SMM Morning Comment For SHFE Base Metals November 29

Published: Nov 29, 2023 09:54

Source: SMM

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LME copper prices opened at $8381.5/mt and closed at $8451/mt in overnight trading, a gain of 0.91%, with the low-end of $8370.5/mt and the high-end of $8484/mt.

SHANGHAI, November 29(SMM) –
Copper
LME copper prices opened at $8381.5/mt and closed at $8451/mt in overnight trading, a gain of 0.91%, with the low-end of $8370.5/mt and the high-end of $8484/mt. Trading volume was 23,000 lots, and open interest stood at 267,000 lots. The most active SHFE 2401 copper contract prices opened at 67890 yuan/mt and finished at 68280 yuan/mt overnight, up 0.71%, with the low-end of 67890 yuan/mt and the high-end of 68390 yuan/mt. Trading volume was 53,000 lots and open interest stood at 165,000 lots. On the macro front, Fed officials are still divided on whether interest rate hikes are coming to an end, but the mainstream view is that the tightening policy is coming to an end. Domestically, Pan Gongsheng, governor of the central bank, said he expects to successfully achieve the 5% economic growth target throughout the year. China's real estate industry is seeking a new balance and has seen some signs of positive development. China's CPI is gradually bottoming out and rebounding, and PMI has also seen some positive changes. In terms of fundamentals, the premiums and discounts in East China fell as expected yesterday. This was mainly due to the fact that most downstream companies were bearish on the market outlook, coupled with the poor performance of terminal orders, resulting in low market purchasing. If the backwardation structure continues to expand, premiums and discounts will further fell; premiums and discounts in South China also fell, mainly due to the increase in arrivals and inventory. Buyers were also bearish on the market outlook, and sellers lowered prices. In terms of consumption, spot quotes fell and demand will grow. Due to the influence of macro sentiment, copper prices will move strongly in the near future.
Aluminum
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18795 yuan/mt, with the highest and lowest prices at 18820 yuan/mt and 18755 yuan/mt before closing at 18790 yuan/mt, down 35 yuan/mt or 0.19%. LME aluminum opened at $2213/mt in the previous trading day, with its low and high at $2199.5/mt and $2225.5/mt respectively before closing at $2218.5/mt, up $6/mt or 0.27%.
On the macro level, the US dollar index continued to fall, hitting a new low in three months. The fall of the US dollar and expectations of no more rate hike by the Fed have brought certain support to aluminum prices. Recently, favorable policies are frequently released in China and the real estate market performs well, boosting market confidence, and driving aluminum consumption to grow towards the end of the year. In terms of fundamentals, aluminum ingot inventory has completely entered a downward trend, and it is expected to maintain a weak inventory. 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 believes that the rebound in aluminum prices on Monday was mainly driven by sharp inventory reduction. However, the ongoing off-season means that any upward potential will be limited for short-term aluminum prices, which may mainly fluctuate around 19,000 yuan/mt.
Lead
Overnight, LME lead opened at $2166.5/mt. Dragged down by the LME lead inventory accumulation, LME lead prices inched lower, falling to as low as $2145/mt. At last, the contract closed at $2151.5/mt, down 0.49%.
The most traded SHFE 2401 lead contract opened at 16085 yuan/mt overnight and recorded a 3-month low of 15965 yuan/mt. SHFE lead finally closed at 16050 yuan/mt, down 0.53%. The open interest was down 1106 lots to 72302 lots.
zinc
Overnight, LME zinc opened at $2531.5/mt and closed up $10.5/mt or 0.42% at $2538/mt. The trading volume was 8133 lots, and open interest added 3867 lots to 207,000 lots. The weakening of the U.S. dollar provides certain support to the market, but the weakening domestic consumption still has certain effects on overseas market.
Last evening, the most active SHFE 2401 zinc contract prices opened at 21140 yuan/mt and closed at 21100 yuan/mt, down 45 yuan/mt or 0.21%. Trading volume stood at 53,000 lots, and open interest gained by 1689 lots to 84,000 lots. Recently, the national weekly TCs fell to as low as 4,550 yuan/mt with metal content, raising the production costs of smelting plants. Some refineries have already experienced losses, and the cost will give certain support to zinc prices.
Tin
SHFE 2401 tin contract fell to 194290 yuan/mt overnight and closed at 195070 yuan/mt, up 0.02%. Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands changed little. Small brand tin ingots were offered at premiums of 300-500 yuan/mt over SHFE 2312 tin contract, versus premiums of 400-800 yuan/mt for delivery brands, premiums of 900-1300 yuan/mt for Yunxi brand, and discounts of 600 yuan/mt imported brand tin ingots. Broadly speaking, the transactions in the spot market were relatively brisk yesterday as lower tin price attracted downstream buyers.
Nickel
Overnight, the most-traded SHFE nickel contract opened at 123400 yuan/mt, and closed at 129160 yuan/mt, up 6387 yuan/mt. Trading volume rose 52182 lots, and open interest decreased by 14137 lots. The current nickel price is not very sensitive to macro sentiment, and is mainly subject to fundamentals of refined nickel instead. The current pure nickel oversupply persists. Supply continues to increase, and there is no plan to reduce production for the time being. Although downstream demand has improved during the week, overall demand is still weak. Nickel price is expected to move rangebound.

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