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SMM Morning Comment For SHFE Base Metals January 4

iconJan 4, 2024 09:54
LME copper prices opened at $8530/mt and closed at $8515/mt in overnight trading, a drop of 0.21%, with the low-end of $8455/mt and the high-end of $8532/mt.

SHANGHAI, January 4 (SMM) –
LME copper prices opened at $8530/mt and closed at $8515/mt in overnight trading, a drop of 0.21%, with the low-end of $8455/mt and the high-end of $8532/mt. Trading volume was 22,000 lots, and open interest stood at 279,000 lots. The most active SHFE 2402 copper contract prices opened at 68350 yuan/mt and finished at 68600 yuan/mt overnight, with the high-end of 68680 yuan/mt and the low-end of 68220 yuan/mt, down 0.03%. Trading volume was 30,000 lots, and open interest stood at 133,000 lots. On the macro front, the minutes of the Federal Reserve meeting were overall dovish, but they downplayed the sense of urgency to cut interest rates compared to before. The market expects that interest rates will remain at their peak for longer. The U.S. ISM manufacturing PMI picked up in December, and the U.S. dollar index also continued to rise, which generally has a suppressive effect on copper prices. In terms of fundamentals, from the supply side, a large amount of imported copper flowed into the domestic trade market yesterday, driving premiums lower. However, actual trading volume was low, consumption of inventories was weak, and supply is expected to remain relatively ample. In terms of consumption, due to the large fluctuations in premiums and the fact that downstream consumption has not yet recovered, the supply is relatively ample. The downstream generally remained bearish and cautious, and only purchased on demand. The actual trading situation was lacklustre. The copper prices will meet resistance as the US dollar index rose.
Overnight, the most-traded SHFE 2402 aluminum contract opened at 19,330 yuan/mt, with low and high at 19,260 yuan/mt and 19,350 yuan/mt before closing at 19,350 yuan/mt, up 10 yuan/mt or 0.05%. LME aluminum opened at $2,326/mt yesterday, with its high and low at $2,337.5/mt and $2,287/mt respectively before closing at $2,306/mt, a decrease of $19.5/mt or 0.84%.
On the macro level, the minutes of the December meeting released by the Federal Reserve indicated that the U.S. interest rate hike cycle may have already ended. Domestic macro environment remained positive, boosting market confidence. In terms of fundamentals, alumina futures prices fell back from highs, thus the cost crisis of aluminum is expected to ease. However, there are still uncertainties on the overseas bauxite market, and the operating rates at major aluminum processing companies needs to be observed. Short-term aluminum prices may fluctuate at the current price level, and we need to pay close attention to the pace of the Federal Reserve's interest rate cuts and the latest changes in raw materials.
LME lead opened at $2059.5/mt last evening and fell by 0.99% to close at $2045/mt, after hitting the lowest point at $2043.5/mt and the highest point at $2070/mt.
The most active SHFE 2402 lead contract prices opened at 15995 yuan/mt last evening, and closed at 15965 yuan/mt, a drop of 0.09%, with the high-end of 16020 yuan/mt and the low-end of 15930 yuan/mt.
Overnight, LME zinc prices opened at US$2,621/ton and touched a high of US$2,622/ton. Entering the night trading session, LME zinc prices moved rapidly downwards and tested as low as 2,562 US dollars/ton, and finally closed down at 2,590 US dollars/ton, down 22 US dollars/ton, or 0.84%. The trading volume decreased by 1,270 lots to 9,084 lots, and the open interest increased by 1,672 lots to 202,000 lots. LME inventory increased by 100 tons to 223325 tons, an increase of 0.04%. The minutes of the Federal Reserve meeting showed that the urgency of cutting interest rates was downplayed, and Federal Reserve officials said that a soft landing of the economy was more likely. The U.S. dollar index rose again.
Overnight, the most-traded SHFE 2402 zinc contract opened at 21505 yuan/mt and touched a low of 21395 yuan/mt and a high of 21545 yuan/mt before closing at 21475 yuan/mt, down 75 yuan/mt or 0.35%. Trading volume decreased 45926 to 39,900 lots, and open interest decreased by 3273 lots to 82,500 lots. Despite the ending of production restrictions in many regions, spot trading was weak, weakening fundamental support for zinc prices.
Tin SHFE 2402 tin contract rose to 212950 yuan/mt overnight, and closed at 212410 yuan/mt, up 1.03%.
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 300-600 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 imported brand tin ingots. Tin prices rose slightly in early trading yesterday and then fell back. Traders reported that downstream companies' purchasing intentions were still sluggish, and they still took a wait-and-see attitude towards the current relatively high tin prices.
Overnight, the most-traded SHFE nickel contract opened at 128010 yuan/mt, and closed at 128090 yuan/mt, up 580 yuan/mt. Trading volume rose 220,000 lots, and open interest dcreased by 2356 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 fundamental point of view, LME nickel inventory continued to rise, with the increase coming from warehouses in Asia. At the same time, SHFE nickel warrants also climbed, with an increase of 514 mt yesterday. Nickel price is expected to move rangebound.

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