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SMM Morning Comment For SHFE Base Metals January 23

iconJan 23, 2024 09:57
LME copper opened at $8376.5/mt overnight, with its session low and high at $8311/mt and $8381/mt before closing down 0.61% at $8329/mt.

SHANGHAI, January 23 (SMM) –
LME copper opened at $8376.5/mt overnight, with its session low and high at $8311/mt and $8381/mt before closing down 0.61% at $8329/mt. Trading volume was 14,000 lots, and open interest was 277,000 lots. SHFE 2403 copper contract opened at 67880 yuan/mt overnight, with its session low and high at 67720 yuan/mt and 67980 yuan/mt before closing dwn 0.12% at 67920 yuan/mt. Trading volume was 18,000 lots, and open interest was 147,000 lots. On the macro front, the Red Sea crisis continues to escalate, market risk aversion may intensify, and the U.S. index strengthens, suppressing copper prices. In terms of fundamentals, on the supply side, a lot of imported copper and low-priced supplies flowed into the spot market over the weekend. In terms of consumption, due to the impact of the futures market, downstream producers still restock as needed at low prices, the overall trading is not active, premiums have continued to fall, and it is expected that there is still room for downside. Overall, the supply is increasing. If futures price and premiums go down, downstream buyers will begin pre-holiday stocking. As of Jan 22, the copper inventory across China’s major trading markets increased by 5,400 mt from last Friday to 80,800 mt. Taken together, the U.S. dollar index is strong, coupled with the current lack of recovery in consumption and low market activity, copper prices are expected to be under pressure.
Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,655 yuan/mt, with high and low at 18,680 yuan/mt and 18,600 yuan/mt before closing at 18,660 yuan/mt, down 35 yuan/mt or 0.19%. LME aluminum opened at $2,174/mt yesterday, with its high and low at $2180/mt and $2,152.5/mt respectively before closing at $2,155/mt, down by $17.5/mt or 0.81%.
From a macro perspective, MoM surge in US retail sales in December exceeded market expectations and stood at 0.6% (0.40% expected). Sales of motor vehicles, personal health care and catering still maintained high YoY growth. Residential consumption were resilient. The market's expectations for Fed’s interest rate cut in first quarter fell back, the US dollar index rebounded, and commodities were under pressure. Domestically, China’s GDP grew by 5.2% in 2023. In December, total retail sales increased by 7.4% YoY, and the growth rate of added value in industries above the designated size hit a 22-month high. Real estate remained weak, manufacturing investment rebounded, and the overall macroeconomic atmosphere at home and abroad was weak. In terms of fundamentals, domestic aluminum supply has entered a stable period, primary aluminum import windows continue to open, and the net import volume of primary aluminum remains at a high level, impacting domestic market to a certain extent. Domestic primary aluminum social inventories may enter a seasonal inventory accumulation cycle at the end of the month, but considering the industry's aluminum liquid conversion rate of around 70%, it is expected that the total inventory before the CNY holidays this year will be far lower than the same period last year. In the short term, the macroeconomic data at home and abroad perform poorly amid market pessimism, and domestic aluminum downstream industries are entering the off-season, weighing on the aluminum prices.
LME lead opened at $2105/mt on Monday, with low of $2093.5/mt, but then rallied on softening US dollar, closing at $2122.5/mt, an increase of 0.69%. The most-traded SHFE 2403 lead contract opened at 16360 yuan/mt overnight and climbed to 16535 yuan/mt, boosted by LME lead prices, closing up 1.1% at 16535 yuan/mt.
Overnight, the People's Bank of China kept the one-year and five-year loan prime rates (LPR) unchanged at 3.45% and 4.20% respectively; the General Office of the CPC Central Committee and the General Office of the State Council: Improve institutional arrangements for the listing and financing of technology companies in the capital market; Bank of Japan will revise CPI expectations for fiscal year 2025. LME zinc opened at $2470.5/mt overnight, with session high of $2474/mt and low of $2445.5/mt, closing down 0.77% at $2454mt. Trading volume fell 2074 lots to 7843 lots, and open interest fell 3519 lots to 193,000 lots, LME zinc inventory fell by 2925 mt to 199125 mt, a drop of 1.08%. The negative overseas news has not been fully digested, the U.S. dollar index has risen, pressuring on LME zinc. Overnight, the most-traded SHFE 2403 zinc contract opened at 20685 yuan/mt, with low at 20675 yuan/mt and high at 20800 yuan/mt before closing at 20760 yuan/mt, up 10 yuan/mt or 0.05%, Trading volume fell 53002 lots to 31548 lots, and open interest fell 388 lots to 89278 lots, Domestic zinc concentrate TCs fell, hurting smelter margins. The cost side offered support to SHFE zinc price.
SHFE 2402 tin contract rose to 216,050 yuan/mt overnight, and closed at 215,450 yuan/mt, up 0.71%.
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 200-800 yuan/mt against SHFE 2402 tin contract, versus discounts of 200 yuan/mt to premiums of 600 yuan/mt for delivery brands, premiums of 500-1000 yuan/mt for Yunxi brand, and discounts of 1000-1100 yuan/mt for imported brand tin ingots. Tin prices rose slightly yesterday, and downstream companies continued to take a wait-and-see stance.
Overnight, the most-traded SHFE nickel contract opened at 127,750 yuan/mt, and closed at 125,940 yuan/mt, down 2,010 yuan/mt. Trading volume rose 3,326 lots, and open interest decreased by 385 lots. On the macro front, given the US CPI data on Jan 11, the core CPI has declined, boosting commodities. In addition, the inflation indicator will be released this week, cooling down the traders' expectations for an interest rate cut in March. Moreover, the news of the suspension of intermediate products projects drove SHFE nickel prices upward. From a fundamental perspective, LME inventory destocked slightly by 84 mt yesterday, with Baltimore being the main driver. Nickel price is expected to swing on a weak note.

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