SMM Morning Comment For SHFE Base Metals October 12

SHANGHAI, October 12(SMM) –
Copper
Copper prices weakened amid dovish Fed meeting minute
LME copper prices opened at $8040/mt and closed at $8001/mt in overnight trading, a drop of 0.35%, with the low-end of $7988.5/mt and the high-end of $8073.5/mt. Trading volume was 16,000 lots, and open interest stood at 271,000 lots. The most active SHFE 2311 copper contract prices opened at 66680 yuan/mt and closed at 66650 yuan/mt last evening, up 0.03%, with the high-end of 66910 yuan/mt and the low-end of 66510 yuan/mt. Trading volumes stood at 26,000 lots and open interest stood at 158,000 lots. On the macro front, the minutes of the September U.S. meeting stated that it was generally believed that inflation faced upward risks and that monetary policy risks were more two-way. All participants agreed to maintain high interest rates for a period of time and agreed that they could proceed with caution. In terms of fundamentals, the market transaction activity in East China yesterday was lower than that on Tuesday, mainly because some downstream companies have completed replenishment, while spot premiums and discounts were relatively strong due to the narrowing of the price spread between the SHFE front-month and next-month contracts and the decline in SHFE copper prices; inventories in South China showed a significant decline. As copper prices fell, downstream enthusiasm for replenishment increased, but the arrival volume was not large. The spot premium and discount rose yesterday. In terms of consumption, although the lower copper price has a certain stimulating effect on downstream purchases, most companies are currently more cautious and do not stock up on goods in large quantities. In terms of price, most companies have maintained a cautious attitude recently which, coupled with the Federal Reserve's decision to maintain high interest rates, will prevent copper prices from rebounding in the near future.
Aluminum
Overnight, the most-traded SHFE 2311 aluminum contract opened at 19,055 yuan/mt, with its lowest and highest at 19,050 yuan/mt and 19,155 yuan/mt before closing at 19,155 yuan/mt, down 10 yuan/mt or 0.05% compared with the previous trading day. LME aluminum opened at $2,214.5/mt on Wednesday, with its high and low at $2,227/mt and $2,206/mt respectively before closing at $2,213.5/mt, a decrease of $0.5/mt or 0.02%.
Overall, external macro news disturbed market. The expectation on November’s interest rate hike cooled, and the US dollar index declined, which boosted market confidence. However, the latest economic data and 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
Lead futures remain weak with LME lead falling for three consecutive days
Data source: SMM
Release time: 12/10/2023 08:11
SHANGHAI, Oct 12 (SMM) -
LME lead open at $2099.5/mt and stabilsied during the Asian trading hours. It rose to $2118.5/mt during the European trading hours, and finally dropped and closed at $2086.5/mt, down 0.24%.
The most active SHFE 2311 lead contract prices opened at 16355 yuan/mt last evening, and closed at 16325 yuan/mt, a decrease of 0.15%, with the high-end of 16425 yuan/mt and the low-end of 16305 yuan/mt.
Zinc
SMM Zinc Morning Comments
Data source: SMM
LME zinc prices opened at $2584.5/mt last evening and closed down $16/mt or 0.64% at $2465/mt. Trading volume decreased to 6457 lots, and open interest decreased by 3868 lots to 222,000 lots. LME zinc inventory shed by 1850 mt to 89050 mt. The minutes of the Federal Reserve meeting showed that many officials released dovish remarks, and expectations for a pause in interest rate increases increased. However, Powell's speech was still hawkish, and the turbulent situation will become a consideration. That, coupled with the pressure of oversupply expectations, caused LME zinc to fall slightly.
The most active SHFE 2311 zinc contract prices opened at 21230 yuan/mt and closed flat at 21295 yuan/mt overnight. The trading volume was down to 45115 lots, and open interest decreased 1623 lots to 104,000 lots. The recent performance of the spot market has not improved. After the holiday, the market's mood for buying goods was poor, and transactions were slightly weak. Premiums in various places have fallen compared with before the holiday. However, at the same time, social inventory accumulation is less than expected, and SHFE zinc maintains stable operation.
Tin
SHFE 2311 tin contract rose rapidly after the opening of yesterday’s night session. After reaching a relatively high of 212,880 yuan/mt, it fell back and finally closed at 212,370 yuan/mt, up 0.64%. Spot premiums and discounts were slightly higher than yesterday. Small brand tin ingots were offered at premiums of 0-500 yuan/mt, premiums of 500-700 yuan/mt for delivery brands, premiums of 1,000-1,200 yuan/mt for Yunxi brands, and discounts of 200-300 yuan/mt for imported tin brands. Tin prices rebounded yesterday, but downstream companies were less willing to purchase due to sufficient stocks. The overall inventory of trading companies was relatively low, and most of them reported that spot sales were flat yesterday morning. Transactions in spot market decreased significantly.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 151,190 yuan/mt, and closed at 150,710 yuan/mt, down 940 yuan/mt compared with the previous trading day. Trading volume dropped by 6,604 lots, and open interest increased by 4,054 lots. On the macro front, CME Group’s Fed Watch Tool showed that the market expected the probability of the Federal Reserve maintaining current interest rates in November to be 85.7%, but current US inflation had not yet reached the ideal level. 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 addition, yesterday’s warehouse receipts surged by 1,800 mt and accumulated. In summary, it is expected that nickel prices will fluctuate in the future.