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SMM Morning Comment For SHFE Base Metals January 25

iconJan 25, 2024 09:56
LME copper prices opened at $8416/mt and closed at $8567.5/mt in last evening trading, a rise of 1.75%, with the low-end of $8402/mt and the high-end of $8586.5/mt.

SHANGHAI, January 25 (SMM) –
LME copper prices opened at $8416/mt and closed at $8567.5/mt in last evening trading, a rise of 1.75%, with the low-end of $8402/mt and the high-end of $8586.5/mt. Trading volume was 35,000 lots, and open interest stood at 278,000 lots. The most active SHFE 2403 copper contract prices opened at 68900 yuan/mt and closed at 68960 yuan/mt last evening, up 1.13%, with the high-end of 69000 yuan/mt and the low-end of 68760 yuan/mt. Trading volumes stood at 42,000 lots and open interest stood at 150,000 lots. On the macro side, the People's Bank of China decided to lower the deposit reserve ratio of financial institutions, support agriculture and small businesses, re-lending, and rediscount rates. Affected by the unexpected decline in U.S. crude oil inventories, crude oil futures rose, and natural gas futures rose under the news of the European sanctions plan. The sharp rise has played a supporting role in copper prices. In terms of fundamentals, from the supply side, imported copper supplies continue to flow in, increasing supply. In terms of consumption, downstream reserves are gradually opening up, but as copper prices rise, consumption may be hit. Overall, although the supply remains sufficient, copper prices are high and premiums are unlikely to be significantly reduced. It is expected that the increase in consumption brought about by downstream stockpiling will be hindered. Taken together, the domestic economic stimulus measures and the rise in crude oil and natural gas futures have boosted copper prices, and copper prices are expected to run at a high level.
Overnight, the most-traded SHFE 2403 aluminium contract opened at 19,075 yuan/mt, with high and low at 19,075 yuan/t and 18,920 yuan/mt before closing at 18,935 yuan/mt, down 90 yuan/mt or 0.47%. LME aluminum opened at $2,231/mt yesterday, with its high and low at $2,268/mt and $2,222/mt respectively before closing at $2,222/mt, down $10/mt or 0.45%.
US Treasury bond yields continued to rise, cooling down market expectations for an interest rate cut by the Federal Reserve in March. An industry survey shows that the interest rate cut is unlikely to happen until June. The domestic economy is showing a recovery trend, and macroeconomic policies are expected to strengthen counter-cyclical and inter-cyclical adjustments. The timing and scale of this RRR cut exceeded market expectations, reflecting the People's Bank of China's support for the real economy recovery. 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 overseas macroeconomic data was positive. In terms of fundamentals, the domestic aluminum downstream industries are entering the off-season, weighing on the aluminum prices.
Market expectations for interest rate cuts by the Federal Reserve weakened, and the decline in nonferrous metals dragged down LME lead [SMM Lead Morning Comment]
LME lead prices opened at $2166.5/mt and closed at $2150.5/mt last evening, down 0.67%, with the high-end of $2188/mt and the low-end of $2144/mt.
The most traded SHFE 2403 lead contract opened at 16690 yuan/mt last night, hitting the lowest point at 16440 yuan/mt, and closed at 16485 yuan/mt, down 1.08%.
SHFE zinc prices edged up
Overnight, LME zinc prices opened at US$2,540/ton. Entering the night trading session, the trend of LME zinc prices moved upward again and touched a high of US$2,590/ton and finally closed at US$2586.5/ton, up US$60.5/ton, or 2.40%. The trading volume increased from 1509 lots to 12142 lots, and the open interest increased by 1479 lots to 220000 lots. LME zinc inventory fell by 2025 tons to 195575 tons, down 1.02%. The initial value of the US Markit manufacturing industry was higher than expected and recorded 50.3.
The most interest-traded SHFE 2403 zinc contract opened at 21360 yuan/mt last evening before rallying to a peak of 21380 yuan/mt. It eventually settled at 21360 yuan/mt, up 250 yuan/mt or 1.18%. Trading volume decreased 75234 to 49185 lots, and open interest gained by 3350 lots to 88690 lots.
SHFE 2402 tin contract remained at highs before closing at 220,360 yuan/mt overnight, up 0.93%.
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 300 yuan/mt to premiums of 600 yuan/mt for delivery brands, premiums of 300-1,000 yuan/mt for Yunxi brand, and discounts of 1000-1300 yuan/mt for imported brand tin ingots. Tin prices remained at highs yesterday, and traders reported that there were very few inquiries and purchasing.
Overnight, the most-traded SHFE nickel contract opened at 130000 yuan/mt, and closed at 129780 yuan/mt, up 130 yuan/mt. Trading volume rose 28359 lots, and open interest decreased by 34389 lots. The inflation indicator favoured by the Federal Reserve will be released on Friday, and traders' expectations for a March interest rate cut have "cooled". In addition, the Bank of Japan stated at the meeting that it will continue to maintain ultra-loose monetary policy. LME nickel inventory fell slightly by 96 mt. Nickel price is expected to swing on a strong note.

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