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SMM Morning Comment For SHFE Base Metals December 28

iconDec 28, 2023 09:57
LME copper prices opened at $8603/mt and closed at $8596/mt in last evening trading, a gain of 1.47%, with the low-end of $8603/mt and the high-end of $8715/mt.

SHANGHAI, December 28 (SMM) –
LME copper prices opened at $8603/mt and closed at $8596/mt in last evening trading, a gain of 1.47%, with the low-end of $8603/mt and the high-end of $8715/mt. Trading volume was 21,000 lots, and open interest stood at 280,000 lots. The most active SHFE 2402 copper contract prices opened at 69260 yuan/mt and closed at 69620 yuan/mt last evening, up 0.62%, with the high-end of 69870 yuan/mt and the low-end of 69260 yuan/mt. Trading volumes stood at 37,000 lots and open interest stood at 160,000 lots. On the macro front, the market expects that the United States will soon start cutting interest rates, which has strengthened sentiment, causing the U.S. dollar index to fall, which is bullish for copper prices. In addition, the profits of domestic industrial enterprises in November increased by 29.5% year-on-year, achieving positive growth for four consecutive months, which also stimulated copper prices. In terms of fundamentals, from the supply side, due to the impact of shipping schedules in some regions, the arrivals of imported copper will be delayed in the near future. It is expected that the supply of imported copper will decrease in the second half of this week. Domestic sellers are under the pressure of clearing inventories at the end of the year and have shipped a large amount of copper. It is expected that the overall supply of copper will decline in the second half of this week. In terms of consumption, many downstream companies have made replenishment. This week, as the accounts are about to be closed at the end of the year. If copper prices remain high, demand is expected to change little. It is expected that copper prices will lack ability to rise further in the near future.
On the macro front, the U.S. dollar index continued to decline. The annual rate of the U.S. core PCE price index in November was lower than expected, and the inflation index cooled down more than expected. In the third quarter, the U.S. real GDP was revised downward, and consumption fell short of expectations, which further strengthened the view that the Federal Reserve will turn to interest rate cut. This, coupled with the recent complex situation in the Red Sea that affects transportation costs, has brought support to aluminum prices. Domestic macro environment remained positive. After major state-owned banks lowered deposit rates, joint-stock banks have also lowered deposit rates. China's main goals this year are expected to be achieved. In terms of fundamentals, Qinghai Province has implemented power load management due to earthquake relief, which could potentially affect the aluminum supply. Demand tends to weaken. As the traditional off-season has arrived, and companies are beginning to increase their cash flow at the end of the year, the willingness to restock has declined. It is expected that the destocking of aluminum social inventory will slow down, but the inventory will still remain low. SMM predicts that the domestic social inventory of aluminum ingots will remain low in the near future, and the aluminum prices will remain firm in the short term due to upstream influences.

LME lead prices opened at $2073/mt and closed at $2087/mt last evening, up $16/mt or 0.77%, with the low-end of $2068.5/mt and the high-end of $2093.5/mt.
The most active SHFE 2402 lead contract prices opened at 15820 yuan/mt and closed at 15865 yuan/mt, an increase of 95 yuan/mt or 0.6%, with the low-end of 15795 yuan/mt.
Last evening, LME zinc opened at $2602.5/mt and closed up $39.5/mt or 1.52% at $2642/mt. The trading volume was 8914 lots, and open interest decreased 612 lots to 194,000 lots. The market's optimism that the U.S. will cut interest rates as early as March continues to grow, the market's bullish sentiment continues to ferment, the U.S. dollar index continues to decline, and the market is on the strong side.
Last evening, the most active SHFE 2402 zinc contract prices opened at 21400 yuan/mt and closed at 21515 yuan/mt, up 165 yuan/mt or 0.77%. Trading volume stood at 34,000 lots, and open interest gained by 617 lots to 88,000 lots. Fundamentally, the SHFE/LME price ratio has recently fallen to around 8.3, import losses are around 300-400 yuan/ton, with the import window closed. Spot prices have been given support; however, considering the current insufficient demand for environmental protection production restrictions in the north, as well as weak orders in the south, the fundamental support is relatively limited, and it may be difficult for zinc prices to move upward.
SHFE 2402 tin contract inched lower and then rebounded before closing at 210,280 yuan/mt overnight, up 0.96%.
Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 200-500 yuan/mt over SHFE 2402 tin contract, versus premiums of 200-800 yuan/mt for delivery brands, premiums of 800-1100 yuan/mt for Yunxi brand, and discounts of 800-1100 yuan/mt for imported brand tin ingots. The overall price of tin rose slightly yesterday, and traders reported that the purchasing sentiment of downstream companies declined compared with the previous day. The spot market transactions yesterday were relatively sluggish due to the recent high tin prices.
Overnight, the most-traded SHFE nickel contract opened at 129,000 yuan/mt, and closed at 129,550 yuan/mt, up 410 yuan/mt. From a macro perspective, along with the fading impact of the shipping crisis, the positive macro sentiment gradually dissipated. From a fundamentals perspective, due to the increase in pure nickel supply and the slower-than-expected growth in downstream demand, the pure nickel inventory has accumulated for two consecutive weeks. To sum up, the positive macro sentiment has been digested, but the fundamentals situation is still poor. It is expected that nickel prices may continue to decline in the future.

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