SMM Morning Comment For SHFE Base Metals November 20

SHANGHAI, November 20(SMM) –
Copper
LME copper prices opened at $8215/mt and closed at $8309/mt in last Friday trading, a gain of 0.83%, with the low-end of $8183.5/mt and the high-end of $8311.5/mt. Trading volume was 17,000 lots, and open interest stood at 263,000 lots. The most active SHFE 2312 copper contract prices opened at 67820 yuan/mt and finished at 67860 yuan/mt last Friday evening, up 0.09%, with the low-end of 67750 yuan/mt and the high-end of 67900 yuan/mt. Trading volume was 19,000 lots, and open interest stood at 131,000 lots. On the macro front, Boston Fed President Collins said that he would not rule out the possibility of further interest rate increases; Chicago Fed President Goolsby believed that inflation has improved, but is still too high, and will make every effort to defeat inflation; San Francisco Fed President Daley reiterated that the Fed is not sure whether inflation can reach its 2% target and should remain patient in the face of economic uncertainty. SMM data showed that as of Friday November 17, copper inventory across major Chinese markets stood at 49,800 mt, down 4,700 mt from last Monday and down 6,500 mt from two Fridays ago. Inventories hit the lowest for the year. Although copper imports in East China increased last week, the amount put into storage was not large, and the price difference between Shanghai and Guangdong was large. Some supply sources were transferred from East China to South China, causing the overall inventory to decrease; inventories in South China increased slightly, mainly due to a slight increase in arrival volume and a decrease in downstream procurement volume. In terms of consumption, in the face of high water prices, demand will be restrained to a certain extent. In terms of prices, the Federal Reserve’s concerns over inflation still weighs on copper prices.
Aluminum
The most-traded SHFE 2312 aluminum contract opened at 18870 yuan/mt at last Friday’s night session, with its low and high at 18805 yuan/mt and 18870 yuan/mt before closing at 18825 yuan/mt, down 40 yuan/mt, or 0.21%. LME aluminum opened at $2212.5/mt in the previous trading day, with its low and high at $2196/mt and $2218/mt respectively before closing at $2216/mt, up $4.5/mt or 0.2%. On the macro level, expectations for interest rate hikes in Europe and the United States continue to cool, and China continues to promote economic recovery. In terms of fundamentals, Yunnan's production reduction coincides with the arrival of the off-season, and both supply and demand are reduced. The reduction on the demand side still needs to be observed. SHFE aluminum may maintain a sideways trend in the short term, and we need to pay close attention to the weakening pace of demand and cost changes caused by raw materials.
Lead
LME lead opened at $2259/mt last Friday evening and rose by 1.64% to close at $2296.5/mt, after hitting the lowest point at $2257/mt and the highest point at $2300.5/mt.
The most active SHFE 2312 lead contract prices opened at 17100 yuan/mt last Friday evening, and closed at 17110 yuan/mt, an increase of 0.88%, with the low-end of 17045 yuan/mt.
Zinc
LME zinc prices opened at $2574.5/mt last Friday and touched an intraday high of $2587/mt, with the low-end of $2540/mt. It closed down $15/mt or 0.58% at $2559/mt Trading volumes decreased to 10909 lots, with open interest rising 1046 lots to 205,000 lots. LME zinc stocks fell by 150 mt or 0.11% to 133050 mt. The short sentiment brought about by the LME delivery under weak overseas demand last Friday continued, and LME zinc performed weakly.
The most active SHFE zinc contract prices opened at 21340 yuan/mt and lost 125 yuan/mt or 0.58% to settle at 21300 yuan/mt in last Friday evening trading with the high-end of 21400 yuan/mt and the low-end of 21260 yuan/mt. Trading volumes decreased to 44587 lots and open interest grew 2678 lots to 79665 lots. Last Friday, SHFE zinc fell for three days in a row. The pessimism about the large delivery of LME inventory has not subsided, and SMM inventory increased again to 105,500 mt last Friday. Short funds were more active. However, the downward trends of domestic and foreign TCs also provides support to zinc prices. It is expected that downside room for zinc prices will be limited.
Tin
SHFE 2312 tin contract fell to 208650 yuan/mt at last Friday’s night session and closed at 208400 yuan/mt, down 2.55%.
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 premiums of 0-300 yuan/mt, versus premiums of 400-700 yuan/mt for delivery brands, premiums of 900-1100 yuan/mt for Yunxi brand, and discounts of 200-700 yuan/mt imported brand tin ingots. Tin prices fluctuated sideways last Friday and quickly rose before closing. Downstream companies still maintained a wait-and-see attitude, and transactions in the trade market were relatively thin.
Nickel
On the macro front, on the evening of November 14, the consumer price index, reported by the Bureau of Labor Statistics, climbed 3.2% year over year in October, showing a slowdown compared to September's 3.7% and falling below market expectations. At the same time, the more closely watched October's core CPI index on a seasonally adjusted basis rose 4% on a year-over-year basis, the smallest 12-month change since September 2021. The unexpected cooling of inflation data further fueled market expectations of four interest rate cuts by the Federal Reserve in 2024. Once the data was released, the non-ferrous metal sector collectively rose that evening, with SHFE nickel gaining about 0.74% on the same day. However, by last Thursday's closing, nickel prices retraced the previous day's gains. Nickel prices continued to fluctuate at a low level on last Thursday, mainly due to the persistently weak fundamentals of SHFE nickel, resulting in insufficient upward momentum. From a fundamental perspective, the Shanghai nickel spot market had sluggish transactions last week. According to SMM research, some traders reported minimal spot transactions last week. Additionally, a small amount of imported nickel plates entered the market on last Thursday and Friday, increasing domestic spot supply. From the demand perspective, the alloy industry has entered the traditional off-season, resulting in a moderate decline in the demand for pure nickel. However, the reduction in nickel plate consumption is better than expected. Additionally, with the support of military orders, the overall support of the alloy industry for nickel prices remains crucial. Moving on to stainless steel, it is affected by a decline in orders, leading to the anticipated production reduction in the 300-series stainless steel as planned, resulting in a certain decrease in nickel plate consumption. Currently, attention should be focused on the price difference between nickel briquette and nickel sulphate. Although nickel briquette prices remain below those of nickel sulphate, they have not yet reached a level conducive to profitable nickel sulphate production. It is noteworthy that nickel sulphate prices are influenced by reduced downstream demand, compounded by the continuous decline in SHFE nickel prices affecting raw material costs. With diminishing cost support and a weakening demand side, future nickel sulphate prices may continue to decline, narrowing the gap between nickel briquette and nickel sulphate prices. In summary, the current macro sentiment remains positive, but there is no significant bullish catalyst driving nickel prices upward. Fundamentally, the market continues to experience a mismatch between supply and demand, with a sustained increase in the oversupply of pure nickel.