SMM Morning Comment For SHFE Base Metals November 27

SHANGHAI, November 27(SMM) –
Copper
LME copper prices opened at $8406/mt and closed at $8440/mt in last Friday trading, a gain of 0.51%, with the low-end of $8363/mt and the high-end of $8444/mt. Trading volume was 12,000 lots, and open interest stood at 263,000 lots. The most active SHFE 2401 copper contract prices opened at 67990 yuan/mt and finished at 68460 yuan/mt last Friday evening, up 0.04%, with the low-end of 67730 yuan/mt and the high-end of 68110 yuan/mt. Trading volume was 22,000 lots and open interest stood at 160,000 lots. On the macro front, European Central Bank President Lagarde said that the fight against inflation is not over yet; a lot of work has been done on interest rates and it can now be observed. In addition, U.S. business activity was stable in November, but private sector employment indicators fell, in line with market expectations for an economic slowdown in the fourth quarter. On Fundamentals, as of Friday November 24, SMM copper inventories across major Chinese markets stood at 57,000 mt, up 7,200 mt from two Fridays ago and 56,400 mt lower than the same period last year. Specifically, the increase in inventories in East China is mainly due to the arrival of imported copper and high prices inhibiting downstream consumption. Inventories in South China declined, mainly due to the impact of maintenance and production cuts at surrounding refineries, which may be difficult to improve in the short term. In terms of consumption, the current premiums are still at a high level, and demand is still suppressed. The pressure on copper weakened due to a lower US dollar.
Aluminum
The most-traded SHFE 2401 aluminum contract opened at 18750 yuan/mt last Friday’s night session, with its low and high at 18680 yuan/mt and 18785 yuan/mt before closing at 18745 yuan/mt, down 15 yuan/mt or 0.08%. LME aluminum opened at $2228/mt last Friday, with its low and high at $2213.5/mt and $2228/mt respectively before closing at $2225/mt, up $3/mt or 0.14%.
On the macro level, expectations for further interest rate hikes in the US have cooled, and the U.S. dollar index has weakened, providing support for aluminum prices. In China, favorable domestic policies serve high-quality development of the economy and high-level opening up to the outside world, boosting market confidence and aluminum consumption towards the end of the year. In terms of fundamentals, aluminum ingot inventory has basically entered a downward trend. Due to aluminum production cuts in Yunnan, domestic operating production capacity has dropped to around 41.8 million mt, easing supply-side pressure. However, due to recent exchange rate fluctuations, the import window has shown signs of opening. The inflow of imported goods will add to domestic supply. The performance of downstream operating rates is weak in the off-season. SMM predicts that falling domestic social inventory of aluminum ingots will support aluminum prices at highs.
Lead
LME lead prices opened at $2218.5/mt last Friday and moved between $2220-2230/mt during Asian trading. Entering the European session, LME lead stocks increased again, reaching a nearly three-year high, and LME lead fell to as low as $2,190/mt, a new low in the past two weeks. At last, the contract closed at $2195/mt, down 0.97%.
The most active SHFE 2401 lead contract prices opened at 16465 yuan/mt and dropped to a 2-week low of 16310 yuan/mt. The contract closed at 16310 yuan/mt, a decrease of 1.12%. Open interest stood at 74294 lots, a decrease of 1125 lots from the previous trading day.
Zinc
Last Friday, LME zinc opened at $2546/mt and closed up $17/mt or 0.67% at $2560/mt. The trading volume was 5702 lots, and open interest added 214 lots to 204,000 lots. Overseas large players once again delivered huge quantities of more than 68,000 mt, and LME inventories increased to more than 210,000 mt, reaching the highest level in the past two years. LME 0-3 contango expanded to 8.1, dampening market optimism and grew bearishness.
Last Friday evening, the most active SHFE 2401 zinc contract prices opened at 21100 yuan/mt and closed at 21060 yuan/mt, up 50 yuan/mt or 0.24%. Trading volume stood at 42,000 lots, and open interest decreased by 1324 lots to 88,000 lots. It is expected that more than 40,000 mt of refined zinc will still be imported in November. Against the background of high domestic supply in the fourth quarter, imports will still be replenished in large quantities. Market surplus is expected to increase, and zinc price support will be weak.

Tin
SHFE 2312 tin contract closed at 201340 yuan/mt last Friday’s night session, down 0.21%.
During the early trading last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at premiums of 300-500 yuan/mt over SHFE 2312 tin contract, versus premiums of 500-800 yuan/mt for delivery brands, premiums of 900-1000 yuan/mt for Yunxi brand, and discounts of 600 yuan/mt imported brand tin ingots. Tin prices continued to fall last Friday, and spot market transactions showed a divided situation. Generally speaking, the spot market transactions last Friday were relatively brisk.
Nickel
On the macro front, the US initial jobless claims fell to 209,000, below the expected 226,000 and marking a new low since October 14. That was the first drop in two months. The labor market isn't cooling down as fast as anticipated. It's also important to note the US dollar index bouncing back from its lowest point in two and a half months. Overall, macro factors aren't pressuring nickel prices much, but last week, nickel continued its decline, slipping below 130,000 yuan/mt. From a fundamentals perspective, the ongoing downward trend in nickel prices is primarily driven by the persistent oversupply of pure nickel. In terms of production, domestic pure nickel output increased by about 34% year-on-year in 2023. It's noteworthy that refined nickel output grew by only 4.4% in 2023, while electrowinning nickel output increased approximately twelvefold compared to the previous year. Based on SMM research, companies primarily producing electrowinning nickel have not reduced or halted production, and the supply of pure nickel has not diminished despite the downward trend in nickel prices. On the demand side, there was a slight improvement in spot market transactions last week, but overall demand remains weak. Demand for nickel plates in the alloy industry declined, but the decrease is better than expected. Additionally, as inventory has already been somewhat depleted, downstream companies are gradually initiating essential purchases. In the stainless steel sector, overall, there is still an expectation of reduced production in the 300-series stainless steel. However, due to the resumption plan of a certain steel mill, it is anticipated that the demand on nickel raw material will increase this week, playing a role in boosting pure nickel demand to some extent. In summary, the current macro sentiment remains positive, but there is no significant positive event to drive nickel prices upward. From a fundamental perspective, there is a continuous increase in the supply of pure nickel, but the growth in downstream demand is limited.