SMM Morning Comment For SHFE Base Metals On January 8

SHANGHAI, January 8 (SMM) –

Copper

Overnight, LME copper opened at $9,023/mt, initially fluctuated downward and then rebounded, reaching an intraday high of $9,035/mt. Subsequently, it fluctuated downward again, hitting an intraday low of $8,977/mt near the close, and finally settled at $8,980/mt, up by 0.16%. Trading volume reached 15,000 lots, and open interest stood at 260,000 lots. Overnight, the most-traded SHFE copper 2502 contract opened at 74,500 yuan/mt, initially hitting a high of 74,580 yuan/mt. It maintained a fluctuating trend during the session, touching a low of 74,370 yuan/mt, and slightly rebounded near the close before pulling back again, finally settling at 74,430 yuan/mt, up by 0.01%. Trading volume reached 15,000 lots, and open interest stood at 144,000 lots. Macro side, the US November JOLTs job openings data recorded 8.098 million, exceeding market expectations, with the previous value revised upward. The December ISM Non-Manufacturing PMI recorded 54.1, also surpassing market expectations. The labour market may show some slowdown, but the pace of deceleration is unlikely to prompt the US Fed to rush into an interest rate cut. Additionally, the market is still digesting the impact of tariff hikes introduced after Trump took office, which could drive US inflation higher, strengthen the US dollar, and suppress copper prices, collectively limiting the gains in copper prices. Fundamentally, the arrival of imported copper increased, and some suppliers actively offloaded goods at the beginning of the year, leading to a rise in copper cathode spot supply. Meanwhile, overall market transactions showed some improvement, and spot premiums are expected to remain flat. In terms of prices, the US January ADP employment data and the US Fed meeting minutes are scheduled to be released today, and copper prices are expected to stabilize today.

Aluminum

Futures Market: Overnight, the most-traded SHFE aluminum 2502 contract opened at 19,735 yuan/mt, reached a high of 19,785 yuan/mt, a low of 19,710 yuan/mt, and closed at 19,745 yuan/mt, up 65 yuan/mt or 0.33%. Yesterday, LME aluminum opened at $2,491/mt, hit a high of $2,524/mt, a low of $2,484/mt, and closed at $2,522.5/mt, up $31/mt or 1.24%.

Summary: On the macro front, the Chinese government continues to focus on boosting consumption, while uncertainty over the US Fed's interest rate cut timeline has increased. 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 remain on the US Fed's future stance on interest rate cuts and changes in the pace of consumption recovery.

Lead

Overnight, LME lead opened at $1,947/mt, fluctuated rangebound during the Asian session with a low of $1,934.5/mt. Entering the European session, LME lead maintained a fluctuating trend, surged at the close to a high of $1,975/mt, and finally settled at $1,972.5/mt, up 1.28%.

Overnight, the most-traded SHFE lead 2502 contract opened higher with a gap at 16,755 yuan/mt, fluctuated downward during the session to a low of 16,720 yuan/mt. Boosted by the upward movement of LME lead, it rose at the close to a high of 16,780 yuan/mt and finally settled at 16,770 yuan/mt, up 0.24%.

Macro Side, the PBOC increased its gold holdings for the second consecutive month, while foreign exchange reserves in December fell by 1.94% MoM. The Chinese Ministry of Foreign Affairs urged the US to immediately lift illegal unilateral sanctions on Chinese enterprises.

Entering January 2025, although the supply of primary and secondary refined lead continues to decline, downstream enterprises remain cautious in the face of weak lead prices, with low purchase willingness. After the New Year holiday, restocking enthusiasm has been subdued. Attention should be paid to whether pre-Chinese New Year restocking by dealers will stimulate raw material demand from downstream battery enterprises and whether lead prices will rebound.

Zinc

Overnight, LME zinc opened at $2,900.5/mt. After the opening, LME zinc gradually moved downward along the daily moving average, surged to a high of $2,918/mt during the midday session, then slightly declined to a low of $2,868/mt during the night session. Subsequently, LME zinc rebounded to hover near the daily moving average and ultimately closed lower at $2,879/mt, down by $16/mt or 0.55%. Trading volume decreased to 11,693 lots, and open interest dropped by 1,800 lots to 218,000 lots. Overnight, LME zinc formed a bearish candlestick, with resistance from the 5-day moving average. LME zinc inventory decreased by 4,625 mt to 224,525 mt, a decline of 2.02%. US November JOLTs job openings data and December ISM non-manufacturing PMI both exceeded market expectations, leading to a rebound in the US dollar index, which continued to pressure zinc prices. The center of LME zinc prices continued to edge downward.

Overnight, the most-traded SHFE zinc 2502 contract opened at 24,340 yuan/mt. At the beginning of the session, SHFE zinc slightly rose to a high of 24,420 yuan/mt, then moved downward to fluctuate below the daily moving average, hitting a low of 24,285 yuan/mt during the session. Near the end of the session, SHFE zinc rebounded again to hover near the daily moving average and ultimately closed lower at 24,320 yuan/mt, down by 75 yuan/mt or 0.31%. Trading volume decreased to 59,408 lots, while open interest increased by 1,557 lots to 106,000 lots. Overnight, SHFE zinc formed a bearish candlestick, with support from the lower Bollinger Band. As the Chinese New Year holiday approaches, downstream demand is gradually weakening. Coupled with SMM's expectation of increased domestic refined zinc production in January, the imbalance of rising supply and weakening demand has led to insufficient fundamental support for zinc prices, causing SHFE zinc to continue to fluctuate downward.

Tin

During the night session yesterday, the international tin market also experienced some fluctuations, which had a certain linkage effect on the prices of domestic SHFE tin contracts. Meanwhile, domestic demand for tin also showed some changes. Spot market prices fluctuated widely following SHFE tin prices, but the overall premium and discount levels remained largely unchanged. Spot market transactions were relatively mediocre yesterday, with most trading enterprises engaging in scattered deals. Some imported tin arrived at ports, but due to high pre-sale volumes, imported spot tin remained relatively tight. Coupled with the approach of the year-end, most trading enterprises held low inventories, which may lead to tighter spot supply in the future.