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SMM Morning Comment For SHFE Base Metals On February 2

iconFeb 2, 2024 09:53
Copper prices fell overnight, market waited for more data guidance

SHANGHAI, February 2 (SMM) –
Copper prices fell overnight, market waited for more data guidance
LME copper prices opened at $8528.5/mt and closed at $8524.5/mt last evening, down 1.06%, with the high-end of $8572/mt and the low-end of $8508.5/mt. Trading volume was 19,000 lots and open interest stood at 283,000 lots. The most active SHFE 2403 copper contract prices opened at 69030 yuan/mt and finished at 68890 yuan/mt last evening, down 0.76%, with the low-end of 68790 yuan/mt and the high-end of 69190 yuan/mt. Trading volume was 22,000 lots, and open interest stood at 146,000 lots. On the macro front, market sentiment was affected by previous statements by Federal Reserve officials, which increased expectations for a delay in interest rate cuts. The market is waiting for more data guidance to judge the path of the Fed's monetary policy. In terms of fundamentals, from the supply side, since long-distance logistics and freight will stop next week, some downstream companies will concentrate on stocking this week and some warehouse receipts were delivered, resulting in a reduction in spot supply. That gave some support to spot prices. In terms of consumption, most downstream companies will complete stocking this week, and overall demand will continue to weaken before the holiday. In addition, according to SMM research, as of Thursday, February 1, SMM copper inventories in mainstream regions in China increased by 10,300 tons from Monday to 102,300 tons, accumulating stocks for three consecutive weeks, with total inventories 161,600 tons lower compared with the same period last year. In terms of price, consumption is weakening as the CNY holidays approaches, and it is expected that copper prices will have little growth momentum.
The most-traded SHFE 2403 aluminum contract opened at 18,900 yuan/mt overnight, with its low and high at 18,850 yuan/mt and 18,915 yuan/mt before closing at 18,895 yuan/mt, down 0.05%. LME aluminum opened at $2,274.0/mt on Thursday, with its low and high at $2,244.0/mt and $2,275.6/mt respectively before closing at $2,249.0/mt, down 1.58%.
Summary: On the macro front, the Federal Reserve maintained its first interest rate in 2024, and its statement was hawkish. Expectations for an interest rate cut in March fell back, and the US index rebounded, suppressing commodities. In China, the macroeconomic environment was positive. The implementation of real estate “white list” and relaxation of purchase restrictions in Guangzhou, Suzhou and Shanghai greatly boosted domestic market sentiment. In terms of fundamentals, the domestic aluminum operation is generally stable before CNY holidays. The market is generally concerned about the time of production resumption in Yunnan. Downstream consumption weakened before CNY holiday. Small and medium-sized enterprises took CNY holidays, coupled with a high aluminium liquid ratio in 2024 CNY holidays, it is expected that the peak of aluminum inventory after CNY holiday may be lower than levels for the same period of previous years. From a macro perspective, the Fed's interest rate cut expectations declined, but domestic expectations improved, coupled with low expectations for total inventory after CNY holiday, the aluminum market has no major negative factors and is expected to move rangebound before CNY holiday.
Overnight, LME lead opened at US$2,157.5/ton. Yesterday, LME lead stocks increased by more than 5,000 tons. LME lead fell to a low of US$2,139/ton, and finally closed at US$2,140.5/ton, a decrease of 0.99%.
SHFE 2403 lead contract prices opened at 16245 yuan/mt last evening and finally closed at 16215 yuan/mt, up 0.22%. Open interest decreased 802 lots to 60020 lots.
SHFE zinc prices weakened dragged by LME zinc
Overnight, LME zinc prices opened at a high of US$2,529/ton, and it reached a low of US$2,515/ton, and finally closed at US$2,470/ton, down US$58/ton, or 2.29%. The trading volume increased to 12,171 lots, and the open interest increased by 2,252 lots to 220,000 lots. LME zinc inventories fell by 550 tons to 198,875 tons, a decrease of 0.28%. The final value of the Markit manufacturing PMI in the United States in January was recorded at 50.7, which was higher than the previous value and the forecast value of 50.3. The ISM manufacturing PMI in the United States in January was recorded at 49.1, which was also higher than the previous value of 47.1 and the forecast value of 47. Under the influence of negative macro sentiment , short sellers further sold, and LME zinc prices ran weakly.
The most active SHFE 2312 zinc contract prices opened at 20880 yuan/mt and fell 260 yuan/mt or 1.24% to settle at 20790 yuan/mt in overnight trading with the low-end of 20760 yuan/mt. Trading volumes decreased to 36105 lots and open interest grew 1615 lots to 81384 lots. There will be no interest rate cut until we are more confident that inflation is approaching 2%. The Fed will consider "any adjustments" to interest rates and will keep the discount rate unchanged at 5.5%, consistent with its last decision. However, the internal market was dragged down by the external market, and the trend was weak.
SHFE 2403 tin contract swung on a soft note before closing at 215,290 yuan/mt, down 1.23%.
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 300-500 yuan/mt against SHFE 2403 tin contract, versus discounts of 200 yuan/mt to premiums of 400 yuan/mt for delivery brands, premiums of 300-800 yuan/mt for Yunxi brand, and discounts of 700-1,100 yuan/mt for imported brand tin ingots. Yesterday, tin prices dropped sharply. With the Chinese New Year drawing near, downstream companies barely showed any purchasing interest. Traders reported that inquiries and purchasing were poor.
Overnight, the most-traded SHFE nickel contract opened at 127530 yuan/mt, and closed at 126240 yuan/mt, down 750 yuan/mt. Trading volume fell 16855 lots, and open interest increased by 4228 lots. On the macro front, it was announced at the Federal Reserve's interest rate meeting on the evening of February 1st that the interest rate range for February would remain unchanged. Powell said that expectations for an interest rate cut during the year still exist, but there is no possibility of an interest rate cut in the short term. From a fundamental point of view, transaction sentiment in the spot market has cooled down as downstream stocking is about to end. 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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