SMM Morning Comment For SHFE Base Metals On January 6

SHANGHAI, January 6 (SMM) –

Copper

Last Friday evening, LME copper opened at $8,806/mt, initially dipped to $8,791.5/mt, then fluctuated upward throughout the session, reaching a high of $8,908/mt near the close, and finally settled at $8,893.5/mt, up 1.05%. Trading volume reached 16,900 lots, and open interest stood at 261,000 lots. Last Friday evening, the most-traded SHFE copper 2502 contract opened at 73,230 yuan/mt, initially dipped to 73,160 yuan/mt, then surged to an intraday high of 73,850 yuan/mt, followed by a slight pullback and rangebound fluctuations near the close, ultimately settling at 73,810 yuan/mt, up 1.08%. Trading volume reached 34,300 lots, and open interest stood at 154,000 lots. Macro side, last Friday, the State Council Information Office held a press conference on "China's High-Quality Economic Development Achievements," which led to a rebound in market sentiment. Looking ahead to this week, the US is expected to release multiple labour market data points, along with speeches from several US Fed officials. However, US data is unlikely to weaken the US dollar index at this stage, which will weigh on copper prices. Fundamentally, although copper prices have remained at low levels recently, end-use demand has not shown significant growth due to seasonal factors. Additionally, copper cathode import volumes in January are expected to remain flat compared to December, and spot premiums are likely to face pressure. In terms of prices, uncertainties surrounding US economic expectations remain high. Although the US dollar index pulled back slightly last Friday, it is expected to continue fluctuating at highs. On the fundamental side, the seasonal weakening of demand is expected to deepen further, suggesting copper prices may face resistance on the upside today.

Aluminum

Futures Market: Last Friday night, the most-traded SHFE aluminum 2502 contract opened at 19,785 yuan/mt, hitting a high of 19,815 yuan/mt and a low of 19,710 yuan/mt, before closing at 19,790 yuan/mt, down 50 yuan/mt or 0.25%. LME aluminum opened at $2,530/mt, reached a high of $2,536.5/mt and a low of $2,491/mt, and closed at $2,494/mt, down $35/mt or 1.38%.

Summary: On the macro front, the Chinese government continues to boost consumption, while regional conflicts remain unresolved. On the fundamentals side, although multiple aluminum smelters in Sichuan and Guangxi reduced production in December, and some capacity resumption progress stalled, production still showed YoY growth. On the demand side, market demand continued to weaken during the off-season, with operating rates in the aluminum processing industry declining steadily, and some aluminum processing plants nearing holiday shutdowns. Overall, on the fundamentals side, supply-side pressure has slightly eased, but weak demand during the off-season and the risk of inventory buildup in social stocks persist. In the short term, aluminum prices are expected to fluctuate downward. In the long term, attention should be paid to the US Fed's future stance on interest rate cuts and changes in the pace of consumption recovery.

Lead

Last Friday, LME lead opened lower with a gap at $1,937/mt. During the Asian session, it briefly touched a high of $1,937.5/mt before fluctuating downward. Due to the high-level fluctuation of the US dollar index, LME lead came under pressure during the European session, hitting a low of $1,920/mt and finally closing at $1,921/mt, down 0.65%.

Last Friday night, the most-traded SHFE lead 2502 contract opened at a low of 16,615 yuan/mt. After briefly touching a high of 16,760 yuan/mt at the beginning of the session, it fluctuated around the intraday moving average and finally closed at 16,690 yuan/mt, down 0.21%.

Macro side, PBOC: Implement a moderately loose monetary policy, cut RRR and interest rates at an appropriate time, and firmly prevent excessive exchange rate adjustments. NDRC: By 2025, increase the issuance scale of ultra-long-term special government bonds and expand the support scope for the "two major" initiatives. China's State Administration of Foreign Exchange: Implement more proactive and effective foreign exchange management policies, strengthen counter-cyclical adjustments in the foreign exchange market, and manage expectations.

Spot fundamentals, supply side, environmental protection impacts vary regionally, leading to significant differences in lead ingot supply across regions. Additionally, battery scrap prices are more likely to rise than fall, making premium trading the norm in the spot market. On the consumption side, post-New Year consumption has been average, and pre-Chinese New Year restocking expectations have yet to materialize. Coupled with expectations for production cuts among large downstream enterprises, the market is showing a weak supply and demand pattern. After the decline in lead prices, attention should be paid to the realization of secondary lead costs and downstream pre-Chinese New Year restocking expectations.

