward throughout the session. Near the close, it hit a low of $8,936/mt, then slightly rebounded to close at $8,967/mt, down 0.34%. Trading volume reached 7,000 lots, and open interest stood at 262,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 74,010 yuan/mt, initially declining to a low of 73,710 yuan/mt before fluctuating upward throughout the session. Near the close, it reached a high of 74,150 yuan/mt and finally closed at 74,060 yuan/mt, up 0.18%. Trading volume reached 10,000 lots, and open interest stood at 138,000 lots. Macro side, the National Fiscal Work Conference was held in Beijing. The meeting emphasized implementing a more proactive fiscal policy in 2025, with sustained and stronger efforts, and deploying a stimulus policy package. It also highlighted the need to support domestic demand expansion and significantly boost consumption in 2025. Copper prices rose on this positive sentiment but faced limited gains due to strong US dollar pressure. Fundamentally, supply side, the continuous arrival of imported copper led to pressure on premiums for some sources. Meanwhile, as the year-end approaches, many suppliers entered the settlement phase, resulting in muted quotations. On the consumption side, performance remained mediocre, with domestic copper social inventory showing an inventory buildup and no improvement in downstream demand. In terms of prices, domestic macro news supported market confidence, but the rising US dollar index exerted pressure. Copper prices are expected to stabilize at current levels today.

Aluminum

US Fed's Interest Rate Cut Pace Unclear; SHFE Aluminum Pulled Back From Highs Last Night [SMM Aluminum Morning Brief Dec 25]

Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,980 yuan/mt, hit a high of 19,990 yuan/mt, a low of 19,865 yuan/mt, and closed at 19,880 yuan/mt, down 85 yuan/mt or 0.42% from the previous trading day. On Tuesday, LME aluminum opened at $2,535/mt, reached a high of $2,575.5/mt, a low of $2,526.5/mt, and closed at $2,556/mt, up $17.5/mt or 0.68%.

Summary: On the macro front, the market remains pessimistic about the extent of the US Fed's interest rate cuts next year, with the US dollar index hovering near a two-year high, exerting pressure on base metals. Fundamentals side, the pressure on the domestic aluminum supply side has slightly eased recently, with a slight decline in domestic aluminum operating capacity. Some aluminum smelters in Sichuan and Guangxi have reported capacity technological transformations or production cuts due to losses. Demand side, market demand continues to weaken during the off-season, with subdued performance in the aluminum plate/sheet and strip and aluminum extrusion sectors, and strong expectations of inventory buildup. Overall, while the macro front remains uncertain regarding the US Fed's interest rate cut pace, and the fundamentals side sees slightly reduced supply pressure, weak demand during the off-season and growing risks of inventory buildup are weighing on the market. In the short term, aluminum prices are expected to fluctuate downward.

Lead

Domestic Supply-Side Production Cuts Fully Priced In, Lead Prices Show Weak Consolidation [SMM Lead Morning Meeting Summary]

Futures Market:

Overnight, LME lead opened at $1,987.5/mt. Trading was sluggish on the eve of Christmas. During the session, base metals generally rose as China, the largest consumer, introduced additional fiscal stimulus measures. LME lead also attempted to reach the $2,000/mt mark but failed, and later trading showed a fluctuating downward trend. It eventually closed at $1,980/mt, down 0.65%. Additionally, today is the Christmas holiday, and the LME is closed.

Overnight, the most-traded SHFE lead 2502 contract opened at 17,400 yuan/mt. Near year-end, market trading turned sluggish, with SHFE lead trading volume shrinking significantly and open interest decreasing daily. On the supply side, environmental protection measures still had an impact, but lead warehouse warrant inventory remained stable. With previous bullish factors exhausted, SHFE lead showed a weak consolidation trend, fluctuating mostly between 17,350-17,400 yuan/mt during the session. It finally closed at 17,355 yuan/mt, down 0.4%, with open interest at 57,980 lots, a decrease of 1,240 lots from the previous trading day.

Spot Market Fundamentals

Yesterday in the lead spot market, SHFE lead fluctuated downward. On the supply side, environmental protection measures still had an impact, and some suppliers had sold out their December inventory, resulting in limited spot market availability. Suppliers stood firm on quotes, generally shipping at premiums against the SMM 1# lead average price. Meanwhile, secondary lead smelters increased their shipments, with secondary refined lead quoted at discounts of 50 yuan/mt to premiums of 50 yuan/mt against the SMM 1# lead average price on an ex-factory basis. Downstream enterprises preferred secondary lead sources, and the trading in the primary lead market remained sluggish. For primary lead, smelters had limited inventory and mostly stood firm on quotes, with spot orders quoted at premiums of 100-300 yuan/mt against the SMM 1# lead average price on an ex-factory basis. In mainstream trade markets such as Jiangsu, Zhejiang, and Shanghai, domestic lead mainstream quotations were at premiums of 0-20 yuan/mt against the SHFE 2501 contract. For secondary lead, production restrictions in major producing areas persisted, and smelters shipped according to market trends, with shipments increasing compared to the previous day. Secondary refined lead was quoted at discounts of 50 yuan/mt to premiums of 50 yuan/mt against the SMM 1# lead average price on an ex-factory basis.

