SMM Morning Comment For SHFE Base Metals On December 30

SHANGHAI, December 30 (SMM) –

Copper

Overnight, LME copper opened at $8,961/mt, maintained wide fluctuations throughout the session, with its center moving upward. It bottomed at $8,951/mt in early trading and peaked at $8,997/mt near the close, finally settling at $8,981.5/mt, up 0.16%. Trading volume reached 9,000 lots, and open interest stood at 262,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened lower at 73,930 yuan/mt, fluctuated upward in early trading, peaked at 74,180 yuan/mt during the session, then its center shifted downward and maintained slight fluctuations near the close, finally settling at 74,070 yuan/mt, down 0.38%. Trading volume reached 15,000 lots, and open interest stood at 148,000 lots. Macro side, uncertainties remain regarding the upcoming Trump administration's policies. The US dollar index fluctuated and eventually closed lower. However, year-end domestic consumption remained weak, leading to mixed performance in the domestic and overseas markets. Domestically, PBOC Governor Gongsheng Pan stated that monetary policy adjustments should be intensified, with a focus on improving precision. On the fundamentals, as the year-end approaches, most enterprises are controlling funds, resulting in overall sluggish market purchasing demand. In summary, with weak domestic consumption at year-end, copper prices are expected to fluctuate downward today.

Aluminum

Futures Market: Last Friday night, the most-traded SHFE aluminum 2502 contract opened at 19,775 yuan/mt, hit a high of 19,785 yuan/mt, a low of 19,700 yuan/mt, and closed at 19,785 yuan/mt, down 10 yuan/mt or 0.05% from the previous trading day. Last Friday, LME aluminum opened at $2,553/mt, reached a high of $2,562/mt, a low of $2,533.5/mt, and closed at $2,557/mt, up $1/mt or 0.04%.

Summary: On the macro front, the European Central Bank may delay its interest rate cuts, and market expectations for the extent of US Fed rate cuts next year remain pessimistic, putting continued pressure on base metals. On the fundamentals side, in December, several aluminum smelters in Sichuan and Guangxi reduced production, while some capacity restarts were delayed. However, production still showed YoY growth. On the demand side, market demand continued to weaken during the off-season, with aluminum processing industry operating rates declining further. Overall, with unclear US Fed rate cut timing and delayed European Central Bank rate cuts on the macro front, and despite slightly reduced supply-side pressure on the fundamentals side, weak demand during the off-season and growing risks of inventory buildup in social stocks are expected to keep aluminum prices fluctuating downward in the short term.

Lead

Last Friday night, the most-traded SHFE lead 2502 contract opened at 16,880 yuan/mt. After opening, it fluctuated around the intraday moving average, briefly touching a high of 16,915 yuan/mt and a low of 16,810 yuan/mt, eventually closing at 16,895 yuan/mt, down 165 yuan/mt or 0.97%. The open interest of the most-traded SHFE lead 2402 contract decreased by 1,111 lots to 54,615 lots.

Last Friday night, LME lead opened at $1,981.5/mt, briefly touching $1,982.5/mt at the beginning of the session. It weakened during the Asian trading hours, hitting a low of $1,950/mt, but rebounded during the European session, closing at $1,966/mt, down $14/mt or 0.71%.

Macro side, the wavering expectations of interest rate cuts and the current lack of new directions have led to a slightly bearish macro sentiment, with gold and silver prices fluctuating. On the fundamentals side, this week, air pollution in regions such as Hebei, Henan, and Shandong has gradually eased, with Shandong already lifting smog restrictions and Henan following suit. The supply of secondary refined lead, previously impacted by environmental protection factors, is no longer the main imbalance in the market. Additionally, some crude lead production in Hunan is expected to resume gradually after meeting rectification standards post-New Year's Day. However, the recovery of primary lead production may be delayed due to insufficient raw material stocking. After the New Year's Day holiday, attention should still be paid to the actual resumption of production by lead smelting enterprises in various regions, as well as the recovery of downstream enterprises to normal operations and pre-holiday stocking by dealers after the resolution of year-end account settlements and inventory checks. The lead market's supply and demand decline may ease to some extent.

