SMM Morning Comment For SHFE Base Metals (Jan 20)

SHANGHAI, Jan 20 (SMM) –

Copper

Last Friday evening, LME copper opened at $9,263/mt, briefly reaching a high of $9,274/mt at the beginning of the session. It then trended downward, hitting a low of $9,124/mt during the session, before slightly rebounding to close at $9,181.5/mt, down 0.69%. Trading volume reached 23,000 lots, and open interest stood at 287,000 lots. Last Friday evening, the most-traded SHFE copper 2503 contract opened at 76,340 yuan/mt, briefly reaching a high of 76,380 yuan/mt at the beginning of the session. It then trended downward, hitting a low of 75,540 yuan/mt during the session, before slightly rebounding to close at 75,800 yuan/mt, down 0.76%. Trading volume reached 42,000 lots, and open interest stood at 165,000 lots. Macro side, supported by the resilience of the US economy and employment, expectations for US Fed interest rate cuts paused in January. The US Fed's monetary policy outlook gradually shifted to a hawkish stance, and before further data validation, the market is likely to lean toward a predominantly hawkish sentiment, which is bearish for copper prices. Fundamentally, supply side, market liquidity improved compared to earlier, but tight supply sentiment persists. On the consumption side, as year-end approaches, spot market transactions were moderate. Additionally, with copper prices continuing to rise during last Friday's session, downstream consumption remained weak, and spot premiums are expected to decline further today. Price-wise, with the new president taking office, there is uncertainty regarding the timing of domestic monetary policy adjustments. Copper prices are expected to face some resistance today.

Aluminum

On Friday night, the most-traded SHFE aluminum 2503 contract opened at 20,470 yuan/mt, hitting a high of 20,545 yuan/mt and a low of 20,430 yuan/mt, and closed at 20,545 yuan/mt, up 75 yuan/mt or 0.36%. On Friday, it opened at $2,631.5/mt, reached a high of $2,692/mt and a low of $2,631.5/mt, and closed at $2,680.5/mt, up $47/mt or 1.79%.

Summary: Macro-wise, US December retail sales growth was weaker than expected, and dovish remarks from US Fed officials lowered US Treasury yields and the US dollar, improving macro sentiment. Domestically, GDP achieved the annual growth target of 5%, and the annual industrial output of enterprises above designated size increased by 5.8% YoY, with domestic data outperforming expectations. On the fundamentals side, aluminum supply remains stable, while alumina spot prices continue to decline due to ample supply, reducing cost support for the aluminum industry. On the demand side, as the Chinese New Year approaches, market demand weakens, and some small and medium-sized aluminum processing plants are nearing holiday closures, creating uncertainties for the sustainability of inventory destocking. In the short term, attention should remain on the impact of falling upstream alumina spot prices on aluminum costs, as well as downstream holiday schedules and the continuation of pre-holiday stockpiling.

Lead

Last Friday night, LME lead opened at $1,970/mt. During the Asian session, it rose to a high of $1,987/mt before declining. In the European session, it continued to weaken, hitting a low of $1,954.5/mt. Before the close, it slightly rebounded and finally settled at $1,965.5/mt, down $11/mt or 0.56%. Last Friday night, the most-traded SHFE lead 2503 contract opened at 16,690 yuan/mt, initially fell to a low of 16,635 yuan/mt, then rebounded and rose, eventually closing at 16,770 yuan/mt, up 75 yuan/mt or 0.45%.

This week, as the Chinese New Year holiday approaches, lead-acid battery enterprises are expected to enter a concentrated holiday period, further weakening lead consumption. Meanwhile, logistics vehicles are expected to operate until around January 23, allowing downstream enterprises to conduct final nearby stockpiling. On the supply side, some secondary lead enterprises are expected to follow downstream enterprises in taking holidays, while primary lead enterprises are likely to maintain normal production, potentially leading to inventory buildup pressure for lead ingots. This week, lead prices are likely to continue fluctuating within a narrow range, with trading requiring closer attention to macro and overseas market dynamics. In the latter half of the week, a situation of "prices without transactions" may emerge.

Zinc

Last Friday, Trump stated it is "very likely" to grant TikTok a 90-day grace period on his first day in office; incoming officials revealed that immigration issues are a key focus in the details of the executive orders Trump plans to issue; the Gaza ceasefire agreement is set to take effect at 5:15 PM Beijing time on the 19th; Israel's National Security Minister resigned; Japanese media reported that the vast majority of Bank of Japan committee members are expected to support a rate hike this week; U.S. Treasury Secretary Yellen announced the initiation of extraordinary measures to avoid a debt default; Chinese President Xi Jinping held a phone call with U.S. President-elect Trump; the People's Bank of China and the China Securities Regulatory Commission jointly held a symposium on stock repurchase and refinancing to further leverage policy tools to stabilize the capital market; various regions in China will begin implementing subsidies for the purchase of mobile phones and other digital products starting January 20; is Xiaomi acquiring NIO? NIO's Ma Lin responded to "brokerage speculation" as "pure fabrication."

