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SMM Morning Comment For SHFE Base Metals January 16

iconJan 16, 2024 09:55
LME copper prices opened at $8324.5/mt overnight before reaching a low of $8324.5/mt and a high of $8393/mt, and closed at $8384/mt, a rise of 1.07%. Trading volumes were 17,000 lots and open interest stood at 280,000 lots.

SHANGHAI, January 16 (SMM) –
LME copper prices opened at $8324.5/mt overnight before reaching a low of $8324.5/mt and a high of $8393/mt, and closed at $8384/mt, a rise of 1.07%. Trading volumes were 17,000 lots and open interest stood at 280,000 lots. The most active SHFE 2403 copper contract prices opened at 67700 yuan/mt and finished at 67970 yuan/mt overnight, up 0.21%, with the low-end of 67700 yuan/mt and the high-end of 68010 yuan/mt. Trading volume was 17,000 lots and open interest stood at 143,000 lots. On the macro side, yesterday the domestic central bank conducted a 1-year MLF operation of 995 billion yuan, and the winning interest rate was 2.50%, which caused some concern in the market. Coupled with the strong performance of the US dollar, copper prices fell. However, there was not much macro information last night, and copper prices experienced a certain correction, waiting for more information and guidance. In terms of fundamentals, as of Monday January 15, SMM social inventory across major Chinese markets increased by 5,700 mt to 77,700 mt from last Friday. There are two main reasons for the accumulation of inventory in East China. Many delivery warehouse receipts were put into storage last weekend, and supply from the north moved to the south, causing a slight increase in inventory. However, inventory in South China remained low with no significant changes. From the supply side, imported copper this week will decrease compared with last week, but supply from the north continues to go southward. Meanwhile, inventory has increased. It is expected that the supply of electrolytic copper will not be tight. In terms of consumption, copper prices continue to fall, and we are paying attention to whether the market will stock up before the Chinese New Year holiday. There will be limited upside room for copper prices as the US dollar weighed.
Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,825 yuan/mt, with high and low at 18,910 yuan/t and 18,825 yuan/mt before closing at 18,860 yuan/mt, down 75 yuan/mt or 0.40%. LME aluminium opened at $2,221.5/mt overnight, with high and low at $2,230/mt and $2,198/mt respectively before closing at $2,200/mt, a drop of $15.5/mt or 0.70%.
On the macro front, the European Central Bank's hawkish tone on Monday cooled down market expectations for interest rate cuts, the US dollar index rose slightly. 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 aluminium ingots may increase. In addition, the aluminium market may enter a traditional inventory accumulation amid low-season, but domestic aluminium ingot inventories continued to remain low. The shipment increased thanks to pre-holiday stockpiling, thus 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.
LME lead prices opened at $2091.5/mt and closed at $2105/mt last evening, up $14/mt or 0.67%, with the high-end of $2113/mt.
The most active SHFE 2403 lead contract prices opened at 16210 yuan/mt and touched a high of 16,295 yuan/mt before closing at 16270 yuan/mt, up 55 yuan/mt or 0.34%.
Overnight, LME zinc opened at $2510/mt, hitting a low and high of $2506.5/mt and $2615/mt respectively, and closed at $2555/mt, up $46/mt or 1.83%. Trading volume increased to 9013 lots, and open interest grew 2400 lots to 213,000 lots. LME zinc inventory dropped by 1675 mt or 0.79% to 209200 mt. Due to higher energy costs and deteriorating market conditions, Nyrstar said it would suspend zinc smelting operations in the second half of January at its Boulder plant in the Netherlands, one of Trafigura's zinc smelters in Europe with an annual capacity of About 300,000 tons. Market optimism revived due to expected reduction in zinc ingot supply, and LME zinc rose sharply during the session.
The most interest-traded SHFE 2403 zinc contract opened at 21300 yuan/mt overnight and fell to 21280 yuan/mt before rallying to a peak of 21410 yuan/mt. It eventually settled at 21345 yuan/mt, up 225 yuan/mt or 1.07%. Trading volume decreased to 34784 lots, and open interest gained by 2523 lots to 77716 lots. As of this Monday (January 15), the total zinc inventory in the seven SMM locations was 76,200 tons, a decrease of 500 tons from January 8 and a decrease of 1,000 tons from January 12. The inventory fell slightly.
SHFE 2402 tin contract fell to 208070 yuan/mt overnight and then soared to 209290 yuan/mt, and closed at 208670 yuan/mt, up 0.14%.
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 0-300 yuan/mt against SHFE 2402 tin contract, spot premiums of 100-600 yuan/mt for delivery brands, premiums of 1000 yuan/mt for Yunxi brand, and discounts of 1000-1100 yuan/mt imported brand tin ingots. The overall price of tin in early trading yesterday was relatively high. Trading companies reported that most downstream companies had a wait-and-see attitude, with fewer inquiries.
Overnight, the most-traded SHFE nickel contract opened at 126760 yuan/mt, and closed at 127200 yuan/mt, down 2220 yuan/mt. Trading volume rose 4039 lots, and open interest increased by 3613 lots. From a macro perspective, judging from the CPI data released by the Federal Reserve on the evening of January 11, the current core CPI has declined, which is good for commodities. Yesterday, LME nickel inventory fell slightly by 96 mt, with the destocking mainly coming from Asia. Nickel price is expected to move rangebound.

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