SMM Morning Comment For SHFE Base Metals October 11

SHANGHAI, October 11(SMM) –
Copper
Copper prices edged down on Fed dovish tone
LME copper prices opened at $8019/mt and closed at $8029/mt in overnight trading, a decline of 1.01%, with the low-end of $7967/mt and the high-end of $8060/mt. Trading volume was 18,000 lots, and open interest stood at 276,000 lots. The most active SHFE 2311 copper contract prices opened at 67200 yuan/mt and finished at 66730 yuan/mt last evening, down 0.25%, with the low-end of 66190 yuan/mt and the high-end of 66780 yuan/mt. Trading volume was 34,000 lots, and open interest stood at 158,000 lots. On the macro front, Fed official Bostic: I don’t think we need to raise interest rates anymore, but if the outlook changes, we may need to raise interest rates further; Kashkari: If the economy is more resilient, we may have to raise interest rates further. In terms of fundamentals, the enthusiasm of downstream replenishment in East China increased, and spot premiums and discounts rebounded accordingly. The increase in inventory in South China began to slow down. Downstream companies in South China did not prepare much stock before the holidays and the enthusiasm for stockpiling after the holidays was strong. And as delivery is approaching, some sellers delivered warrants, resulting in limited spot resources. The overall premiums and discounts rose. In terms of consumption, copper prices fell to new lows, which will boost demand, but the growth is expected to be limited. Copper prices will weaken due to unstable market sentiment.
Aluminum
Overnight, the most-traded SHFE 2311 aluminum contract opened at 19,020 yuan/mt, with its lowest and highest at 18,965 yuan/mt and 19,055 yuan/mt before closing at 19,045 yuan/mt, down 55 yuan/mt or 0.29% compared with the previous trading day. LME aluminum opened at $2,242.5/mt on Tuesday, with its high and low at $2,249.5/mt and $2,211/mt respectively before closing at $2,214/mt, a decrease of $32/mt or 1.42%.
Overall, external macro news showed signs of improvement in the past two days. Interest rate hike expectations cooled, and the US dollar index declined, which boosted market confidence. However, the intensification of the Palestinian-Israeli conflict added uncertainty to market. The domestic manufacturing PMI data in September rebounded to beyond 50%, further confirming the consumption recovery. Subsequent favorable policies and internal system adjustments are expected to further promote the economy. In terms of fundamentals, the domestic aluminum supply side was approaching its peak, and it is difficult to see a significant increase in the short term. Under various factors, although the domestic social inventory of aluminum accumulated in stages and soared after the holiday, the total volume still remained at a relatively low level over the same period in history. Based on the current survey of domestic aluminum downstream operations, downstream orders turned to gain after the holiday. In the later period, aluminum social inventory may start destocking after concentrated post-holiday downstream replenishment, and aluminum supply and demand were still in a tight balance. In the short term, accumulated inventory may suppress Shanghai aluminum and spot premiums, but in the medium and long term, with the growth rate of the supply side narrowing significantly, the tight supply-demand balance may remain, giving support to SHFE aluminum.
Lead
Overnight lead futures prices closed down
SHANGHAI, Oct 11 (SMM) -
LME lead prices opened at $2126/mt and closed at $2091.5/mt in overnight trading, down 1.51%.
The most traded SHFE 2311 lead contract opened at 16335 yuan/mt and closed at 16345 yuan/m, a drop of 0.88%, after briefly hitting the lowest point of 16295 yuan/mt and the highest point of 16385 yuan/mt.
Zinc
SMM Zinc Morning Comment
The most-traded SHFE 2303 zinc contract fell after opening lower at $2514.5mt, and finally closed at $2481/mt, down $31/mt or 1.23%. Trading volume was up to 9070 lots, and open interest fell by 1325 lots to 225,000 lots. LME zinc inventory shed by 1525 mt to 90900 mt. As Federal Reserve officials released dovish remarks, the U.S. dollar index weakened and recovered slightly.
The most active SHFE 2311 zinc contract prices opened at 21230 yuan/mt and closed at 21295 yuan/mt overnight, down 160 yuan/mt or 0.75%. The trading volume was down to 53684 lots, and open interest decreased 710 lots to 108,000 lots. SMM domestic refined zinc output in September increased to 544,000 mt, and is expected to exceed the high of 590,000 mt in October, putting pressure on long-term supply. At the same time, the situation in Country Garden has once again triggered market concerns about consumption, and zinc prices met resistance.
Tin
SHFE 2311 tin contract maintained sideways after opening low on yesterday’s night session and then rebounded rapidly before finally closing at 211,380 yuan/mt, down 0.53%. Spot premiums and discounts were slightly higher than yesterday. Small brand tin ingots were offered at premiums of 0-400 yuan/mt, premiums of 400-700 yuan/mt for delivery brands, premiums of 1,000-1,200 yuan/mt for Yunxi brands, and discounts of 300-500 yuan/mt for imported tin brands. Yesterday, tin prices dropped again, and downstream purchase sentiment was fueled. Most trading companies reported that shipments continued to run higher yesterday, with a shipping volume of 20-70 mt yesterday morning. However, some companies also reported that the remaining tin ingot inventory was currently low and supply was limited except for those from long-term orders.
Recently, LME inventory accumulation caused imported tin prices to weaken. After the holiday, the SHFE-LME price ratio rose again, leading to the expansion of the theoretical profit level of tin ingot imports, enabling LME tin ingot to flow into domestic market directly. Affected by factors such as the overall weakening of nonferrous metals, tin prices fell after the holiday. In the past two days, most smelting companies in the domestic market held a strong willingness to raise prices, while downstream generally also had a high purchasing sentiment. After a large number of shipments in the past two days, some companies reported that their remaining inventory was small. The tighter supply in the spot market may support tin prices in the short term. As the subsequent imported tin ingots gradually arrived at domestic ports, the pace of overseas inventory accumulation may also gradually slow down.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 151,970 yuan/mt, and closed at 151,650 yuan/mt, up 660 yuan/mt. Trading volume rose by 73,814 lots, and open interest decreased by 5,629 lots. On the macro front, the Fed’s dovish speech weakened the US dollar, advantageous for commodities. In the fundamentals, the demand for domestic electrowinning nickel remained stable and the purchase amount of Jinchuan nickel plate was acceptable. Norilsk nickel transactions in spot market were sluggish and dropped overall after the holiday. In summary, it is expected that the subsequent decline in nickel prices will be limited.