Last Friday, LME zinc opened at $2,879.5/mt. At the beginning of the session, LME zinc dipped to $2,868.5/mt, after which bulls increased positions, driving LME zinc to fluctuate upward above the daily moving average. During the night session, the center of LME zinc slightly moved downward below the daily moving average, then quickly rebounded to fluctuate around $2,940/mt, eventually closing higher at $2,944.5/mt, up by $70.5/mt or 2.45%. Trading volume increased to 47,147 lots, and open interest rose by 94 lots to 220,000 lots. Last Friday, LME zinc recorded a large bullish candlestick, with the middle Bollinger Band forming resistance above. LME zinc inventory decreased by 2,550 mt to 201,350 mt, a decline of 1.25%, marking a reduction in LME inventory. The pullback in the US dollar index and heightened expectations of an interest rate cut supported the slight upward movement of LME zinc. Trump is set to hold his inauguration ceremony today, and macro front developments should continue to be closely monitored.

Last Friday, the most-traded SHFE zinc 2503 contract opened at 24,275 yuan/mt. At the beginning of the session, bears increased positions, driving SHFE zinc downward below the daily moving average to a low of 24,025 yuan/mt. However, bulls increased positions, pushing SHFE zinc upward to a high of 24,360 yuan/mt, recording a "V-shaped" reversal. Subsequently, the center of SHFE zinc fluctuated rangebound around 24,300 yuan/mt, eventually closing higher at 24,305 yuan/mt, up by 80 yuan/mt or 0.33%. Trading volume decreased to 121,000 lots, while open interest increased by 861 lots to 105,000 lots. Last Friday, SHFE zinc recorded a long lower shadow bullish candlestick, with the 20-day moving average forming resistance above and the 5-day moving average providing support below. As the Chinese New Year approaches, downstream consumption is weakening, while domestic smelters' days of raw material inventories have rebounded, and processing fees have recovered, reducing supply-side imbalances. SHFE zinc may maintain a fluctuating trend in the short term, but macro developments should also continue to be closely monitored.

Tin

Last week, the tin market exhibited volatility and uncertainty, with SHFE tin prices experiencing significant fluctuations under the interplay of bullish and bearish factors. In the international market, tin price movements, domestic supply and demand conditions, and macroeconomic data collectively influenced market trends. Specifically, the price of the most-traded SHFE tin futures contract initially rose after the New Year opening but later pulled back under selling pressure, ultimately closing lower compared to the previous trading day. Supply side, refined tin production in December decreased by 4.41%. With the Chinese New Year approaching, production is expected to continue declining, as the operating rate of refined tin smelters in Yunnan and Jiangxi provinces dropped to 61.19%, indicating increased pressure on raw material supply. Demand side, the recovery expectations in the new energy and electronics industries remain optimistic, particularly with the growing demand for tin in the EV and renewable energy sectors, which is expected to support tin prices in the medium and long term. However, in the short term, market sentiment has turned cautious due to low inventory levels and policy changes. In the spot market, transactions were relatively mediocre, with most traders engaging in scattered deals. Some imported tin arrived at ports, but due to high pre-sale volumes, spot imported tin remained relatively tight. Coupled with the year-end approaching, most traders held low inventory levels, which may lead to tighter spot availability in the future. Recently, SHFE tin prices saw a significant rally driven by macroeconomic factors, particularly after the Ministry of Commerce announced subsidies for purchasing new home appliances and digital products, further stimulating end-use demand. Nevertheless, downstream enterprises showed limited enthusiasm for purchases, with most opting to wait for further price declines before restocking. Given the combined influence of domestic and international economic conditions, policy adjustments, and supply-demand dynamics in the tin industry, SHFE tin prices are expected to maintain a fluctuating trend in the short term. Investors should closely monitor global economic data, domestic economic policies, and changes in industry demand to better navigate market dynamics and mitigate risks.

Nickel

Last week, nickel prices fluctuated upward, with spot prices ranging between 126,950-130,700 yuan/mt and futures prices fluctuating within 125,700-128,800 yuan/mt. The premium for Jinchuan brand nickel dropped sharply, declining from an average of 2,200 yuan/mt at the beginning of the week to around 1,700 yuan/mt by Friday, reflecting sluggish market transactions and ample supply. LME nickel prices continued to fluctuate upward, further widening the spot-futures price spread between domestic and overseas markets. Bonded warehouse inventories increased WoW, while on the nickel ore supply side, Philippine mines gradually offered small volumes, with traders actively quoting prices. Meanwhile, domestic trade in Indonesian nickel ore was active, with prices fluctuating upward. Prices are expected to remain stable and strong in the short term. Downstream, the stainless steel market sentiment improved slightly, and high-grade NPI prices saw a slight correction. However, domestic NPI producers, facing losses, showed low acceptance of high-priced nickel ore. Indonesian local policies and the progress of temporary quota issuance will continue to impact global nickel supply. On the demand side, as the Chinese New Year holiday approaches, downstream enterprises showed weaker purchase willingness, and overall transactions remained sluggish. For nickel sulphate, due to strong cost support, nickel salt smelters faced critically low finished product inventories, with tight supply and prices showing upside room. Overall, SHFE nickel prices are expected to maintain a fluctuating trend next week, with spot nickel prices likely to range between 125,300-130,000 yuan/mt.