Zinc

Prime Minister of Greenland's Autonomous Government: "Necessary" to Gain Independence from Denmark; South Korea's Corruption Investigation Office to Transfer Arrest Warrant for Yoon Suk-yeol to Police; Russian Presidential Press Secretary: Putin Has No Plans to Meet with Trump and Scholz; Ukrainian Forces Launch Large-Scale Offensive in the Kursk Direction; PBOC: Implement Moderately Loose Monetary Policy, with Timely RRR Cuts and Interest Rate Cuts; National Development and Reform Commission (NDRC): Increase the Issuance Scale of Ultra-Long-Term Special Treasury Bonds by 2025; State Administration of Foreign Exchange: Strengthen Counter-Cyclical Adjustments and Expectation Management in the Foreign Exchange Market; National Bureau of Statistics Organizes Seminar on Promoting Innovative Development of Platform Economy.

Last Friday, LME zinc opened at $2,932/mt, initially reaching a high of $2,934/mt before fluctuating downward, hitting a low of $2,880/mt during the night session. It then rebounded near the daily moving average, ultimately closing down at $2,891.5/mt, a decrease of $32.5/mt or 1.11%. Trading volume fell to 12,900 lots, while open interest increased by 410 lots to 221,000 lots. Last Friday, LME zinc formed a bearish candlestick, with the KDJ indicator widening. Although the US dollar index slightly declined on Friday, it remained at a high level, continuing to pressure the performance of base metals. The center of LME zinc prices continued to decline.

Last Friday, the most-traded SHFE zinc 2502 contract opened at 24,495 yuan/mt. After the opening, SHFE zinc slightly declined to 24,420 yuan/mt, then rebounded above the daily moving average and fluctuated, reaching a high of 24,595 yuan/mt. It ultimately closed down at 24,560 yuan/mt, a decrease of 105 yuan/mt or 0.43%. Trading volume fell to 80,504 lots, while open interest decreased by 1,998 lots to 113,000 lots. Last Friday, SHFE zinc formed a bullish candlestick, with the lower Bollinger Band acting as resistance. Domestic zinc concentrate TCs showed a significant MoM increase in January, alleviating the tight supply of zinc ore and weakening support for zinc prices. Coupled with downstream sectors gradually starting holidays and weakening demand, SHFE zinc continued to fluctuate downward.

Tin

At the beginning of last week, the most-traded SHFE tin contract opened at 243,000 yuan/mt. In subsequent trading, prices continued to show an upward trend, with the latest price once reaching 247,000 yuan/mt. As the trading days progressed, SHFE tin futures prices gradually pulled back. During mid-week trading, a slight bottoming out was observed, with the latest price of the most-traded SHFE tin contract once reaching 241,000 yuan/mt. Approaching the weekend, SHFE tin futures prices rebounded slightly. According to the latest data, the closing price of the most-traded SHFE tin contract has exceeded the opening price at the beginning of the week, indicating stronger market buying momentum. Notably, during Friday's trading, SHFE tin futures prices once hit a high of 245,000 yuan/mt, marking a significant increase compared to the beginning of the week. In summary, last week, the price trend of the most-traded SHFE tin contract experienced an upward movement at the start of the week, a slight dip mid-week, and a rebound towards the weekend. Overall, market prices fluctuated significantly but gradually showed an upward trend over time.

Nickel

Last week, nickel prices showed a fluctuating trend, with spot prices ranging from 122,200 to 130,000 yuan/mt, while SHFE nickel futures prices fluctuated between 122,270 and 125,650 yuan/mt. Last week, nickel prices overall declined. In terms of supply, as of December 2024, national refined nickel production increased by 2.2% MoM and 27.6% YoY, with the industry's monthly operating rate at 73%, basically flat compared to the previous month but slightly up. The main growth driver continued to be production increases from top-tier enterprises. On the demand side, enterprises engaged in year-end stockpiling during the first half of the week, leading to relatively active market transactions. However, after entering January, market demand turned mediocre as stockpiling activities concluded. Regarding premiums and discounts, domestic refined nickel premiums rose slightly on Friday but declined overall during the week. The spot market in January is expected to remain sluggish, with no significant reduction in supply. Against the backdrop of loose supply and demand, nickel prices are expected to continue fluctuating downward in the short term.