SMM Morning Comment For SHFE Base Metals December 4

SHANGHAI, December 4(SMM) –
Copper
LME copper prices opened at $8552.5/mt and closed at $8625/mt in last Friday trading, a gain of 1.84%, with the low-end of $8511/mt and the high-end of $8640/mt. Trading volume was 32,000 lots, and open interest stood at 266,000 lots. The most active SHFE 2401 copper contract prices opened at 68660 yuan/mt and closed at 68990 yuan/mt last evening, up 0.97%, with the high-end of 69150 yuan/mt and the low-end of 68660 yuan/mt. Trading volumes stood at 40,000 lots and open interest stood at 172,000 lots. On the macro front, last Friday, Powell's speech failed to dispel traders' bets on interest rate cuts next year, and U.S. bond yields plunged during the session. In addition, the U.S. ISM manufacturing PMI index recorded 46.7, which was lower than expected. It was below 50 for the 13th consecutive month, setting the longest record in more than 20 years. On Fundamentals, as of December 1, SMM copper inventories across major Chinese markets stood at 54,900 mt, down 3,700 mt from last Monday and 57,800 mt lower than the same period last year. Limited shipments arrivals of imported and domestic copper over East China and no decline in downstream purchasing lowered inventories. In South China, due to the increase in arrivals from surrounding areas and production halts at some downstream resulted in an increase in inventory. In terms of consumption, with high prices, demand is expected to remain suppressed. Due to the influence of low inventory and macro sentiment, copper prices will move strongly in the near future.
Aluminum
At last Friday’s night session, the most-traded SHFE 2401 aluminum contract opened at 18545 yuan/mt, with its low and high at 18545 yuan/mt and 18695 yuan/mt before closing at 18690 yuan/mt, up 135 yuan/mt or 0.73%. LME aluminum opened at $2198/mt last Friday, with its high and low at $2217/mt and $2183/mt respectively before closing at $2200/mt, an increase of $6/mt or 0.27%.
On the macro front, market expectations for the end of the Federal Reserve's current interest rate hike cycle have increased again. Earlier, Federal Reserve Chairman Powell's speech strengthened the market's confidence that the Federal Reserve has completed monetary policy tightening and may start cutting interest rates starting in March next year. Domestic macroeconomic data have weakened, and the manufacturing PMI index remained below 50%. There are growing expectations for the release of domestic favorable policies at the end of the year, but it will still take time to transmit to the manufacturing industry and other sectors. In terms of fundamentals, there are no further changes expected on the supply side in the short term, and market trading logic generally focuses on the resilience of consumer demand in the off-season. The short-term macro atmosphere is negative and the off-season will pressure aluminum prices. At the same time, inventory continues to be reduced, giving aluminum prices certain support.
Lead
LME lead open at $2131.5/mt and went downward during the Asian trading hours last Friday evening, declining to $2113/mt during the European trading hours. It finally dropped and closed at $2126.5/mt, down $0.5/mt or 0.02%.
The most-traded SHFE 2401 lead contract opened at 15810 yuan/mt and fell 150 yuan/mt or 0.95% to 15705 yuan/mt last Friday evening, briefly hitting the lowest point at 15700 yuan/mt and the highest point at 15850 yuan/mt.
zinc
Last Friday, LME zinc opened at US$2,478.5/ton and tested as low as US$2,455/ton. It touched a high of US$2,533/ton at the end of the day, and finally closed up at US$2,519.5/ton, an increase of US$47/ton, or 1.90%. The trading volume decreased by 760 lots to 10,800 lots, and open interest decreased by 1,667 lots to 202,000 lots. LME inventories decreased by 1,975 tons to 224,300 tons, a decrease of 0.87%.
Last Friday evening, the most-traded SHFE 2401 zinc contract opened at 20750 yuan/mt and rose to 20945 yuan/mt before closing at 20925 yuan/mt, up 205 yuan/mt or 0.99%. Trading volume decreased 51101 to 43,800 lots, and open interest decreased by 4308 lots to 87,900 lots. Caixin China's manufacturing industry in November exceeded expectations and recorded 50.7, returning to above 50. Macroeconomic sentiment has recovered.
Tin
SHFE 2401 tin contract rose to 201120 yuan/mt at last Friday’s night session and closed at 199660 yuan/mt, up 1.92%.
During the early trading last Friday, spot premiums and discounts in domestic spot market for various tin ingot brands did not changes much. Small brand tin ingots were offered at premiums of 0-300 yuan/mt over SHFE 2312 tin contract, versus premiums of 500-800 yuan/mt for delivery brands, premiums of 1000-1100 yuan/mt for Yunxi brand, and discounts of 600 yuan/mt imported brand tin ingots. Due to the recent fluctuations in tin prices, downstream companies mostly took a wait-and-see attitude and the purchasing sentiment was not high.
Nickel
Nickel prices hit bottom and rebounded last week, with a peak daily increase of about 5.2%. By last Friday's close, SHFE nickel prices fell back to 129,380 yuan/mt. On the macro front, the US Labor Department announced on the evening of November 30 that the initial jobless claims for the week ending November 25 were 218,000, compared to the previous value of 209,000, and market expectations of 220,000. Another key data was the US initial jobless claims in the week ending November 18, which were 1.927 million, expected at 1.872 million, and the previous value was 1.84 million. It is worth noting that the initial jobless claims for the week ending November 25 include the Thanksgiving holiday, and there is typically significant volatility in the numbers around holidays. All these data reflect a cooling of the US labor market, leading to increased market expectations for a subsequent interest rate cut by the Federal Reserve. This had a positive impact on commodities in general, but pure nickel was not significantly affected by macro sentiment due to fundamental drag. From a fundamental perspective, according to SMM research, some small electrowinning nickel enterprises reduced output in November. It is anticipated that certain enterprises will resume normal production in December. This has no significant impact on the overall oversupply situation. Additionally, due to the continuous decline in nickel sulphate price and the rebound in SHFE nickel, the premium of nickel sulphate over nickel briquette narrowed to around 1,000 yuan/mt. The production of nickel sulphate from nickel briquette is once again unprofitable. Looking at the downstream demand, alloy orders remained relatively stable overall, with a slight reduction in civilian orders compared to the previous month, leading to a minor decline in pure nickel demand. In summary, the current macro situation continues to improve, but the fundamental pressure on SHFE nickel hinders upward momentum, and there is still downward potential.