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SMM Morning Comment For SHFE Base Metals January 3

iconJan 3, 2024 09:52
LME copper prices opened at $8586.5/mt and closed at $8532.5/mt last evening, a drop of 0.34%, with the low-end of $8511/mt and the high-end of $8571/mt.

SHANGHAI, January 3 (SMM) –
LME copper prices opened at $8586.5/mt and closed at $8532.5/mt last evening, a drop of 0.34%, with the low-end of $8511/mt and the high-end of $8571/mt. Trading volume was 18,000 lots open interest stood at 273,000 lots. The most active SHFE 2402 copper contract prices opened at 68670 yuan/mt and finished at 68660 yuan/mt overnight, with the high-end of 68850 yuan/mt and the low-end of 68500 yuan/mt, down 0.23%. Trading volume was 23,000 lots, and open interest stood at 139,000 lots. On the macro side, traders have lowered their expectations for the Federal Reserve to cut interest rates, and the U.S. index has accelerated its recovery, suppressing copper prices. In addition, U.S. employment data and Federal Reserve meeting minutes and other data and events to be released this week will also continue to have an impact on copper prices. On the fundamentals, as of Monday January 2, SMM copper inventories in major Chinese markets grew 5,200 mt to 71,600 mt compared with last Friday. The total inventory dropped by 37,700 mt compared with the same period last year when the inventory was recorded at 109,300 mt. Increased arrivals and fewer shipments have led to a large increase in post-holiday inventory. This, coupled with weak consumption, will ensure adequate supply this week. In terms of consumption, inventories have increased significantly after the holiday. However, due to the increase in holding costs during the holiday, sellers raised prices. But many downstream have prepared stocks in advance. Actual transactions were lukewarm. If copper prices remain stable and premiums decline, it is expected that transactions will increase. There will be limited upside room for copper prices as the US dollar index rose faster.
Overnight, the most-traded SHFE 2402 aluminum contract opened at 19,670 yuan/mt, with low and high at 19,400 yuan/mt and 19,750 yuan/mt before closing at 19,465 yuan/mt, down 290 yuan/mt or 1.47%. LME aluminum opened at $2,388.5/mt yesterday, with its high and low at $2,398/mt and $2,316.5/mt respectively before closing at $2,325.5/mt, a decrease of $62/mt or 2.6%.
On the first trading day after New Year's Day, the People's Bank of China tightened liquidity, and the inventory of both aluminum ingots and aluminum billets accumulated. A series of bearish news, which, combined with continuous rise in SHFE aluminum prices previously, resulted in the exit of bulls, thus SHFE aluminum saw a retaliatory correction. However, the market still expected the Federal Reserve to cut interest rates. On the cost side, alumina prices surged, and the restoration of coal import tariffs has given support to aluminum prices. In the short term, aluminum prices are expected to be difficult to drop significantly, and may fluctuate within a wide range.
LME lead opened at $2070.5/mt last evening and fell by 0.07% to close at $2065.5/mt, after hitting the lowest point at $2042/mt and the highest point at $2080/mt.
The most active SHFE 2402 lead contract prices opened at 15970 yuan/mt last evening, and closed at 15910 yuan/mt, a drop of 0.28%, with the high-end of 15985 yuan/mt and the low-end of 15860 yuan/mt.
Overnight, LME zinc opened at US$2,660.5/ton. During the European trading session, LME zinc fluctuated and moved above the daily moving average. It consolidated around US$2,640/ton and touched a high of US$2,660.5/ton before falling to a low of US$2,586/ton. Prices finally closed down at US$2,612/ton, down US$50/ton, or 1.88%. Trading volume increased by 3,474 lots to 10,400 lots, and open interest decreased by 355 lots to 201,000 lots. LME zinc inventory decreased by 1,600 tons to 223,225 tons, a decrease of 0.71%. The final U.S. Markit manufacturing PMI in December was lower than expected at 47.9 and the market reduced its bets on the Fed's interest rate cuts. The U.S. dollar index moved up rapidly.
Overnight, the most active SHFE 2402 zinc contract opened at 21,555 yuan/ton and reached a low of 21,430 yuan/ton. The contract touched a high of 21,605 yuan/ton, and finally closed up at 21,595 yuan/ton, up 105 yuan/ton, or 0.49%. The trading volume decreased by 25,130 lots to 39,800 lots, and the open interest decreased by 1,532 lots to 84,300 lots. In December 2023, the Caixin China Manufacturing PMI rose slightly to 50.8. Macroeconomic sentiment gave zinc prices a certain support. However, SMM social treasury recorded an increase, and spot transactions remained quiet. Fundamental support was insufficient.
SHFE 2402 tin contract did not change much overnight and closed at 210,070 yuan/mt. 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 300-700 yuan/mt compared to SHFE 2402 tin contract, versus premiums of 0-700 yuan/mt for delivery brands, premiums of 1000-1100 yuan/mt for Yunxi brand, and discounts of 900-1300 yuan/mt for imported tin ingots. Tin prices rebounded after falling in early trading yesterday, and traders reported that downstream companies' purchasing intentions were still sluggish. Generally speaking, the spot market transactions yesterday were relatively thin.
Overnight, the most-traded SHFE nickel contract opened at 125640 yuan/mt, and closed at 127510 yuan/mt, up 2300 yuan/mt. Trading volume fell by 139,000 lots, and open interest decreased by 11518 lots. From a macro perspective, the conflict between the US military and the Houthi armed forces broke out on December 31, 2023, and the Red Sea crisis escalated again, which may further boost market risk aversion. From a fundamentals point of view, the LME nickel inventory continued the trend of accumulating, with the increase coming from warehouses in Asia. In contrast, SHFE nickel warrants fell slightly by 41 mt. Nickel price is expected to move rangebound.

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