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SMM Morning Comment For SHFE Base Metals January 5

iconJan 5, 2024 09:52
U.S. labor market data better than expected, strong U.S. dollar suppresses copper prices [SMM Copper Morning Comment]

SHANGHAI, January 5 (SMM) –
U.S. labor market data better than expected, strong U.S. dollar suppresses copper prices [SMM Copper Morning Comment]
LME copper prices opened at $8535/mt and closed at $8481.5/mt in overnight trading, a drop of 0.39%, with the low-end of $8424.5/mt. Trading volume was 19,000 lots and open interest stood at 277,000 lots. The most active SHFE 2402 copper contract prices opened at 68200 yuan/mt and finished at 68410 yuan/mt overnight, with the high-end of 68420 yuan/mt and the low-end of 68120 yuan/mt, a drop of 0.01%. Trading volume was 23,000 lots, and open interest stood at 129,000 lots. On the macro front, the U.S. ADP employment numbers in December and the number of people applying for unemployment benefits at the beginning of last week both fell more than expected. The U.S.'s better-than-expected labor market data suppressed expectations for an interest rate cut this year. The U.S. index rose slightly, which had a short-term suppressive effect on copper prices. It is also necessary to continue to pay attention to the upcoming unemployment rate and non-farm payroll data in the United States. In terms of fundamentals, as copper prices shifted downward, downstream consumption rebounded slightly. Although sellers are willing to ship at higher prices, there is a demand for replenishment downstream, and actual trading has picked up. On the supply side, inventory has increased significantly, and consumption is expected to be limited at present. Supply is not tight. In terms of consumption, if copper prices remain stable, consumption is expected to pick up. The copper prices will meet resistance as the US dollar index rose.
U.S. economic data is improving and lead prices met resistance as the U.S. 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 $2,304/mt yesterday, with high and low at $2,316.5/mt and $2,269/mt respectively before closing at $2,285/mt, a decrease of $21/mt or 0.91%.
Summary: From a macro perspective, the Fed’s interest rate hike cycle may has already ended, and the time for interest rate cuts is unknown. Domestic macro environment remained positive, which boosted market confidence. Fundamentally, the cost crisis of aluminum is likely to ease, and social inventory began to accumulate during the off-season. As the macro front was intertwined with bullish and bearish factors in the 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 $2050.5/mt last evening and rose by 0.17% to close at $2048.5/mt, after hitting the lowest point at $2040/mt and the highest point at $2059.5/mt.
The most active SHFE 2402 lead contract prices opened at 15940 yuan/mt last evening, and closed at 15960 yuan/mt, a drop of 0.03%, with the high-end of 15980 yuan/mt and the low-end of 15920 yuan/mt.
The import window is about to open and SHFE zinc weakened [SMM Morning Comment]
Overnight, LME zinc prices opened at US$2,580/ton and touched a high of US$2,593.5/ton. During the European trading session, LME zinc prices fell to the recent low of US$2,526.5/ton, and finally closed down at US$2,539/ton, down US$51/ton, or 1.97%. The trading volume decreased by 621 lots to 8,643 lots, and the open interest increased by 2,083 lots to 204,000 lots. LME inventory decreased by 1,550 tons to 221,775 tons, a decrease of 0.69%. The number of U.S. ADP jobs in December exceeded expectations and recorded 164,000. ADP non-farm data was eye-catching, and the number of initial jobless claims in the United States last week fell more than expected. The market's expectations for the Federal Reserve to cut interest rates have been weakened again. LME zinc prices were under pressure.
Overnight, the most-traded SHFE 2402 zinc contract opened at 21290 yuan/mt and touched a low of 21110 yuan/mt before closing at 21135 yuan/mt, down 295 yuan/mt or 1.38%. Trading volume decreased 46180 to 42,200 lots, and open interest decreased by 2445 lots to 78,600 lots. The import window will reopen and supply tightness will ease.
SHFE 2402 tin contract fell to 208800 yuan/mt overnight and closed at 208850 yuan/mt, down 1.42%. 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. Trading companies reported that downstream companies still held a wait-and-see attitude.
Overnight, the most-traded SHFE nickel contract opened at 126850 yuan/mt, and closed at 125400 yuan/mt, down 2690 yuan/mt. Trading volume rose 36438 lots, and open interest increased by 11804 lots. From a macro perspective, the Fed's speech last night changed from dove to hawk, and the market's optimistic expectations for 2024 have cooled down. From a fundamental perspective, pure nickel warehouse receipt inventories continued to accumulate yesterday. Nickel price is expected to move rangebound.

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