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SMM Morning Comment For SHFE Base Metals January 17

iconJan 17, 2024 09:47
Copper prices under pressure as dollar rose after Fed officials said they will not cut interest rates quickly

SHANGHAI, January 17 (SMM) –
Copper prices under pressure as dollar rose after Fed officials said they will not cut interest rates quickly
LME copper prices opened at $8373.5/mt and closed at $8345/mt in overnight trading, a decline of 0.47%, with the low-end of $8330/mt and the high-end of $8363/mt. Trading volume was 19,000 lots, and open interest stood at 279,000 lots. The most active SHFE 2403 copper contract prices opened at 68020 yuan/mt and finished at 68010 yuan/mt last evening, up 0.29%, with the low-end of 67900 yuan/mt and the high-end of 68160 yuan/mt. Trading volume was 23,000 lots, and open interest stood at 145,000 lots. On the macro front, Fed Governor Waller said that interest rate cuts should be carried out in a cautious and orderly manner, and there is no reason to cut interest rates as quickly as in the past. Market expectations for rapid interest rate cuts in the United States were hit, and the U.S. index rose, suppressing copper prices. We need to pay attention to the upcoming U.S. economic Beige Book and official speeches, which will have an impact on market expectations for interest rate cuts. In terms of fundamentals, from the supply side, domestic inventories are currently accumulating, and warehouse receipts will gradually flow into the market. Copper supply is expected to be relatively loose this week. In terms of consumption, the downstream has optimistic expectations for the inflow of imported copper and the release of warehouse receipts in the future. As the consumption of its own inventory slows, downstream procurement has slowed down. If copper prices continue to decline, downstream procurement demand will increase to a certain extent. Otherwise, demand is expected to weaken. It is understood that processing companies will start pre-holiday stocking next week. The strong US dollar will weigh on copper prices.
Overnight, the most-traded SHFE 2403 aluminum contract opened at 18,830 yuan/mt, with its lowest and highest at 18,825 yuan/mt and 18,940 yuan/mt before closing at 18,915 yuan/mt, up 90 yuan/mt or 0.48%. LME aluminum opened at $2,201.5/mt on Tuesday, with high and low at $2,217.5/mt and $2,195/mt respectively before closing at $2,214/mt, a drop of $1.5/mt or 0.07%.
On the macro front, Federal Reserve Governor Waller’s hawkish tone on Tuesday once again cooled down market expectations for interest rate cuts, and the US dollar index rose to a month high; the resurgence of the Red Sea incident is pushing up global shipping prices. In terms of fundamentals, the disturbance in the alumina supply still existed, 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 aluminum 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. While the support for aluminium prices from fundamentals has weakened, high alumina prices have offered solid cost support. SMM predicts that most-traded SHFE aluminium are likely to drift sideways, 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 $2104/mt and went downward during the Asian trading hours last evening, declining to $2093.5/mt during the European trading hours. It finally dropped and closed at $2094/mt, down $11/mt or 0.52%.
The most active SHFE 2403 lead contract prices opened at 16250 yuan/mt and touched 16270 yuan/mt before closing at 16250 yuan/mt, up 35 yuan/mt or 0.22%.
LME zinc opened at $2555/mt yesterday evening, and hit a high of $2567/mt before falling back to $2531/mt, and closed at $2553/mt, a decrease of $2/mt or 0.08%. The trading volume decreased to 6671 lots, and open interest fell 2975 lots to 210,000 lots. LME zinc inventory decreased by 1900 mt or 0.91% to 207300 mt. Federal Reserve Board Governor Waller said that interest rate cuts should be carried out in a cautious and orderly manner, downplaying expectations of rapid interest rate cuts.
The most active SHFE 2403 zinc and then due to the growth opened at 21205 yuan/mt and fell 100 yuan/mt or 0.47% to close at 21200 yuan/mt trading with the high-end of 21300 yuan/mt and the low-end of 21170 yuan/mt. Trading volumes decreased to 38839 lots and open interest grew 2569 lots to 79744 lots. Recently, the import window for zinc ingots has been closed again. However, demand has also weakened due to the successive closures in the downstream. Under the weak supply and demand, SHFE zinc has declined. However, supported by low domestic inventories, there is not much room for price declines.
SHFE 2402 tin contract rose to 213480 yuan/mt overnight and closed at 213890 yuan/mt, up 2.34%.
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, versus premiums of 0-600 yuan/mt for delivery brands, premiums of 1000 yuan/mt for Yunxi brand, and discounts of 800-1200 yuan/mt for imported brand tin ingots. Tin prices rose slightly in early trading yesterday. Trading companies reported that downstream companies were less enthusiastic about purchasing. Most of them used recently replenished stocks for production.
Overnight, the most-traded SHFE nickel contract opened at 126680 yuan/mt, and closed at 126850 yuan/mt, down 350 yuan/mt. Trading volume increased by 24792 lots, and open interest decreased by 5248 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, but the recent strong performance of the US dollar has put pressure on nickel prices. From a fundamental point of view, LME nickel inventory were unchanged yesterday, and the inventory accumulation trend has slowed down in the past two days. Nickel price is expected to inch lower.

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