SMM Morning Comment For SHFE Base Metals January 24

SHANGHAI, January 24 (SMM) –
Copper
LME copper prices opened at $8328/mt and closed at $8420/mt in last evening trading, a rise of 1.09%, with the high-end of $8427.5/mt. Trading volume was 20,000 lots, and open interest stood at 278,000 lots. The most active SHFE 2403 copper contract prices opened at 68010 yuan/mt and closed at 68110 yuan/mt last evening, down 0.31%, with the high-end of 68250 yuan/mt. Trading volumes stood at 22,000 lots and open interest stood at 149,000 lots. On the macro front, former Federal Reserve official Bullard urged the Federal Reserve to cut interest rates as soon as possible, saying that if the rate cut is too slow, it may have to cut interest rates by 50 basis points at the next meeting. According to the content of the party committee meeting, the market expects China to release more stimulus policies, and copper prices stabilized and rebounded. In terms of fundamentals, from the supply side, there is a certain inflow of low-priced imported copper, and the supply is still relatively sufficient. In terms of consumption, there is currently a certain demand for stockpiling in the downstream, but it has not had a significant impact on overall consumption for the time being. Premiums were still falling, and the oversupply situation has not changed. Overall, if copper prices rise again, it may inhibit consumption and slow down the pace of downstream stockpiling. Taken together, the former "Eagle King" of the Federal Reserve has made dovish statements, and the Red Sea crisis continues to escalate. There is still a risk aversion in the market, but the current consumption activity is not high, and the upside space for copper prices is expected to be limited.
Aluminum
Overnight, the most-traded SHFE 2403 aluminium contract opened at 18,700 yuan/mt, with its lowest and highest at 18,700 yuan/mt and 18,945 yuan/mt before closing at 18,910 yuan/mt, up 265 yuan/mt or 1.42%. LME aluminium opened at $2,159/mt yesterday, with its high and low at $2,237/mt and $2,156/mt respectively before closing at $2,232/mt, up by $77/mt or 3.57%.
The implementation of a package of sanctions by European Union mainly target Russian aluminium products. It was reported that the European Union began discussions on a new round of sanctions against Russia, which will be adopted on February 24. 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 aluminium supply has entered a stable period, primary aluminium import windows continue to open, and the net import volume of primary aluminium remains at a high level, impacting domestic market to a certain extent. Domestic primary aluminium social inventories may enter a seasonal inventory accumulation cycle at the end of the month, but considering the industry's aluminium 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 overseas macroeconomic data was positive. In terms of fundamentals, the domestic aluminium downstream industries are entering the off-season, weighing on the aluminium prices.
Lead
LME lead opened at $2124/mt last evening and rose by 2% to close at $2165/mt, after hitting the lowest point at $2123/mt and the highest point at $2172/mt.
The most active SHFE 2403 lead contract prices opened at 16665 yuan/mt last evening, and closed at 16696 yuan/mt, an increase of 0.06%, with the high-end of 16725 yuan/mt and the low-end of 16640 yuan/mt.
Zinc
Overnight, LME zinc prices opened at US$2,456/ton and hit a high of US$2,533/ton. It finally closed up at US$2,526/ton, up US$72/ton, or 2.93%. The trading volume increased by 3,820 lots to 10,633 lots, and the open interest increased by 2,157 lots to 218,000 lots. LME zinc inventory dropped by 1525 mt or 0.77% to 197600 mt. Former hawkish officials from the Federal Reserve turned dovish in their speeches, coupled with continuous declines in LME inventories, the strong performance of bullish funds in the market helped push LME zinc upward.
The most interest-traded SHFE 2403 zinc contract opened at 20910 yuan/mt last Friday before rallying to a peak of 21090 yuan/mt. It eventually settled at 21035 yuan/mt, up 255 yuan/mt or 1.23%. Trading volume decreased 39438 to 53207 lots, and open interest fell by 2688 lots to 87073 lots. The decline in domestic inventories and pre-holiday stockpiling supported SHFE zinc prices.
Tin
SHFE 2402 tin contract rose slightly to 219,600 yuan/mt before closing at 218,490 yuan/mt overnight, up 0.92%.
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 700 yuan/mt for delivery brands, premiums of 500-1,000 yuan/mt for Yunxi brand, and discounts of 1000-1300 yuan/mt for imported brand tin ingots. Tin prices rose sharply yesterday. Traders reported that there were very few inquiries and purchasing in the morning amid strong wait-and-see sentiment.
Nickel
On January 23, the most active SHFE nickel contract prices opened at 126520 yuan/mt and closed at 129650 yuan/mt, a gain of 3710 yuan/mt from the closing price of the previous trading day. The trading volume increased by 3186 lots, and open interest decreased by 16307 lots. Bears had a better mentality, while the bullishness was weak. And the price will not rise immediately. At the same time, Indonesian policies have slowed down the approval process of nickel ore quotas, and the market has some concerns about the subsequent supply of nickel ore, pushing nickel prices upward. The Fed's favored inflation indicator was released this week, and traders' expectations for a March interest rate cut have "cooled". In addition, affected by the news of the suspension of production of overseas intermediate products projects, the SHFE nickel prices were driven upward. LME nickel inventory fell slightly 54 mt. It is expected that the nickel price may fluctuate rangebound at highs in the near term.