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SMM Morning Comment For SHFE Base Metals On February 6

iconFeb 6, 2024 10:07
LME copper prices opened at $8455.5/mt and closed at $8374.5/mt overnight, a drop of 1.06%, with the low-end of $8357/mt and the high-end of $8485/mt.



LME copper prices opened at $8455.5/mt and closed at $8374.5/mt overnight, a drop of 1.06%, with the low-end of $8357/mt and the high-end of $8485/mt. The trading volume was 189,000 lots, and open interest stood at 290,000 lots. SHFE 2403 copper opened at 68360 yuan/mt overnight and fell to 68000 yuan/mt after rising to 68390 yuan/mt, closing at 68050 yuan/mt, down 0.86%. The trading volume was 27,000 lots, and open interest stood at 133,000 lots. On the macro front, Federal Reserve Chairman Powell’s speech once again hit expectations for an interest rate cut. The possibility of an interest rate cut in March has almost been eliminated. At the same time, U.S. data continues to push the U.S. index higher, and copper prices are under pressure. In terms of fundamentals, from the supply side, suppliers registered a large amount of goods with warehouse receipts last weekend. At the same time, due to the heavy snow in the north, transportation was blocked. The holidays are about to begin, and cross-provincial logistics will also be suspended. The market supply may tend to decrease. In terms of consumption, as downstream holidays continue to take place, logistics operations gradually cease, and market trading sentiment becomes increasingly quiet. Therefore, both the supply and demand fell. In terms of price, on the whole, copper prices are under overall pressure as Federal Reserve Chairman Powell's repeated hawkish remarks. That, coupled with concerns about domestic demand have suppressed the price.


The most-traded SHFE 2403 aluminum contract opened at 18,740 yuan/mt overnight, with its low and high at 18,710 yuan/mt and 18,775 yuan/mt before closing at 18,760 yuan/mt, down 0.29%. LME aluminum opened at $2,236.5/mt on Monday, with its high and low at $2,236.5/mt and $2,203/mt respectively before closing at $2,204.5/mt, down 1.43%.

As CNY is drawing near, inventory grew amid subdued consumption. Transactions in the spot market was sluggish, in line with market expectations. From a macro perspective, expectations for an interest rate cut by the Federal Reserve in March fell. The Chinese government continued to stress efforts to boost market confidence. In the short term, aluminium prices are expected to move rangebound. However, there were rumours that Yunnan may relax energy efficiency management after CNY. SMM will keep a close eye on its progress and other unexpected news from the macro perspective.


LME lead opened at $2140/mt and fell during the Asian trading hours yesterday. During the European trading hours, LME lead briefly hit the lowest of $2106/mt, closing down 1.43% at $2106/mt overnight.

The most-traded SHFE 2403 lead contract opened at 16205 yuan/mt and fell to the lowest point at 16125 yuan/mt. SHFE lead rose slightly and finally closed at 16150 mt, down 45 yuan/mt or 0.28% overnight.


LME zinc opened at $2465/mt yesterday evening, and hit a high of $2465.5/mt before falling back to $2416/mt, and closed at $2425/mt, a decrease of $26.5/mt or 1.08%. Trading volume decreased to 9888 lots, and open interest grew 2021 lots to 224,000 lots. LME zinc inventory decreased by 1050 mt or 0.53% to 197275 mt. The owner of Russia's Ozernoye zinc mine said that the mine has postponed the start-up of zinc concentrate until at least the third quarter of this year. The delay in production has intensified the market's expectations for long-term shortages at the mine end. However, the U.S. ISM service industry index rose to 53.4 in January. , hitting a four-month high, strong economic data continues to dampen market expectations for interest rate cuts by the Federal Reserve, and macro bearish sentiment has revived. Grupo Mexico's fourth quarter report for 2023 revealed that its Buenavista zinc project will begin operations in the first quarter of 2024.

The most active SHFE 2403 zinc contract opened at 20520 yuan/mt and fell 15 yuan/mt or 0.07% to close at 20520 yuan/mt trading with the high-end of 20585 yuan/mt and the low-end of 20485 yuan/mt. Trading volumes decreased to 26821 lots and open interest grew 706 lots to 80131 lots. Inventories in seven SMM markets in China recorded 89,900 tons, an increase of 7,500 tons from the previous week. Domestic social warehouses continued to accumulate, and the support for zinc prices from inventories weakened. Shanghai zinc was weak and fluctuated.


SHFE 2403 tin contract fell to 207,470 yuan/mt overnight, down 2.31%.

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 0-500 yuan/mt against SHFE 2403 tin contract, versus discounts of 200 yuan/mt to premiums of 600 yuan/mt for delivery brands, premiums of 300-800 yuan/mt for Yunxi brand, and discounts of 500-1,000 yuan/mt for imported brand tin ingots. Yesterday, tin prices continued to fall. With CNY drawing near, downstream purchasing basically ended and traders also took CNY holidays.


Overnight, the most-traded SHFE nickel contract opened at 126870 yuan/mt, and closed at 124860 yuan/mt, down 1570 yuan/mt. Trading volume rose 70756 lots, and open interest increased by 5982 lots. On the macro front, the Federal Reserve's interest rate meeting announced on the evening of February 1st showed 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 in the spot market has cooled down as downstream pre-holiday stocking has basically ended. With new arrivals, the supply of pure nickel has increased. Nickel price is expected to swing on a soft note.

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