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SMM Morning Comment For SHFE Base Metals December 1

iconDec 1, 2023 09:51
LME copper prices opened at $8407.5/mt overnight before reaching a high of $8480/mt, and closed at $8469.5/mt, a rise of 0.29%. Trading volumes were 20,000 lots and open interest stood at 267,000 lots.

SHANGHAI, December 1(SMM) –
LME copper prices opened at $8407.5/mt overnight before reaching a high of $8480/mt, and closed at $8469.5/mt, a rise of 0.29%. Trading volumes were 20,000 lots and open interest stood at 267,000 lots. The most active SHFE 2401 copper contract prices opened at 68000 yuan/mt and finished at 68290 yuan/mt overnight, up 0.21%, with the low-end of 67960 yuan/mt and the high-end of 68330 yuan/mt. Trading volume was 30,000 lots and open interest stood at 163,000 lots. On the macro front, the annual core PCE rate in the United States in October was in line with expectations at 3.5%, the lowest since April 2021. U.S. Treasury Secretary Yellen said that she does not believe that further radical monetary tightening is needed and that the United States will be well positioned to achieve a soft landing. In terms of fundamentals, the premiums and discounts in East China rose again yesterday. It is understood that the main reason was that a large buyer purchased goods the day before, which made the overall supply of goods tight. Although the willingness of downstream purchasing was suppressed, some companies needed to replenish their stocks and were forced to accept high premiums. Inventories in South China increased for four consecutive days. At the end of the month, downstream consumption was weak, but affected by sentiment in Shanghai, it also rose. In terms of consumption, cable companies delivered more orders to the State Grid in November. Therefore, even with high prices and high prices, companies still maintain rigid purchases and are less sensitive to prices. It is expected that copper prices will run strongly in the near future.
Overnight, the most-traded SHFE 2401 aluminum contract opened at 18545 yuan/mt, with low and high at 18500 yuan/mt and 18625 yuan/mt before closing at 18530 yuan/mt, down 50 yuan/mt or 0.27%. LME aluminum opened at $2218.5/mt in the previous trading day, with its low and high at $2187/mt and $2219/mt respectively before closing at $2194/mt, down 0.95%.
On the macro level, despite data showing that U.S. inflation and the labor market continue to slow, the U.S. dollar index continues to rise and stands firmly above the 103 mark. Although expectations for further interest rate hikes by the Federal Reserve have cooled, there are still occasional hawkish voices that affect market trading sentiment. In terms of fundamentals, aluminum ingot inventory fell more than expected, and have dropped below 600,000 mt. Due to aluminum production cuts in Yunnan, domestic operating production capacity has dropped to around 41.8 million mt, easing supply-side pressure. 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. The PMI for domestic aluminum processing sectors was below 50%, indicating contraction territory, with production and order index both weak. SMM believes that in the off-season of consumption, the market's upward driving force is insufficient, and short-term aluminum prices may struggle to find support.
Overnight, LME lead prices opened at $2144/mt, Entering the European session, LME lead stocks turned to a downward trend, with a daily decrease of nearly 3,000 mt. The contract dropped to a low of $2,121/mt, once again set a new low in the past month. At last, the contract closed at $2127/mt, down 0.7%.
The most-traded SHFE 2401 Lead contract opened at 15825 yuan/mt in overnight trading, with the high-end of 16015 yuan/mt. The price reached as low as 15,755 yuan/mt, setting a new low since July 21, 2023. The contract closed at 15800 yuan/mt, a decrease of 0.44%. Open interest stood at 64576 lots, a decrease of 3090 lots from the previous trading day.
Overnight, LME zinc opened at $2500/mt and closed down $25/mt or 1% at $2472.5/mt. The trading volume was 11605 lots, and open interest increased 1189 lots to 204,000 lots. The strong macro data has repeatedly emphasized the bearish sentiment in the context of interest rate hikes, putting upward pressure on the market in the short term.
The most-traded SHFE 2401 zinc contract opened lower at 20720 yuan/mt and rose before closing at 20690 yuan/mt, down 110 yuan/mt or 0.53%. Trading volume was 43,000 lots, and open interest fell 879 lots to 92,000 lots. After the zinc price fell, the spot trading atmosphere improved, and the fundamentals gave some support to the market. However, the expected output of refineries is still huge, and the abundant supply will remain, weighing on zinc prices.
SHFE 2401 tin contract rose to 194580 yuan/mt overnight, closing at 194690 yuan/mt, down 0.65%.
Yesterday, 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 300-600 yuan/mt over SHFE 2312 tin contract, versus premiums of 500-900 yuan/mt for delivery brands, premiums of 1000-1100 yuan/mt for Yunxi brand, and discounts of 600 yuan/mt imported brand tin ingots. SHFE tin prices maintained a weak consolidation after opening low yesterday, and the spot market transactions were relatively thin.
Overnight, the most-traded SHFE nickel contract opened at 131590 yuan/mt, and closed at 131210 yuan/mt, up 100 yuan/mt. Trading volume rose 19867 lots, and open interest increased by 1955 lots. From a macro perspective, the Federal Reserve continues to be dovish and a number of data reflect the economic decline in the US. Market expectations for the Federal Reserve to cut interest rates have increased, boosting commodities. From a fundamental perspective, pure nickel social inventories still show a trend of accumulation, and downstream orders have not picked up significantly yet, reflecting the poor transaction atmosphere in the market. Nickel price is expected to move rangebound.

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