SHANGHAI, January 15 (SMM) –
Copper
SMM copper morning comment: Growing risk aversion lowered copper prices
LME copper prices opened at $8384.5/mt and closed at $8295/mt last Friday evening, a drop of 0.96%, with the low-end of $8292.5/mt and the high-end of $8413.5/mt. Trading volume was 23,000 lots, and open interest stood at 277,000 lots. The most active SHFE 2403 copper contract prices opened at 68000 yuan/mt and closed at 67850 yuan/mt last Friday evening, down 0.32%, with the high-end of 68140 yuan/mt and the low-end of 67800 yuan/mt. Trading volumes stood at 22,000 lots and open interest stood at 141,000 lots. On the macro front, after the US and UK attacks on Yemen, the market's risk aversion was strong, which to a certain extent stimulated the US dollar index to rise, suppressing copper prices. On fundamentals, as of Monday January 12, SMM copper inventory across major Chinese markets decreased 900 mt from last Monday to 72,000 mt, down 63,500 mt YoY. In the East China market, a decline in arrivals, some supplies going to the south and strong demand resulted in a decrease in inventory; the high premiums in South China attracted supply from other regions, and shipments from local warehouses decreased, increasing inventories in South China. The arrival of imported copper has decreased from the previous week, and the enthusiasm of refineries to ship goods will decrease after the delivery. The supply is expected to decrease from last week. In terms of consumption, processing companies are currently preparing for the CNY holiday. When copper prices are relatively low, demand is expected to increase significantly, and consumption is expected to be better than last week. In terms of price, strong macro risk aversion and gradual weakening of consumption at the end of the year have put greater pressure on copper prices.
Aluminum
Overnight, the most-traded SHFE 2403 aluminum contract opened at 19,000 yuan/mt, with high and low at 19,030 yuan/mt and 18,960 yuan/mt before closing at 18,980 yuan/mt, down 25 yuan/mt or 0.13%. LME aluminum opened at $2,239/mt last Friday, with high and low at $2,245/mt and $2,206/mt respectively before closing at $2,215.5/mt, a drop of $19.5/mt or 0.87%.
On the macro front, the US PPI data unexpectedly fell over the weekend, the US dollar index plunged sharply, intensifying market expectations for interest rate cuts. At the same time, the resurgence of the Red Sea incident is pushing up global shipping prices. In terms of fundamentals, the disturbance in the alumina supply re-emerged, domestic aluminium smelters maintained stable operation, the amount of aluminium ingot produced was expected to increase MoM in January, and imported aluminum ingots may increase. In addition, the aluminium market may enter a traditional inventory accumulation amid low-season, but the total inventory may be difficult to exceed level in the same period of 2023. The support for aluminium prices from the supply and demand fell sharply, but the recent strong performance of alumina market drove aluminium prices. SMM predicts that most-traded SHFE aluminium are likely to 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.
Lead
LME lead prices opened at $2098/mt and closed at $2091/mt last Friday evening, down 0.21%.
The most-traded SHFE 2402 lead contract opened at 16345 yuan/mt and fell 215 yuan/mt or 1.31% to 16240 yuan/mt last Friday evening, briefly hitting the lowest point at 16170 yuan/mt.
Zinc
Last Friday, LME zinc prices opened at $2506.5/ton, then fell again to a low of $2489.5/ton. Then it stopped falling and rose to a high of US$2,530/ton. At the end of the day, LME zinc prices fell again, and finally closed up at US$2,509/ton, up US$3/ton, or 0.12%. LME zinc inventory decreased by 2800 mt or 1.31% to 210875 mt. The U.S. PPI recorded an annual rate of 1% in December, which was lower than expected for three consecutive months. As inflation fell, the market increased its bets on the possibility of an early interest rate cut by the Federal Reserve. The bearish sentiment eased and LME zinc prices recovered.
The most-traded SHFE 2403 zinc contract opened at 21035 yuan/mt overnight and fell to 21010 yuan/mt before rallying to a peak of 21185 yuan/mt. It eventually settled at 21180 yuan/mt, up 65 yuan/mt or 0.31%. Trading volume increased 3275 to 26872 lots, and open interest gained by 4416 lots to 70073 lots. During the off-peak consumption season, some zinc downstream companies are considering taking an early holiday in January. Insufficient demand has suppressed zinc prices, and zinc prices have been running weakly.
Tin
SHFE 2402 tin contract closed at 210690 yuan/mt at last Friday’s night session, up 2.03%. Last Friday, 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 and premiums of 0-300 yuan/mt over SHFE 2402 tin contract, versus premiums of 0-800 yuan/mt for delivery brands, premiums of 1000 yuan/mt for Yunxi brand, and discounts of 1000-1100 yuan/mt for imported brand tin ingots. The overall tin price maintained an upward trend in early trading last Friday. Trading companies reported that most downstream companies had a wait-and-see attitude, with fewer inquiries. According to SMM research, downstream solder companies reported that order volume in January 2024 did not usher in the expected growth. In previous years, terminal companies would choose to carry out pre-stocking in January, which would bring a certain increase in orders to downstream solder companies. However, this year's end-user companies have adopted a more conservative strategy, with most choosing to only maintain inventory for a few days during the Spring Festival holiday. As a result, the increase in orders at downstream solder companies is less than expected, and the downstream solder companies themselves are also affected by large fluctuations in tin prices and weak recent demand. However, considering that global semiconductor sales in November 2023 achieved year-on-year growth for the first time since August 2022, demand in 2024 may be relatively positive. In addition, according to SMM research, social inventories have been significantly reduced by 1,308 mt last week. The supply of goods flowing into the market is not as sufficient as before. Coupled with the weak domestic supply side, the downward space of tin prices will be limited.
Nickel
Nickel prices hit bottom and rebounded, increasing during the evening session of January 10. They rose by about 3.24% last week, reaching 129,420 yuan/mt at the close on January 12. The price difference between nickel sulphate and pure nickel expanded, mainly influenced by the rise in nickel prices and relatively small fluctuations in nickel sulphate spot prices compared to the previous week. On the macro front, on the evening of January 11, the U.S. announced that the December non-seasonally adjusted CPI rose to 3.4%, up from the previous 3.1%. The non-seasonally adjusted core CPI went down from 4% to 3.9%. The expectation of further inflation pressure led to a strengthening of the U.S. dollar that night. The Fed is keeping a close eye on the year-on-year core inflation, which has slightly decreased from the previous 4% to 3.9%. This has led to a cooling off in gold prices, benefiting commodity prices, and causing nickel futures prices to trend upward. From a fundamental perspective, LME inventory added by 4,212 mt, and China's social inventory rose by 2,524 mt. Globally, apart from China, Europe has the highest cumulative inventory, increasing by about 9% compared to previous week. In Asia, the main increase in warehouse stock is in Singapore. The recent increase in inventory was mainly attributed to nickel briquettes last week. The main reason for the domestic inventory accumulation is the continuous arrival of nickel plates from other regions to Shanghai, coupled with the downstream demand weakening due to the rebound in nickel prices. Additionally, as of last Friday, electrowinning nickel exported to LME remains profitable is more profitable than selling it at a discount in the domestic spot market. The electroplating industry is growing steadily because it's receiving more orders in response to increased downstream demand from various industries. As for the alloy sector, research indicates a slight cooling of purchasing sentiment last week, primarily influenced by earlier completion of some procurement for stockpiling. In November, domestic stainless steel production is expected to decrease compared to the previous month, according to SMM research. This is attributed to the industry entering the maintenance period, leading to a further reduction in demand for pure nickel.