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SMM Morning Comment For SHFE Base Metals January 9

iconJan 9, 2024 09:57
LME copper opened at $8,396/mt on Monday, rose all the way at the beginning and during the session, touching $8,461.5/mt, and then consolidated sideways at the end of the session, finally closing at $8,437/mt, with open interest reaching 276,000 lots.

SHANGHAI, January 9 (SMM) –
LME copper opened at $8,396/mt on Monday, rose all the way at the beginning and during the session, touching $8,461.5/mt, and then consolidated sideways at the end of the session, finally closing at $8,437/mt, with open interest reaching 276,000 lots. SHFE 2402 copper contract opened at 68090 yuan/mt overnight, with its session low and high at 67930 yuan/mt and 68250 yuan/mt before closing down 0.16% at 68130 yuan/mt. Open interest stood at 123,000 lots. On the macro front, the U.S. non-farm payrolls and wage growth in December exceeded expectations. This reduced the possibility of the Federal Reserve cutting interest rates in March. The U.S. dollar index fluctuated sideways. Federal Reserve officials made hawkish statements, which exerted some pressure on copper prices. The current New York Fed survey shows that inflation expectations have dropped to a three-year low, and we need to pay attention to key inflation data for subsequent trends. As of Jan 8, copper inventory across China’s major trading markets decreased by 4,000 mt from last Friday to 72,900 mt. Compared to last Friday, inventories in most regions across the country fell, with only increases in Jiangsu. However, due to limited recovery in consumption, the supply situation is not tight, and spot premiums are expected to continue to fall. In terms of consumption, consumption has rebounded to a certain extent after the holidays, but the overall increase is limited. If copper prices fall further, it may give a certain boost to consumption. In terms of price, the market expectations for the Federal Reserve to cut interest rates have weakened, the U.S. dollar index remained at a high level, and copper prices are expected to come under pressure.
Overnight, the most-traded SHFE 2402 aluminum contract opened at 19,080 yuan/mt, with high and low at 19,135 yuan/mt and 19,020 yuan/mt before closing at 19,030 yuan/mt, down 155 yuan/mt or 0.81%. LME aluminum opened at $2,274.5/mt on Monday, with high and low at $2,276/mt and $2,234/mt respectively before closing at $2,237/mt, a drop of $35/mt or 1.54%.
From a macro perspective, the US services sector barely grew in December and indicators measuring employment fell to the lowest level in nearly three and a half years, leading to further decline in the US dollar. The US dollar index was down 0.15% overnight. Investors continued to digest last week's mixed US economic data and awaited new clues on when the Federal Reserve may start cutting interest rates from key inflation data. In terms of fundamentals, the domestic aluminum supply entered a period of stable operation in January, with no significant fluctuations in the short term; as for demand, aluminum downstream operating rates continued to be weak, and the amount of aluminium ingot produced was expected to increase MoM. Domestic aluminum ingot inventories continued to grow, suppressing SHFE aluminum. Short-term aluminum prices will remain volatile, and we need to pay close attention to the pace of the Federal Reserve's interest rate cuts, domestic consumption and inventory changes.
LME lead opened at $2075.5/mt on Monday. During the Asian trading session, LME lead traded basically between $2,080-2085/mt. After entering the European session, economical concerns amid global political turmoil weighed down base metals. LME lead fell back to $2055.5/mt, and finally closed at $2064/mt, a decrease of 0.58%.
Overnight, the most-traded SHFE 2402 lead contract opened higher at 16,105 yuan/mt. The supply of secondary lead increased and the destocking of lead ingots slowed down. SHFE lead once fell to 16,070 yuan/mt at the beginning of the session. The contract finally closed at 16120 yuan/mt, an increase of 0.06%; its open interest reached 37991 lots, a decrease of 827 lots from the previous trading day.
Overnight, the U.S. dollar index closed down 0.14%. The U.S. non-manufacturing purchasing managers' index in December and the service industry employment sub-indicator in December both fell, inhibiting the rise of the U.S. dollar; The New York Fed's December survey showed that consumers' inflation expectations for 2024 fell to 3.01% in December from 33.6% in the previous month, the lowest in three years. Federal Reserve Board of Governors officials said that the risk of rising inflation still exists and that it is not yet the right time to cut interest rates. The Federal Reserve is expected to cut interest rates for the first time in the third quarter, once again cooling expectations for a rate cut by the Federal Reserve. LME zinc opened at $2553/mt on Monday, with a session low of $2491/mt before closing at $2504/mt, down 1.57%. Open interest rose 1108 lots to 203,000 lots. LME zinc inventories fell 1675 mt to 218375 mt.Overnight, the most-traded SHFE 2402 zinc contract opened at 21140 yuan/mt, and closed at 21095 yuan/mt, down 160 yuan/mt or 0.75%. Trading volume fell to 37495 lots, and open interest decreased 2004 lots to 69996 lots. According to SMM statistics, domestic refined zinc production is expected to drop to 572,400 mt in January 2024 from 590,900 mt in December, and the market's spot volume may remain in short supply, providing support for SHFE zinc.
SHFE 2402 tin contract fell to 203,710 yuan/mt and then rebounded overnight, before closing at 204,610 yuan/mt overnight, down 0.67%.
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 0-500 yuan/mt against SHFE 2402 tin contract, versus premiums of 100-800 yuan/mt for delivery brands, premiums of 900-1000 yuan/mt for Yunxi brand, and discounts of 1000-1500 yuan/mt for imported brand tin ingots. Yesterday, tin prices generally moved sideways. Traders reported that downstream companies were more enthusiastic about purchasing. The transactions in the spot market increased yesterday.
Overnight, the most-traded SHFE nickel contract opened at 123,300 yuan/mt, and closed at 124,450 yuan/mt, up 910 yuan/mt. Trading volume rose 9329 lots, and open interest increased by 7,082 lots. From a macro perspective, the Fed's speech last night changed from dovish to hawkish, and the market expectations for interest rate cuts in 2024 have cooled down. From a fundamentals perspective, pure nickel warehouse receipt inventory continued to accumulate yesterday, with LME inventory accumulating 360 mt. In summary, it is expected that nickel prices may continue to fluctuate in a narrow range in the future.

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