Zinc

Last Friday, Elon Musk challenged MAGA, while the Trump alliance faced internal discord over immigration issues; the European Central Bank may consider waiting longer before the next interest rate cut; the leader of Syria's Sham Liberation Front announced plans to dissolve the organization during the National Dialogue Conference; Yemen's capital Sanaa was hit by airstrikes, with Houthi forces claiming the US and UK were responsible; Pan Gongsheng stated the need to intensify and enhance the precision of monetary policy adjustments; the Hong Kong SAR government reported that the number of startups in Hong Kong reached a record high in 2024; Honor completed its equity restructuring and plans to initiate the IPO process at an appropriate time; China's first domestically developed and constructed Type 076 amphibious assault ship, the Sichuan, was officially launched.

Last Friday, LME zinc opened at $3,054/mt. In early trading, LME zinc briefly rose to a high of $3,055/mt. By the European trading session, longs reduced positions, and LME zinc declined to a low of $3,008/mt before stabilizing around $3,030/mt. It eventually closed higher at $3,040/mt, up $6/mt or 0.62%. Trading volume increased to 5,979 lots, while open interest decreased by 1,584 lots to 225,000 lots. Last Friday, LME zinc recorded a small bearish candlestick with a long lower shadow. LME inventory decreased by 4,450 mt to 244,500 mt, a drop of 1.79%. Expectations for US Fed interest rate cuts weakened, the US dollar strengthened, and base metals came under pressure, with LME zinc's center also shifting lower. It is expected to trade mainly in a range today.

Last Friday, the most-traded SHFE zinc 2502 contract opened at 25,170 yuan/mt. In early trading, shorts reduced positions, and SHFE zinc quickly surged to a high of 25,310 yuan/mt. Later, as longs exited, SHFE zinc's center shifted lower to 25,230 yuan/mt. By the end of the session, SHFE zinc's center moved higher again, closing at 25,300 yuan/mt, up 125 yuan/mt or 0.5%. Trading volume decreased to 60,598 lots, while open interest fell by 737 lots to 143,000 lots. Last Friday, SHFE zinc recorded a small bullish candlestick. The 20-day moving average above acted as resistance, with mixed positions from both longs and shorts. Macro sentiment remained relatively bearish, but fundamentals continued to provide support for SHFE zinc. It is expected to trade mainly in a range today.

Tin

Last week, SHFE tin prices fluctuated rangebound. Specifically, at the beginning of the week, the most-traded SHFE tin contract saw a slight rebound. However, during the night session early in the week, SHFE tin prices exhibited corresponding volatility, opening lower and pulling back continuously. Mid-week, the most-traded SHFE tin contract prices rebounded slightly, impacting market sentiment to some extent, though the overall price trend appeared somewhat weak. By Thursday, the most-traded SHFE tin contract prices showed a rangebound trend. During this period, market sentiment was mediocre, with traders mostly adopting a wait-and-see approach. By the weekend, prices edged down slightly during the late session, with the market's primary focus remaining on supply and demand dynamics and changes in the macroeconomic environment. From a broader perspective, the most-traded SHFE tin contract prices primarily fluctuated rangebound this week, mainly influenced by increased supply, demand-side fluctuations, and the macroeconomic environment. In the spot market, consumption activity was relatively mediocre this week, with daily trading volumes for some trading enterprises reaching 20-50 mt. Traders adopted a more cautious stance amid the complex and volatile market environment, with a dominant wait-and-see sentiment. Looking ahead, SHFE tin prices are expected to maintain wide fluctuations.

Nickel

Last week, nickel prices fluctuated, with spot prices ranging from 123,000 to 130,000 yuan/mt and SHFE nickel prices ranging from 122,000 to 129,000 yuan/mt. During the week, nickel prices first rose and then fell, influenced by increased downstream willingness for low-price stockpiling and macroeconomic factors. However, the overall demand from downstream sectors such as stainless steel, batteries, and alloys did not show fundamental improvement, making it difficult to support the upward trend in nickel prices.

Spot Market: From Monday to Wednesday, as nickel prices rose and the previous week's low-price stockpiling by downstream sectors ended, spot market transactions cooled, and premiums for domestic refined nickel remained stable at high levels. Starting Thursday, with significant improvement in the tight supply of domestic Jinchuan-brand refined nickel in the spot market, premiums for domestic refined nickel began to decline rapidly. It is expected that premiums for domestic refined nickel are unlikely to return to high levels before the year-end.