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SMM Morning Comment For SHFE Base Metals January 10

iconJan 10, 2024 09:55
LME copper prices opened at $8462.5/mt and closed at $8329/mt overnight, down 1.28%, with the highest of $8483/mt and the lowest of $8324/mt.

SHANGHAI, January 10 (SMM) –
LME copper prices opened at $8462.5/mt and closed at $8329/mt overnight, down 1.28%, with the highest of $8483/mt and the lowest of $8324/mt. Trading volume was 26,000 lots, and open interest stood at 278,000 lots. The most active SHFE 2402 copper contract prices opened at 67980 yuan/mt and closed at 67930 yuan/mt last evening, down 0.35%, with the high-end of 68180 yuan/mt and the low-end of 67860 yuan/mt. Trading volumes stood at 23,000 lots and open interest stood at 123,000 lots. On the macro front, the NFIB Small Business Confidence Index in the United States recorded 91.9 in December, a new high since July 2023. The market expects that the Federal Reserve will cut interest rates as soon as possible when the economy is already weak. The U.S. dollar index ran at a high level and this exerted some pressure on copper prices. In terms of fundamentals, after the downstream replenishment at low prices, as the price spread between front-month and next-month contracts increases, the overall demand was weak near the end of the year. The supply side is expected to remain ample. In terms of consumption, if copper prices do not fall significantly, consumption is expected to remain weak, and premiums are expected to continue to fall. The copper prices will meet resistance as the US dollar index rose.
Overnight, the most-traded SHFE 2402 aluminum contract opened at 18,980 yuan/mt, with high and low at 19,090 yuan/mt and 18,980 yuan/mt before closing at 19,040 yuan/mt, up 70 yuan/mt or 0.37%. LME aluminum opened at $2,239/mt on Tuesday, with high and low at $2,257.5/mt and $2,227/mt respectively before closing at $2,242/mt, an increase of $5/mt or 0.22%.
From a macro perspective, the U.S. dollar rose 0.22% overnight, and the market awaited inflation data due to be released on Thursday for clues on when the Federal Reserve may cut interest rates. The consumer price inflation report in December is the main economic data of the week. If inflation continues to slow, it may intensify expectations for a rate cut in March. In terms of fundamentals, as the disturbance in the alumina supply faded, the domestic aluminum production entered a period of stable operation, 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.
Domestic fundamentals remain favorable and lead prices continue to fluctuate strongly [SMM Lead Morning Comment]
Overnight, LME lead prices opened at US$2063.5/ton. It fell to US$2,047.5/ton. The decline was slightly repaired in late trading, and finally closed at US$2,058/ton, a decrease of 0.29%.
The most active SHFE 2402 lead contract prices opened at 16150 yuan/mt last evening and finally closed at 16220 yuan/mt, up 0.5%. Open interest decreased 1471 lots to 37408 lots.

The influence of macro sentiment weighed on SHFE zinc [SMM Zinc Morning Comment]
Overnight, the U.S. trade deficit narrowed in November as domestic demand slowed, causing imports of consumer goods to reach their lowest level in a year. The U.S. Department of Commerce’s Bureau of Statistics said the trade deficit shrank 2.0% in November to $63.2 billion. It is understood that economists had previously predicted that the deficit would increase to US$65 billion. If this trend continues in December, trade may have no effect on economic changes in the fourth quarter.
Overnight, LME zinc prices opened at US$2,510.5/ton and reached a high of US$2,535/ton. LME zinc fell to as low as US$2,500/ton and finally closed up at US$2,510/ton, up US$6/ton, an increase of 0.24%. Trading volume decreased by 1551 lots to 7951 lots, and the open interest increased by 2323 lots to 206,000 lots. LME zinc inventory fell by 1675 tons to 220050 tons, a decrease of 0.76 %. The overall macro sentiment was bearish and the US dollar rebounded, thus LME zinc prices performed weakly.
Overnight, SHFE 2402 zinc contract opened as low as 21,175 yuan/ton. At the beginning of the session, it rose sharply and hit a high of 21,235 yuan/ton. Prices quickly moved down to a low of 21,095 yuan/ton. The contract finally closed down at 21,135 yuan/ton, down 25 yuan/ton, or 0.12%. The trading volume decreased by 52,065 to 35,056 lots, and the positions decreased 540 lots to 68028 lots. Recently affected by macro sentiment, commodities are overall bearish. However, from the perspective of spot fundamentals, there is demand for stocking up at the end of the year and buying on dips. The spot market is tight, and the premium remain high. The fundamental support is strong. It is expected that SHFE zinc may fluctuate widely.

Tin prices remained low despite active spot trading
The price of the most active SHFE 2402 tin contract fell rapidly after opening in overnight trading session, reaching a low of 204050 yuan/mt. The prices finally closed at 204530 yuan/mt last evening, a rise of 0.08%.
During the early trading yesterday, spot quotes of various domestic tin ingot brands did not change much. Among them, the discounts of small brand tin ingots stood at a maximum of 500-100 yuan/mt, and the premiums of delivery brands ranged from discounts of Guangdong against 100 yuan/mt to 600 yuan/mt. Yunxi brand was quoted with premiums of 900-1000 yuan/mt, and imported tin brand were quoted with discounts of 1200-900 yuan/mt. The price of tin fluctuated downward in early trading yesterday. Trading companies reported that the purchasing enthusiasm of downstream companies has weakened. Some companies have completed replenishment and were waiting for tin prices to fall. Yesterday, most trading companies traded 10-20 tons, and a small number of trading companies traded around 2 vehicles. Generally speaking, the spot market transactions yesterday cooled down but were still relatively brisk.

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