Lead Price Forecast:

Macro side, China's Ministry of Finance announced that in 2025, it will focus on expanding domestic demand, appropriately increasing basic pensions for retirees, raising fiscal subsidies for urban and rural residents' medical insurance, increasing the fiscal deficit ratio, and arranging for larger-scale government bonds. The NDRC stated that it will further standardize the implementation of new government and social capital cooperation projects, prioritizing private enterprises' participation.

Fundamentally, the overseas market is temporarily stagnant due to the Christmas holiday. The domestic market, also at year-end, saw continued environmental protection impacts on smelters in regions such as Hunan and Anhui. However, consumption remained weak as some large downstream enterprises closed accounts and conducted inventory checks at year-end, leading to reduced lead ingot procurement. As a result, the lead spot market showed limited shipments, high prices, and poor transactions. Lead prices are expected to remain in a consolidation trend in the short term.

Zinc

Positive Domestic Macro News Released, SHFE Zinc Center Moves Upward [SMM Zinc Morning Comment Dec 25]

Overnight, some major US banks are expected to sue the US Fed; Biden is considering imposing new sanctions on Russia's energy sector; South Korea has entered a "super-aged society"; the State Council Executive Meeting emphasized the role of intermediary institutions as "gatekeepers" in the capital market; the Ministry of Finance stated that the fiscal deficit ratio is expected to increase in 2025.

Overnight, LME zinc opened at $2,995.5/mt, initially dipped to $2,992/mt, then fluctuated upward above the daily moving average, with the center fluctuating rangebound around $3,034/mt and reaching a high of $3,053/mt during the session. It eventually closed higher at $3,034/mt, up $35.5/mt or 1.18%. Trading volume decreased to 51,317 lots, and open interest fell by 1,615 lots to 227,000 lots. Overnight, LME zinc recorded a bullish candlestick, with the middle Bollinger Band providing resistance above and the lower Bollinger Band offering support below. LME inventory decreased by 3,025 mt to 248,950 mt, a decline of 1.20%, marking a reduction in LME inventory. The continuous decline in LME inventory is expected to provide some support for zinc prices. Today, LME zinc is closed for Christmas.

Overnight, the most-traded SHFE zinc 2502 contract opened higher with a gap at 25,340 yuan/mt. Initially, it fluctuated slightly near the daily moving average, then surged upward to a high of 25,435 yuan/mt as bulls increased positions. However, as bears increased positions, SHFE zinc fluctuated downward slightly. By the end of the session, bulls reduced positions and exited, causing SHFE zinc to continue its downward trend, eventually closing higher at 25,350 yuan/mt, up 120 yuan/mt or 0.48%. Trading volume decreased to 74,153 lots, while open interest increased by 2,170 lots to 141,000 lots. Overnight, SHFE zinc recorded a bullish candlestick, with the 10-day moving average providing support below. The National Fiscal Work Conference set a positive tone, with the Ministry of Finance stating that the fiscal deficit ratio is expected to increase in 2025. Meanwhile, domestic spot zinc remains tight, supporting the upward movement of SHFE zinc's center.

Tin

Last Night SHFE Tin Prices Rose Slightly, Fluctuating Trend May Persist Before the Holiday [SMM Tin Morning Brief Dec 25]

In yesterday's trading, the SHFE tin market exhibited a relatively stable trend. At the opening, SHFE tin prices rose slightly, mainly driven by positive news from overseas markets. As trading progressed, market sentiment remained relatively optimistic, with investors' expectations for the year-end consumption peak providing some support for tin prices. By the close of trading yesterday, the most-traded SHFE tin contract rose slightly, with prices fluctuating within a range. From an overall trend perspective, market activity appeared somewhat cautious, and open interest showed relatively small changes, indicating that investors are gradually adopting a wait-and-see approach before the holiday. Yesterday, overseas markets provided some support for domestic tin prices, particularly with the slight increase in London Metal Exchange (LME) tin prices, which boosted market confidence. Additionally, stable demand from domestic downstream industries and a slightly tight supply side also provided fundamental support for tin prices.

Looking ahead to today, as the Christmas holiday approaches, market trading activity may decline. However, close attention should be paid to further developments in international markets and changes in macroeconomic data, as these may impact market sentiment after the holiday. Investors are advised to remain cautious and manage risk positions prudently.