SMM Morning Comment For SHFE Base Metals November 13

SHANGHAI, November 13(SMM) –
Copper
LME copper prices opened at $8070/mt and closed at $8036.5/mt last Friday evening, a drop of 1.02%, with the low-end of $8020/mt and the high-end of $8095/mt. Trading volume was 21,000 lots, and open interest stood at 264,000 lots. The most active SHFE 2312 copper contract prices opened at 67030 yuan/mt and finished at 66810 yuan/mt last Friday evening, down 0.61%, with the low-end of 66720 yuan/mt and the high-end of 67100 yuan/mt. Trading volume was 34,000 lots, and open interest stood at 145,000 lots. On the macro front, the one-year expected consumer inflation rate in the United States in November was 4.4%, the highest level since April 2023, exceeding the expected 4% and the previous value of 4.2%. In addition, Moody's lowered the outlook on the U.S. rating to negative from stable. SMM data showed that as of Friday November 10, copper inventory across major Chinese markets stood at 56,300 mt, down 3,900 mt from last Monday and down 7,400 mt from two Fridays ago. Inventories hit the lowest for the year. Inventories in East China increased slightly. Although domestic copper increased, customs clearance of imported copper was small, and the total supply changed little. Inventories in South China fell sharply, mainly due to the small amount of imported copper and the reduction in production of surrounding refineries. In terms of consumption, high premiums combined with high price spread between the front-month and next-month contract will dampen demand before the delivery of the SHFE front-month contract.
Aluminum
The most-traded SHFE 2312 aluminum contract opened at 19070 yuan/mt at last Friday’s night session, with its low and high at 18935 yuan/mt and 19070 yuan/mt before closing at 18970 yuan/mt, down 130 yuan/mt, or 0.68%. LME aluminum opened at $2237/mt last Friday, with its low and high at $2209.5/mt and $2244/mt respectively before closing at $2221/mt, down $17/mt or a decrease of 0.76%.
Opinions of US Federal Reserve officials were split over future rate hike path, and there is still great uncertainty in overseas macro. Domestic favorable policies continue to boost the domestic economy. In terms of fundamentals, aluminium smelters in Yunnan have started to cut production, with 1.15 million mt of capacity estimated to be reduced. We are currently switching between the peak season and off-season. SHFE aluminum is expected to move sideways short-term.
Lead
LME lead open at $2187.5/mt and went downward during the Asian trading hours last Friday, declining to $2162/mt during the European trading hours. It finally dropped and closed at $2180/mt, down $12.5/mt or 0.57%.
The most active SHFE 2312 lead contract prices opened at 16455 yuan/mt and touched 16400 yuan/mt before closing at 16480 yuan/mt, down 20 yuan/mt or 0.12%.
Zinc
LME zinc opened at $2601/mt last Friday, and hit a high of $2619.5/mt before falling back to $2552/mt, and closed at $2560.5/mt, a decrease of $40.5/mt or 1.56%. The trading volume rose to 7581 lots, and open interest added 4026 lots to 204,000 lots. LME zinc inventory dropped by 2325 mt or 3.31% to 70150 mt. The expected one-year inflation rate of U.S. consumers in November was 4.4% higher than expected. The expected inflation rate for 5-10 years rose to 3.2% from 3% in October, the highest level since 2011. Higher inflation triggered market concerns. The Fed is worried about raising interest rates again, coupled with the Fed's hawkish statements, weighed down non-ferrous metals.
The most active SHFE 2311 prices opened at 21665 yuan/mt and lost 80 yuan/mt or 0.37% to settle at 21555 yuan/mt in overnight trading with the high-end of 21695 yuan/mt and the low-end of 21525 yuan/mt. Trading volumes decreased to 53478 lots and open interest fell 2623 lots to 85844 lots. According to SMM research, the social inventory of zinc in Shanghai increased slightly by 0.4 thousand tons to 98,000 tons last Friday, weakening the support for zinc prices. Poor spot trades and LME zinc also pushed SHFE zinc prices lower.
Tin
SHFE 2312 tin contract rose to 210770 yuan/mt at last Friday’s night session and then fell back, closing at 209790 yuan/mt, down 0.05%.
During the early trading last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands did not change much. Small brand tin ingots were offered at discounts of 100 and premiums of 500 yuan/mt, versus premiums of 400-700 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 100-600 yuan/mt imported brand tin ingots. Tin prices fell slightly last Friday, but many downstream companies took a wait-and-see attitude. Market transactions were relatively bleak.
Nickel
On the macro front, rising initial jobless claims in the US suggested a slowing labour market, leading the Federal Reserve to hasten monetary easing. Among the recent hawkish speeches by Fed officials, Fed Chair Powell's remarks emphasised a commitment to stringent monetary policy which yet reached its target, indicating potential further tightening. Following his speech, the dollar index shifted, with US bond yields climbing. Amid these macroeconomic tensions, nickel prices fell, reversing gains from the past two days, reflecting the current market's delicate state. The significant fall in SHFE nickel ended the inverse price spread between nickel sulphate and nickel briquettes, achieving theoretical profits for converting nickel briquettes into nickel sulphate in early November. However, limited downstream demand for nickel sulphate and a rebound in SHFE nickel from oversold conditions could further reduce prices, potentially leading to a negative profit margin from nickel briquettes to nickel sulphate. Domestic refined nickel stock has been rising since September, with inventories up 9.26% week-on-week to 14,398 mt as of 10th November, according to SMM. This increase added pressure on domestic refined nickel inventory. Additionally, SMM reported that despite falling nickel prices, domestic refined nickel production in October remained unaffected, with some smelters ramping up to full capacity. Thus, the supply of refined nickel remained robust. On the demand side, weakening downstream demand has led some major steel mills to plan reductions or halts in 300-series stainless steel production, diminishing the demand for refined nickel. Meanwhile, in the alloy sector, which was currently in its off-peak season, domestic orders are weak, though stable military orders were supporting refined nickel consumption. In conclusion, both macroeconomic and fundamental factors are pressuring nickel prices. The sharp price fall, dipping below the production costs of some companies, has influenced prices and profitability across nickel-based products. Consequently, nickel prices are expected to experience fluctuations this week with limited scope for further decline.