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SMM Morning Comment For SHFE Base Metals January 2

iconJan 2, 2024 09:50
The SHFE market was closed last Friday evening. LME copper opened at $8620.5/mt and closed at $8536.5/mt.

SHANGHAI, January 2 (SMM) –
The SHFE market was closed last Friday evening. LME copper opened at $8620.5/mt and closed at $8536.5/mt. From a macro perspective, a conflict broke out between the US military and the Houthi armed forces on December 31, 2023, and the Red Sea crisis escalated again, which may further boost market risk aversion. The domestic PMI in December was 49.0%, a decrease of 0.4 percentage points from the previous month. The level of manufacturing prosperity has fallen, and consumption is expected to drag the copper price. In addition, the U.S. index closed higher last Friday, putting pressure on copper prices. On the fundamentals, as of Friday December 29, SMM copper inventories in major Chinese markets increased 16,000 mt to 66,400 mt from last Monday, up 9,800 mt from two Fridays ago. Inventories in Shanghai increased significantly due to decreased shipments against the rise in copper prices and the continuous flow of supplies into warehouses. Inventory continued to increase during the New Year's Day holidays, and the supply is expected to increase after the holiday. In terms of consumption, it is expected that downstream processing companies will have replenishment needs after returning from the holiday, but the overall demand will show an off-season effect. There will be limited upside room for copper prices as the US dollar index closed higher.
The SHFE market was closed at last Friday’s night session. LME aluminum opened at $2,368/mt last Friday, with its high and low at $2394.5/mt and $2363/mt respectively before closing at $2,387.5/mt, an increase of $20.5/mt or 0.87%.
From a macro perspective, the view that the Federal Reserve will turn to interest rate cut was strengthened. The People's Bank of China continued to release liquidity, providing support for aluminum prices. In terms of fundamentals, although the off-season and production cut for environmental protection weighed on the production of aluminum processing enterprises, it is insufficient to offset the impact from upstream raw materials. The aluminum prices will remain firm in the short term.
LME lead opened at $2084/mt last Friday and fell by 0.82% to close at $2067/mt, with the lowest point at $2055/mt and the highest point of $2090/mt.
Due to the New Year's Day holiday, domestic futures exchanges did not conduct night trading on Friday evening. The market was closed from December 30, 2023 (Saturday) to January 1, 2024 (Monday).
Last Friday, LME zinc opened at US$2,634/ton and reached a low of 2,629 yuan/ton. Entering the night trading period, LME zinc reached a high of US$2,675 and finally closed up at $2,662/ton, up $35/ton, or 1.33%. The trading volume decreased by 8 lots to 6,880 lots, and the open interest increased by 3,969 lots to 201,000 lots. LME zinc inventory increased by 2,700 tons to 224,825 tons, an increase of 1.22%. TCs of imported zinc concentrate were lowered, and the cost gave LME zinc support. But deliveries to LME warehouses suppressed market optimism, and LME zinc lacked upward momentum.
Last Friday, the SHFE zinc market was closed due to New Year's Day, and the night trading was suspended.
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 discounts of 0-800 yuan/mt over SHFE 2402 tin contract, versus premiums of 400-800 yuan/mt for delivery brands, premiums of 600-1100 yuan/mt for Yunxi brand, and discounts of 500-2000 yuan/mt for imported brand tin ingots. Tin prices inched lower and then rebounded last Friday, and traders reported that the purchasing sentiment of downstream companies remained sluggish. The trading volumes of most traders were around 10 mt, and the spot market transactions remained sluggish last Friday.

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