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SMM Morning Comment For SHFE Base Metals January 30

iconJan 30, 2024 09:56
LME copper opened at $8507/mt overnight, with its session low and high at $8507/mt and $8590/mt before closing up 0.57% at $8578/mt.
SHANGHAI, January 30 (SMM) –
LME copper opened at $8507/mt overnight, with its session low and high at $8507/mt and $8590/mt before closing up 0.57% at $8578/mt. Trading volume was 16,000 lots, and open interest was 281,000 lots. SHFE 2403 copper contract opened at 68900 yuan/mt overnight, with its session low and high at 68870 yuan/mt and 69190 yuan/mt before closing up 0.29% at 69170 yuan/mt. Trading volume was 17,000 lots, and open interest was 151,000 lots. On the macro front, the U.S. Treasury Department lowered its estimate of net borrowing from January to March to $760 billion from the $816 billion announced at the end of October, and U.S. bond yields fell. There was limited macro news at home and abroad yesterday, and the market paid more attention to this week's Federal Reserve interest rate decision. In terms of fundamentals, from the supply side, imported copper will arrive one after another this week. With weak demand, supply is expected to become increasingly loose. According to SMM data, as of Monday January 29, copper inventories in mainstream regions across the country increased by 6,800 tons from last Friday to 92,000 tons. Except for a slight decrease in Shanghai, inventories in other regions increased. From the perspective of consumption, some downstream companies have closed for CNY holiday last week, and more companies will take a break this week. With copper prices at high levels, consumption is expected to weaken further. It is expected that there will be limited room for continued rise in copper prices amid soft consumption.
The most-traded SHFE 2403 aluminum contract opened at 19,005 yuan/mt overnight, with its low and high at 18,985 yuan/mt and 19,060 yuan/mt before closing at 19,055 yuan/mt, up 50 yuan/mt or 0.26%. LME aluminum opened at $2,261.5/mt on Monday, with its low and high at $2,237.0/mt and $2,268.0/mt respectively before closing at $2,251.0/mt, down 1.03%.
On the macro front, US macro data demonstrated the resilience of the economy, and expectations for interest rate cuts once again cooled; In China, the macroeconomic environment was positive. Real estate support policies and relaxation of purchase restrictions in Guangzhou greatly boosted domestic market sentiment. In terms of fundamentals, as CNY is drawing near, aluminium downstream industries slashed or halted their production, weakening demand and pushing up the inventory of aluminium ingot, but industry inventories remained at low levels driven by a high aluminum liquid ratio and downstream stockpiling before the CNY holiday. SMM predicts that the total domestic inventory accumulation during the 2024 CNY holidays may be lower than levels for the same period of previous years. In the short term, amid low inventory and no obvious imbalance between supply and demand, aluminium prices may fluctuate along with macro sentiment before CNY holidays.
Overnight, LME lead opened at $2,160.5/mt. LME lead rose to $2173.5/mt and closed down 0.09% at $2170/mt. The most-traded SHFE 2403 lead contract opened at 16255 yuan/mt overnight, and once rose to 16335 yuan/mt, but then fell back as falling raw material prices drove longs to leave the market. It closed at 16280 yuan/mt, up 0.15%. Open interest fell by 1146 lots to 69461 lots.
Overnight, LME zinc opened at $2580/mt and hit a low of $2550/mt, closing down 1.12% at $2559/mt. Trading volume decreased to 6,432 lots, while open interest increased by 712 lots to 217,000 lots. LME zinc inventory fell by 675 mt to 190,925 mt, a decrease of 0.35%. The Dallas Fed Business Activity Index in January in the United States recorded -27.4, far lower than the expected value of -11.8 and the previous value of -10.4, a new low since June 2023. The U.S. index fell back after rising. Overnight, the SHFE-traded SHFE 2403 zinc contract opened at 21370 yuan/mt, with high at 21405 yuan/mt and then fell back before closing at 21360 yuan/mt, down 55 yuan/mt or 0.26%. Open interest fell 968 lots to 200,000 lots. The Spring Festival is approaching, downstream consumption is in the seasonal off-season, the spot market performance is weak, leaving SHFE zinc weak.
SHFE 2403 tin contract continued to fall at the opening of last night's trading, and rebounded slightly before closed at 220,350 yuan/mt, down 0.36%.
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 2403 tin contract, versus discounts of 300 yuan/mt to premiums of 200 yuan/mt for delivery brands, premiums of 300-500 yuan/mt for Yunxi brand, and discounts of 1000-1300 yuan/mt for imported brand tin ingots. Tin prices remained at highs yesterday. Downstream companies barely showed any purchasing interest due to weakening demand.
Overnight, the most-traded SHFE nickel contract opened at 131200 yuan/mt, and closed at 132350 yuan/mt, down 1120 yuan/mt. Trading volume fell by 21090 lots, and open interest decreased by 3451 lots. On the other hand, the inflation indicator favored by the Federal Reserve was released on Friday, and market expectations for a March interest rate cut have "cooled". In addition, the Bank of Japan stated that it will continue to maintain ultra-loose monetary policy. From a fundamental point of view, spot nickel price followed futures prices up, and the transaction sentiment in the spot market has cooled down. With the arrival of some pure nickel, the supply of pure nickel has increased. Nickel price is expected to swing on a soft note.
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